Larvotto Resources’ $8m acquisition of the Hillgrove project in NSW comes replete with a million ounces of gold, Australia’s biggest antimony resource, gold-laced tailings with good grades and a mothballed processing plant and exploration package that has soaked up $200m from previous players.
The project was put on the chopping block by administrators when Red River Resources fell over after experiencing a fall-of-ground event at its Thalanga base metals mine in Queensland and never recovered.
Remarkably, the mining plant that was thrown in with Larvotto’s purchase was operational only three years ago and the exploration package around it is bursting with high-value targets that Red River spent $20 million on for exploring before sliding into administration – just as it was creating a new plan for the project.
And perhaps more remarkable was the purchase price that Larvotto paid, which was a miserly $3 million – most of which was in shares – and the payment of a $5 million environmental bond, which presumably will be one day refunded.
Larvotto says the administration process and negotiations originally attracted several interested parties, however the process was long and laborious. One by one they all dropped off, leaving only Larvotto to essentially steal the project that it says boasts 1.4 million ounces of gold equivalent at an average grade of 6.1 grams per tonne gold equivalent.
The word “equivalent” is used as the project is also blessed with about 90,000 tonnes of contained antimony going 1.2 per cent in addition to its 1036 ounces of gold grading 4.5g/t. When combined together and expressed in economic terms as a gold-only resource, Larvotto says it has the equivalent of 1.42 million ounces of gold grading 6.1g/t – a resource that could not have been discovered with a drill bit for even a pufteenth of the project ‘s exceptional $3 million purchase price.
Even if you count the $5 million environmental bond as part of the purchase price, it seems Larvotto has managed to land 1.42 million ounces of gold equivalent for the bargain basement price of about $6 an ounce – which sure beats drilling for it.
Curiously, Larvotto says its existing antimony resource is the biggest in Australia and likely in the top 10 globally. No estimate has yet been made of the tungsten grades or content also thought to be lurking within the geology.
Management says the strategic acquisition of the Hillgrove project has moved the company into a new league, transforming it from explorer to developer and potential miner overnight.
The deal was partly funded through a $4.9 million placement and also shares to the value of $2.5 million. The shares were issued to international commodity trader Trafigura, which will now speak for 15 per cent of Larvotto’s stock. Trafigura was a major creditor of Red River, the previous owner of Hillgrove, and agreed to transfer its Red River debt into Larvotto stock in order to enact the deal.
Additionally, the company gained the support of a new cornerstone investor, Beijing-based GAGE Capital Management, which not only subscribed for $2.9 million in the placement for a 19.9 per cent holding in Larvotto, but fully underwrote a $2.7 million entitlement offer.
Commenting on the deal that was consummated in December last year, Larvotto managing director Ron Heeks said: “After an intense few months of due diligence and negotiations with the administrators of Red River, we have achieved what no exploration program could ever have done – in one swoop, we have added 1.4-million ounces of high-grade JORC gold-equivalent ounces for the purchase price of under $6/oz (after NSW government environmental bonds).”
Hillgrove is 375km north of Sydney and 23km east of the regional city of Armidale in northern NSW, placing it within easy reach of key supportive infrastructure including major highways, grid power, rail links and regional airports.
While the project already has a sizeable resource and plenty of well-developed drill targets, it curiously also has a 113-hectare tailings dump that was commissioned in 1982 by New England Antimony Mines, about 500m from the current processing plant.
The tailings are entirely within the current mining leases and encouragingly, old records show gold sitting in them at 1.34g/t, antimony and plenty of tungsten. All told, there are 1.4 million tonnes of tailings in the dump that was created mostly during the era of antimony mining.
Larvotto still has more work to do to see how consistently the 1.34g/t grade runs through the tailings. However, at 1.4 million tonnes, if the grade holds up Larvotto may well have a rolled-gold walk-up start to mining and quick and easy cashflows.
In-house test results and physical TSF surveying support the old production records and documented grades and indicate that recovery of gold and antimony is potentially viable from the tailings. Further tailings evaluation and metallurgical testwork is ongoing to determine average grades and recoveries for gold, antimony and potentially tungsten.
It will also be carried out on hard rock gold–antimony recoveries to model possible co-processing from any existing stockpiles and likely future mill feedstock and may also explore the feasibility of a dedicated tungsten recovery module.
Notably the current resource at Hillgrove includes nothing from the tailings, which means they could become a source of a quick and easy – and cheap – resource upgrade.
The historic mining town of Hillgrove was established in 1884 and grew rapidly during the 1880s and 1890s due to increasing production from the mines. Early Hillgrove mining operations were centred around a collection of small mines worked mainly for gold, antimony and, to a much lesser extent, tungsten during the late-19th century.
