Blackham Resources’ planned expansion of the Matilda/Wiluna gold mine to more than 200,000 ounces a year will see the mine churn out an annual EBITDA of more than $118m a year or 36c a share for a stock that can be bought on market today for just 28.5c a share.
Blackham’s long awaited expansion PFS shows the project will bank free cash over the initial 9 year mine life of $571m or $1.74 per share assuming the $114m expansion capex can be debt funded.
The project’s net present value in todays money is $360m or $1.09 a share assuming an average ongoing gold price of AUD$1600 an ounce which is less than the average price for FY17 of AUD$1665.
It shows an Internal rate of return before corporate overheads and tax of 123% at AUD$1600 an ounce with that rate of return shooting off the richter scale if the gold price hits AUD$1700 an ounce.
The planned expansion will boost annual gold production at the Matilda/Wiluna project from mid-2019 to an average of 207,000 ounces a year for at least the first six years of the initial 9 year mine life.
The expansion PFS boosts Blackham’s reserve base to 1.2 million ounces of gold from 15 million tonnes grading 2.5 grams per tonne gold. This represents a 116% increase in reserves in the last year alone and just a fraction of the current resource base of 6.1 million ounces that is not yet included in the mine plan.
The PFS is based on an innovative expansion plan that will see mining and processing from a mix of open-pit and underground ores, unlike previous operators who relied almost entirely on mill feed from the underground operations.
Blackham have cleverly made the most of existing infrastructure to keep the initial capex of the expansion to just $114 million. This is projected to drive a dramatic reduction in Life of mine all in sustaining costs to A$1,058 per ounce.
The impressive metrics in the PFS make Blackham a stand-out against industry peers. According to the company, Blackham's fully funded enterprise value per ounce of gold reserves is just $195 an ounce.
Gold Road sits at $349 and Dacian Gold at $445 an ounce.
Blackham Managing Director, Bryan Dixon, said: “The Wiluna Expansion Plan aims to achieve a step-change in gold production from the 6.2Moz resource at the Matilda/Wiluna Operation. The Expansion PFS has confirmed gold production averaging 207,000ozpa is achievable on a very capital efficient basis for a likely long mine life. Very few Australian gold operations operate at this scale with long mine lives, which proves the significance of the Wiluna goldfield as a major gold province for the future.”
Blackham reported that work on a definitive feasibility study was well underway and due to be completed by the first quarter of 2018.
There is still an opportunity to increase open pit reserves at Matilda, Lakeway, Wiluna North and Regent and the Wiluna underground also still has 20Mt @ 4.8g/t for 3.0 million ounces outside the mine plan.
After a shaky start to first production this year, due largely to inclement weather, teething problems with the mill and the high cost of driving to the ore body, nervous investors headed for the sidelines with Blackham’s shares sold down to as low as 18c a share.
If the metrics in the latest PFS end up being even close to accurate, 18c a share will be but a distant memory for the aspiring 200,000 ounce a year club member.
By Matt Birney
