Horizon Minerals has opened the cash floodgates from mining and processing gold-bearing ore from the company’s two cash-generating mines, under separate toll treating arrangements in Western Australia’s renowned Goldfields region.
Under its watchful eye, Horizon has witnessed a stream of cash pouring through its doors as the hauling and processing of ore achieves a continuous steady state.
The company’s two producing mines – Phillips Find and Boorara – have separate mining and tolling agreements in place.
Last August, Horizon approved the development of its Phillips Find gold deposit, 45 kilometres west of Coolgardie, with a canny decision to execute a joint venture (JV) agreement with specialist private mining firm BML Ventures to develop and mine two open pits.
Under the agreement, BML is covering all the project’s upfront costs and managing all its operational, technical and maintenance aspects. Net cash flow, after cost recovery, is to be split equally between the two partners.
Horizon also has a toll milling agreement for its Phillips Find ore with mill owner FMR Investments to process 200,000 tonnes of ore at FMR’s Greenfields Mill, beginning earlier this year. Greenfields is about 50km east of Phillips Find.
The agreements for Phillips Find are starting to pay big dividends, with Horizon reaping the cash rewards. Processing of its second stockpile has been completed, generating a sterling $5.8 million in revenue for the JV from 18,676 tonnes of ore processed at 1.97 grams per tonne (g/t) gold.
A strong 95.5 per cent metallurgical recovery rate produced 1132.2 ounces at an average realised gold price of $5140 per ounce.
The JV partners agreed on an early release of funds already received, which will see a cool $1.5 million from the project’s first cash flow distributed into Horizon’s coffers. The early payment results from the June processing campaign being deferred until August and helps Horizon stay flush with cash.
The funds distributed came from 300 ounces of gold sold at a healthy $5060 per ounce.
A final processing block of 60,000t will round out the FMR Greenfields campaign, which set out to process 200,000t of material. A further 27,000t of ore from Boorara will also be treated, to see the agreement completed in August.
Total processing to date from stockpiles one and two at Greenfields has generated a solid $13.74M in revenue for the JV parties.
Horizon plans to process a further 70,000t ore parcel at Focus Minerals’ Three Mile Hill processing plant in September-October to finish up its first-phase Phillips Find mining program.
Horizon Minerals managing director and chief executive officer Grant Haywood said: “We are pleased that our haulage and processing activities are ramping up to crystallise the significant cash we have tied up within our ore stockpiles, with gold production and therefore revenue increasing significantly from the March quarter with both operations starting to build up cash flow.”
Horizon last year entered an ore sale agreement for its Boorara deposit with Norton Gold Fields’ Paddington mill. Under the deal, 1.24 million tonnes of material from Boorara will be processed across 18 months.
Horizon also entered a tie-in with Kalgoorlie firm Hamptons Transport last year. The Hamptons contract is expected to comprise mining at four open pits at Boorara, containing 1.24Mt of ore grading 1.24 grams per tonne (g/t) gold for an expected 49,500 ounces.
When the link-up with Hamptons was revealed, the project was expected to generate $30M in free cash flow at a $3600 per ounce gold price. With today’s gold price cruising at more than $5200 an ounce, the project may realise significantly higher returns.
Management struck an impressive deal on the mining services and load-and-haul contracts, with no payments to Hamptons required until the first gold sale. In the meantime, the sale proceeds will gather interest in Horizon’s bank account.
Boorara sits adjacent to Northern Star’s mammoth Super Pit mine at Kalgoorlie, which has produced more than 60M ounces of gold. The Kalgoorlie-Boulder township is 15km west of Boorara.
Horizon has significant stockpiles on-hand, with about 190,000t of high-grade ore sitting on the Boorara or Paddington mill run-of-mine pads. A stockpile of 126,000t of low-grade ore is also awaiting haulage.
The March quarter yielded a stellar $6.3M in revenue from Paddington, including the whole payment for the first stockpile processed and 50 per cent from the second stockpile.
Cash keeps rolling in for Horizon with $12.8M in revenue received from the Paddington mill campaign this quarter to date. The company received a further $7.5M from Boorara ore treated at FMR’s Greenfields mill, as part of its April processing campaign.
The April parcel processed by FMR comprised 51,228 t at 0.92g/t gold, with an impressive metallurgical recovery of 94.71 per cent for 1439.3 ounces. The ore fetched an average price of $5195 per ounce.
The head-turning $20.3M in total payments will be split with Horizon’s partners as per the agreed terms.
Management says low-grade ore from early mining stages at Boorara has hit its cost performance results in recent months, however, the company believes its grades are improving with depth. Higher-grade material has achieved steady state. Horizon expects continuous haulage and processing will soon follow, allowing it to achieve a stronger cash flow performance in the second half of the year.
The company’s next steps involve treating 87,000t of ore at the Greenfields mill, starting in early August and the remaining 70,000t at Focus.
Horizon has well and truly opened the floodgates for cash production and with its collection of gold deposits scattered around the Goldfields region, the welcome level of cash coming through its doors may well continue.
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