Early smaller gold mines in the area were soon eclipsed by the discovery of high-grade gold at Baker’s Creek in March 1887, which developed into the Baker’s Creek Goldmining Company’s lease. First returns from the mine were impressive at 51 ounces of gold to the tonne, precipitating a gold rush to the area and a 20-head crushing battery was soon installed alongside a tramway that was built for more efficient transport up and down the steep gorge.
The mine remained one of the richest in NSW for the first decade of the 20th century. Past production from Bakers Creek, mostly between about 1880 and 1916, is estimated at about 304,000 ounces of gold from 176,000 tonnes of ore for an average grade of more than 50g/t gold, making it the most productive gold mining area in the Hillgrove mineral field.
Larvotto views the area as retaining significant potential for new high-grade gold discoveries. Results from 2022 drilling by Red River into the “Little Reef lode” at the Hillgrove project, which is part of the rich Bakers Creek reef system, underscore the company’s view.
Management says three diamond drill holes put into the inferred extension of Little Reef to locate a repeat of the steeply-dipping, high-grade ore shoots successfully demonstrated reef continuity and intercepted high gold grades in all three holes. They include 0.45m at an eye-watering 257g/t gold, 0.4m going 96.8g/t gold and 0.6m running 108 g/t gold. The latter intersection accompanied a shorter 0.4m intercept higher in the same hole at a stunning 525 g/t gold.
Other broader intercepts include 9.5m at 4.3g/t gold and 0.8 per cent antimony from 70m, in addition to 20.3m at 4.1g/t gold and 0.9 per cent antimony from 51m.
Larvotto says the three drill holes intercepted quartz breccia structures on-trend with the Little Reef structure. Along with other structures in the approach to the footwall structure, the breccias display visible gold, reflected by high-grade gold in assays – which is always a good sign.
Notably, historical records also show mining at Little Reef through a north-west strike of 280m to a vertical extent of 550m below the base of the gorge yielded production in 1890 at grades above 2 ounces (more than 60g/t) of gold per tonne, which begs the question, how much of this mineralisation did the old-timers miss?
The company’s Hillgrove tenure encloses a total of 254sq km made up of four exploration licences and importantly, 48 already-granted mining leases. The area was mined for both gold and antimony at different times as far back as 1857 and continuous antimony production at the site took place for more than 30 years up until 2002 when the price fell to an all-time low.
The Hillgrove operations have produced more than 740,000 ounces of gold and about 40,000 tonnes of antimony.
Before slipping into administration, largely due to the woes associated with its Queensland operations, Red River was planning to refresh the reserves base and increase resources at Hillgrove through exploration of both new and existing targets. It spent about $20 million on exploration and successfully increased resources and generated several more high-grade new targets adjacent to existing resources, which Larvotto says it will follow-up.
More than 2000 tonnes of scheelite concentrate, the principal ore mineral of tungsten, have also been produced from the area.
As an upside to future exploration, more than 204 individual mineral occurrences have been identified to date in the greater region, with the mineralisation often developed as strike-extensive veins up to 20km long, with potentially deep, steeply dipping fissures.
Both antimony and tungsten are designated as strategically critical commodities by many countries including the United States, European Union, China, and Australia and add an unusual and unique flavour to the project that is essentially a gold play.
Larvotto says while Hillgrove was operated successfully as a gold mine and as an antimony mine – both were never mined at the same time – although both metals often have complementary extraction processes and together constitute an overall high-grade mining opportunity.
The locality typically hosts higher-grade antimony near the surface with gold grades increasing with depth as antimony decreases. The company believes that one commodity could potentially support the other through the mine’s transitional phases.
Larvotto is about to get into a 2000m diamond core drilling program to test the exciting Bakers Creek reef system, which it believes could hold significant potential for high-grade gold mineralisation. Success in the Bakers Creek drilling could give it a good initial leg up as the company begins reassessing the resource inventory of the entire operation.
The Larvotto story is one that the gaggle of financial players known as “admin chasers” always hope to emulate, but few manage to do so. Admin chasers are those financial markets types that hang around administrators and receivers hoping to steal and reinvent the crumbs of failed operations. By any measure, however, Larvotto has pinched Hillgrove from the administrators.
Paying just $3 million – or call it $5 million if you like (including the environmental bond) – for a fully-functioning mining plant and an exploration package that combined have seen about $200 million thrown at them, is the dream play of the admin chasers.
Throw in a 1.4-million ounce gold equivalent resource going more than 6g/t gold equivalent and a backroom full of high-value exploration targets on paper, and it is starting to get a little embarrassing for the administrators.
Oh yes, and the tailings appear to be laced with gold going at least partially 1.34g/t, too… and that’s on top of the biggest antimony resource in the country.
Not a bad little asset spread for a $15 million market-capped company.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Doug Bright
