Looking at the timelines and the market structure I suspect the original plan developed in 2022 was for a larger open pit which may well have had a high strip ratio. Gold would have been a byproduct that assisted a lower mining cost making the high strip ratio lithium mine affordable. In designing around lithium and gold coming from lithium "waste" ore, gold may have had unstable annual volumes. Unstable volumes over perhaps 4-8 years of open pit mining period lends itself to contract processing at a large gold processor.
At least some of the Mt Ida lithium is always going to be UG given its depth. At this point in time in 2022 I suspect the plan would have been more open pit and less UG. This would have captured more of the known gold as a byproduct as well most likely as some unknown gold as a byproduct. It would have also increased the instability in quarterly gold volumes.
Four critical events have occurred since 2022:
- Gold prices have risen
- Lithium prices have fallen sharply
- Exploration success at expanding Mt Ida lithium has been limited (Lithium hasn't gone to 20-30Mt)
- Greater acceptance is emerging around UG mining in the lithium sector.
The falling lithium price means maximum strip ratios need to come down. The amount of open pit gold (from lithium "waste" rock decreases), however some areas of the proposed pit may become fully self sufficient from a gold perspective. If gold is driving the show, its easier to plan for stable gold ore rates of production. If the balance shifts towards more UG mining then its also easier to plan for stable gold ore rates. If gold is driving more of the open pit decisions then greater flexibility exists around gold ore volumes recovered each year (than for a lithium driven mine plan). For a while these factors resulted in less variability in the potential annual range of gold processing discussions. As the Gold JORC increased, thinking may have flipped to gold volumes being stable enough and large enough that it became a 50/50 call on a Mt Ida gold concentration plant vs contract processing. The bigger the gold deposit the more it favours on-site processing.
The speed Delta would like to complete open pit operations means significant gold processing capacity is needed (even with modest ROM flex). Delta may have been planning on peak gold volumes of over 100ktpa oz per from the open pit. You don't build a near 100ktpa gold plant for 400kt oz, or for 600kt oz because the plant life becomes too short. You might however build a near 100ktpa plant with a 1Mt oz resource because you are now at 10 years with potential to contract process / acquire nearby tenements to push that mine life beyond 10 years. The commercials of a dedicated decent sized gold plant start to work.
An interesting gap in Minres's portfolio is gold. Its impossible that Minres haven't looked at dozens of gold projects but in the way they looked at a lithium hub in Lake Johnston they may also be looking at a gold hub either at Mt Ida or nearby. It may be Minres is looking at an expandable gold processing hub (possibly starting by acquisition) and they want to get Delta big enough to be a cornerstone customer on this operation or do a JV with them. If Minres outlined a lithium/gold contract processing hub proposal involving low capex to the board members of Delta, it might explain the shafting of David Flanagan about a year ago. Back then iron ore was near $120/t back then and got to $140/t by the end of 2023 so Minres had more operational cash flow.
It would be the ultimate irony of multiple metals if Delta was waiting on stronger iron ore prices so Minres has the capital to execute some sort of Lithium/Gold hub that then makes Delta's pathway into production comparatively easy.
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