The French Kiss and Harrys Hill open pits will be depleted in the current (March) quarter to be replaced by Daisy underground ore feed to the mill later this financial year. Quotes from the quarterly:
“Pre-stripping of theKaronie open pit has been scheduled to dovetail with the completion of miningat French Kiss and Harrys Hill towards the end of Q3 FY20.”
“During the secondhalf, high grade ore from the Daisy complex will displace lower grade Aldissopen pit feed to the mill.”
The Mount Monger stockpile at Dec 31st was 1.49 Mt @ 1.4 g/t containing 68,400oz. In March, mining will commence at Karonie open pit and “is expected to produce 86,000ozover an 18 month period”. Karonie has a Probable Reserve of 1.62 Mt @ 1.6 g/t for 82,000oz.
By Sept 2021, the stockpile (with additions from Karonie) could then be 3 Mt @ 1.5 g/t for 150,000oz, which begs the question is SLR positioning to expand its 1.2Mt pa mill throughput at Mount Monger? I question this considering its imminent (higher grade) ore sources in FY21:
1) