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Blackham Resources Ltd

Blackham Resources to put up to $23 million for Wiluna expansion plan DFS work

Snapshot

Reserve expansions and a Wiluna expansion DFS are upcoming milestones.

Open pit operations have focused on Matilda

Quick facts: Blackham Resources Ltd

Price: $0.01

Market: ASX
Market Cap: $39.96 m
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Blackham Resources Ltd (ASX:BLK) (FRA:NZ3) (OTCMKTS:BKHRF) has narrowed its focus to its Matilda-Wiluna Gold Operation in Western Australia as the company aims to produce more than 200,000 ounces a year from one site.

The company, which stabilised production at the operation at an average of 19,700 ounces a quarter for the three quarters to September 30, is expected to produce its next quarterly report to shareholders in the next week.

READ: Blackham Resources secures $23 million from Lind to reduce short-term debt and expand gold production

Last quarter the company produced 19,049 ounces at Matilda-Wiluna at an all-in sustaining cost per ounce (AISC) of $1,588 an ounce.

At the time of Blackham’s September quarter reporting, the company tipped it expected higher grade Wiluna ore would increase December quarter production to between 20,000 and 23,000 ounces.

An August 2017 pre-feasibility study (PFS) had demonstrated the merits of expanding into the higher-grade sulphides that make up 70% of resources.

The PFS also highlighted the benefits of developing refractory processing capacity.

Both efforts were expected to allow the company to increase overall gold production from a then all-free-milling 80,000 to 90,000 ounces a year (20,000 to 22,500 ounces a quarter) to the company’s current forward target of 200,000 ounces a year (50,000 ounces a quarter.

FLASHBACK: Blackham Resources PFS shows it has potential to join 200,000-gold-ounce a year production club

For a capital outlay of $114 million, the PFS predicted the reforms would lower life-of-mine AISCs to $1,058 an ounce and widen margins to 35-40%.

The net present value (NPV8) of the project was put at $360 million at an 8% discount, for a 123% internal rate of return (IRR).

The mine plan modelled was to include 19 million tonnes grading 2.8 g/t for 1.7 million contained ounces.

A gold price of $1,650 was used in modelling, well below the spot gold price of $1,816.19 an ounce on Friday.

READ: Blackham Resources valued 4X its current price by Alternative Resource Capital

The 200,000 ounces a year target was viewed as achievable for the first six years after expansion.

A further 300,000 ounces would be produced in years 7 to 9, putting production in the first 9 years at 1.5 million ounces.

Wiluna open pit restart a December quarter event

Blackham restarted open pit mining at Wiluna for the first time in 10 years on October 17.

The company delineated 18.6 million open pit tonnes grading 2.52 g/t for 1.5 million ounces with 18-months of drilling campaigns of more than 100,000-metres.

These ounces represent free milling resources of 5.1 million tonnes grading 1.43 g/t for 236,000 ounces.

The total size of the Wiluna portfolio has been put at 6.7 million ounces.

Blackham executive chairman Milan Jerkovic told Proactive Investors last month the company hoped to add more reserves to its stock so it had five years of reserves for its plant.

Upcoming GWR JV to supply ounces and mill feed stock

After producing the report, the company inked a binding heads of agreement with its neighbour GWR Group Ltd for the partner’s 254,000-ounce Wiluna West Gold Project.

Wiluna West’s JORC resource of 3.5 million tonnes grading 2.3 g/t gold is expected to grow given a recent 72-hole RC drilling campaign has returned some impressive drill results.

READ: Blackham Resources partner GWR Group drills more high-grade gold

These include 7 metres grading 12 g/t gold from 28 metres at Golden Monarch; 5 metres grading 15 g/t gold from 45 metres at Emu; and 12 metres at 2.1 g/t gold from 43 metres at Eagle.

Blackham’s 65% expected take of its upcoming JV with GWR is expected to contribute ounces to the company’s one-site target, with the Wiluna West project only 40 kilometres by road from Blackham’s Wiluna treatment plant.

Blackham will be able to access additional free milling inventory for the operating plant at Wiluna-Matilda operation, once the parties sign a JV deal.

AISC figure guidance

On October 24, Blackham predicted its AISC per ounce was likely to decline in the December quarter and for the remainder of the 2018-19 financial year (FY19).

Blackham reconfirmed its FY19 production and cost guidance in its September quarter activities report.

Production guidance was 77,000 to 89,000 ounces at an AISC of $1,250 to $1,450 an ounce.

Funding arrangements change

The December quarterly report will take into account a change in funding arrangements.

In early October, Blackham received the first $6 million tranche of the initial $7.5 million Lind Partners convertible note funding facility agreed to in September.

READ: Blackham Resources finalises joint venture with A-Cap Energy

The Lind Partners agreed to provide a further $15.5 million in security, putting the size of its potential investment at $23 million.

After receiving word of Lind’s funding, the company paid down the full $5.4 million total of its remaining Orion Fund JV Limited secured finance facility on October 4, avoiding the 10% interest rate it had been attracting.

Significant transactions

Blackham took steps to divest part of its non-core Wilconi Cobalt Nickel Project in WA to A-Cap Energy Ltd (ASX:ACB) in the last two weeks of the December quarter.

A-Cap was to start earning into a stake of up to 75% for the cobalt, nickel and associated metals of the project.

READ: Blackham Resources agrees to further extension of A-Cap Energy’s Wilconi farm-in deal

The energy company was to take an initial 20% JV interest in the project on December 20 with a $2.8 million payment.

A-Cap was to then chase that with a third-party exploration data payment of $100,000.

Wilconi has a JORC inferred resource of 80.5 million tonnes at 0.77% nickel and 0.058% cobalt.

Expected cashflows and financing activity

In its September quarterly cashflow report published on October 24, the company predicted its estimated cash outflows for the December quarter were likely to be $39.1 million.

Among the line items were $1.3 million on exploration, $3 million on pre-production mining costs and $27.6 million on production.

The company had $27.5 million in loan facilities on September 30, with $20 million of these drawn down.

READ: Blackham Resources partner GWR Group drills more high-grade gold

These facilities included a MACA Limited secured finance facility with an interest rate of 10% a year which had $14.3 million remaining — which the company continued to hold after quarter’s end.

Blackham had $3.35 million cash on September 30.

 

Blackham Resources Ltd (ASX:BLK) chairman Jerkovic spoke to Proactive Investors’ Stocktube video channel about the company’s Matilda-Wiluna operation in December.

He also explained the company’s refined strategy for gold production from the prolific Wiluna Mine & Coles Find Shear areas, also in WA.

Jerkovic said: "Our aim is to consolidate the current production, increase our short-term cash flow, reduce our debt, and essentially put the company in a position where it could unlock a much larger inventory of gold and hopefully put us in the rank of the top 15 producers in Australia in a single location.

“Short term it’s all about production stability and repairing the balance sheet to a point where we have a very solid base from which to launch our next growth stage.”

Jerkovic confirmed the company was looking to hold to feed higher grades into its plant, continue to have a steady production level for the December and March quarters, and bring down costs.

Blackham’s activities & cashflow reports for the December quarter are expected in the coming week.

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