Baird signals a change in FocusRichard Roberts, 7 September 2009...

Baird signals a change in Focus
Richard Roberts, 7 September 2009

Focus is on track to recommission the Three Mile Hill plant in December.
A HIGHER gold price environment has the ASX-listed gold junior Focus Minerals and its CEO daring to dream about a brighter future for Coolgardie, Western Australia’s quintessential boom-bust mining town. But it is the focus on reshaping the cost profile of gold production in the district that will determine the reality.
Campbell Baird is certainly under no illusions about this.
But neither is he prepared to let the campaign-style existence of many previous Coolgardie miners limit his thinking on the way forward for Focus. That recent past, stretching back to the 1980s gold boom, features a mix of good and bad stories that ultimately doesn’t inspire confidence in a ‘big district picture’.
“One of the key things you’ve got to say about Coolgardie is the operation in the 1980s and 90s was mined in a different price environment,” Baird told HighGrade.
“It was mined in a price environment of $US250-300/oz, and that sort of price environment means that you mine purely to survive and you really were limited in your cash generation and your ability to then drill outside of the box, so to speak, instead of just 50m in front of you.
“And that’s where the opportunity for Focus is certainly arising. When we turn our mill on we’re going to drop our operating costs significantly. We get to mill continuously, and we’re going to start generating a lot of cash in this new price environment. And with that cash we’re going to be able to do a lot more drilling than other parties were ever able to do.”
Focus has about $A20 million of cash in the bank and $A9 million of the $A17 million fixed cost of refurbishing/rebuilding the Three Mile Hill gold plant to be paid by the end of November. It expects to recommission Three Mile Hill through December and January, when it puts what it hopes will be its final batch of campaign ore through the Greenfields mill near Coolgardie. This is the arrangement that’s been generating cash for Focus from toll milling over the past 18 months or so.
Next year Focus expects to produce 80,000oz at a cash cost of about $A650/oz, and generate a cash surplus of $A12-18 million based on a $A1150/oz gold price.
Its emphasis on growing reserves – openpit and underground to achieve the right grade and metallurgical (sulphur) balance – will sharpen. The company currently has indicated and inferred resources in multiple deposits totalling nearly 23.3 million tonnes grading 2.1-2.9gpt for 1.88 million ounces, but reserves of only about 110,000oz.
Baird, the former Kambalda mine manager who became Focus CEO earlier this year, said analysts’ views on escalating cash costs at Coolgardie – one Focus supporter has them climbing to $A760/oz in the year to June 30, 2010 ($A840/oz total costs) and $A790/oz ($A890/oz) the following year – were tied to the average head grade extrapolated from published resources.
“For me to talk about my costs in 2011 in a realistic sense at this point in time is pretty difficult,” Baird conceded.
“But I think it’s fair for most people looking in to say, where are their reserves coming from? We’ve got mine plans and models based on resource conversion, which we’re reasonably confident of meeting, but that makes it hard to answer authoritatively [on cash costs], particularly for 2011 and 2012.
“What I can say is that our focus is on strictly managing our cost base going forward. I’m looking at Perseverance, and Coolgardie, and The Mount, as high grade gold mines first and then rock factories second. To me it’s going to be more about producing ounces rather than trying to produce tonnes.
“Grade is certainly king so the second thing we’re really focusing on is where we can get our ounces, and get our high grade, to keep our ounces up and our costs low. We don’t want to be going into a pit that’s got 1.5gpt, and we’ve got plenty of those, because that’s where you immediately start to get into a high cost-per-ounce environment.
“Now we have a 1.2Mtpa mill, but premier in our mind is always going to be getting 100,000oz out of that mill rather than doing 1.2Mt.”

