Hot on the heels of a recent gold resource increase, ASX-listed junior explorer, Kingwest Resources has released a “strong economic case” for mining to kick off at its multi-deposit Menzies gold project approximately 130 kilometres north of Kalgoorlie. The company’s scoping study on Menzies points to a proposed open-cut mining and toll treatment gold operation spitting out estimated revenues of $330 million and free cash flows of between $64 million and $95 million across an initial project life of just over two-and-a-half years.
Total costs of the initially contemplated 31-month mining exercise have been forecast at $250.4 million or A$1,688 an ounce of gold produced. The study’s financial projections for the mooted Menzies open-pit mining and third-party toll treatment processing scenario were arrived at using a gold price of $2,300 an ounce.
Major components of the $250.4 million in total costs are toll processing of mined ore by third parties estimated at $105.1 million, mining costs at $105.1 million and haulage costs of $30.9 million.
The Perth-based company says funding likely required for capital works and pre-production working capital under the scoping study parameters will be approximately $20 million, which may be sourced via both the equity and debt markets or even a royalty streaming or joint venture arrangement.
Earlier this month, Kingwest lifted the near-surface indicated and inferred mineral resource estimate for the Menzies group of satellite deposits to 11.05 million tonnes of ore grading an average 1.26 grams per tonne for 446,200 ounces of contained gold at a 0.5 g/t cut-off grade. All deposits remain open at depth, according to the company.
The revised gold resource, which underpins the scoping study, was generated following the company’s extensive infill RC drilling program in the second half of last year comprising 180 holes totalling 17,224 metres.
It brings the total RC and diamond drilling coverage the company has piled on at Menzies since September 2019 to more than 35,000m.
Kingwest has also provided an indicated and inferred mineral resource estimate for Menzies of 5.36 million tonnes of ore at an average grade of 1.83 g/t for 315,500 ounces of contained gold based on a higher cut-off grade of 1.0 g/t.
The multiple-mine plan for Menzies envisaged in the study involves eight separate open pits, with four new pit designs for the Pericles, Stirling, Bellenger and Warrior deposits and four cutbacks to the existing open pits of Lady Shenton, Lady Harriet, Yunndaga and Selkirk.
Overall mined material numbers assumed in the scoping study consist of 3.15 million tonnes at 1.72 g/t for 174,700 ounces of contained gold. The high-grade and medium-grade ore totalling 2.39 million tonnes at 2.02 g/t for 155,000 ounces of contained gold would then be sent for toll milling.
Subsequent total gold production after applying a 95 per cent recovery rate has been estimated at 147,200 ounces.
Kingwest says it has already entered into negotiations with multiple parties in relation to third-party treatment of the ore mined from Menzies.
Kingwest Resources Chief Executive Officer, Ed Turner said: “We have now demonstrated the potential economics of the Menzies gold project and the near-term production possibilities which have attractive profit margins using the current gold price.”
“This is a culmination of dedicated and focused exploration over the last 18 months by our small team who will continue to search for further additions to these near surface resources in order to continue to add value to the project.”
The company says the positive results of the study support further work on assessing the potential economic exploitation of Menzies and to that end, it plans to follow up the scoping study in more detail with a pre-feasibility study.
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