Focus announced this week that it had secured mining permits and environmental approval to mine the 350,000oz The Mount deposit, about 80km south of Coolgardie, where it will develop a small, 3.5m-by-3.5m exploration decline to drive through a number of the near-vertical lode structures it expects to underpin a 200,000-300,000tpa, narrow-vein underground mining operation. The decline and further drilling will enable Focus to convert the current resource of 2.2Mt grading 5.5gpt to a reserve.
“We’ve got about 20 structures identified there,” Baird said. “There’s going to be a lot of coarse gold down there [and] it’s going to be a low-tonnage, high-grade mine. The guys [local contractor] are going to drive that on two levels. And from that information we’ll be able to get a picture of what sort of an operation it will actually be [but] realistically we’ll be focusing on maximising ounces out of the ground and onto the surface while minimising tonnes onto the surface for the 85km haul to the plant.”
Next year Baird is counting on processing about 1Mt of Focus’ ore at Three Mile Hill, and toll treating about 200,000t of material. A recent deal with Matsa Resources to toll mill ore from that company’s North Scotia deposit at Norseman has set the tone for other similar opportunities Baird believes are available.
“North Scotia has about 100,000t in reserve, according to our preliminary modelling, at around 6gpt. We have said to them we will mill that for them as they can deliver it, for the cost of milling, and we’ll retain 20% of the gold,” Baird said.
“That is equivalent to us mining a 4gpt openpit deposit, so you immediately displace your own ore and put that stuff through because ... it’s a zero-risk option for us; the mining and delivery risks are all theirs and it’s a Norseman quartz deposit so you’re most likely going to get more gold out of it than you expect. It’s going to be a coarse gold opportunity ... and we’ve got a fantastic new gravity circuit going in.
“We’re looking actively for those opportunities as well going forward, and there’s quite a few of them out there.”
The Brilliant (240,000oz resource), Dreadnought (221,000oz) and Lindsays (314,000oz) are marked down as sources of opencut feed for Three Mile Hill, though the latter might also yield 4-5gpt as a large-scale underground operation. The Tindals mining area, where Focus is concentrating most of its current exploration to find extensions of the Perseverance, Empress, Countess and Cyanide lodes, is also seen as a potential source of bulk underground tonnage rather than the higher-cost, narrower-focus mining centre it has been to date.
Baird said new future mining scenarios for Tindals were starting to evolve.
“The Tindals mining centre, just that little region of about 500m strike length, has about 750,000oz produced or in resources down to a depth of only 250m,” he said. “Now we’ve just started to drill under those [Perseverance, Countess, Empress, Cyanide] deposits and the results have just been fantastic. We’ve now drilled about 15 holes and the first hole returned 4m at 31gpt, and every other hole after that has had 4-5gpt in it.
“The bigger story there might well be, on that ounces-to-vertical-metre rate seen so far, another 500,000oz over the next 200-300m. So we’re just exploring that one right now.”
Baird said ground conditions in and around the mineralised diorite and greenstone structures at depth at Tindals were very good.
“There have been no geotech problems and we have a very good program underway to make sure that it stays that way,” he said.
“We are big users of the ikon [electronic controlled] blasting system underground and our senior mining engineer is one of the recognised experts in it in the Goldfields. We have reduced our dilution down in our stopes to 5-8% over the past couple of months through great drill and blast practices and very good ground conditions.
“It’s going to take us months to start working this one up and understanding what we’ve got, and a lot more drilling, but I’d like to think that we’re going to be getting 70% of our feed out of Tindals, and then another 10-20% out of The Mount, and then after that, at 1.2Mtpa, you’ve actually got all of these other assets actually competing for space in the mill.”
While the association of sulphur and copper with higher-grade ore from some mines – and most notably Perseverance in recent times – has meant increased treatment costs, Baird is confident the issue can be better managed with a bigger plant.
“We’ve got a campaign going through now [at Greenfields) and as of today there was 4% sulphur going through. But we’ve got a whole lot of Countess material which is zero sulphur so we’re blending it down,” he said.
“That’s the key with going to a 1.2mtpa plant: you’re going to be able to mine each of these deposits at 20,000-30,000t/month, you’ve got 100,000t/month capacity, so you’ve got serious capacity to blend it down. From all of the work we’ve done over the past 12 months at Greenfields we’ve shown that with extra oxygen capacity and reagents we can certainly manage any sulphur issues. But the larger plant capacity gives us that blending capability as well, so it’s just not going to be a problem going forward.”
Focus has budgeted $A7 million for exploration this year. An underground drill rig is working continuously at Tindals and a surface rig is due to arrive later this year or early next year. Minimal drilling has occurred on the field, outside of Perseverance, for the past three years.
“So far our discovery cost this year has been about $A11/oz,” said Baird.
“I’ve got a grand vision that in 3-4 years time, with a lot of drilling and a lot of work, we will have the ability to be producing at 3Mtpa with a million tonnes per annum from underground, out of Tindals and The Mount and other places, and the rest coming out of our openpits.”
That’s the vision. Now let’s see what tomorrow brings.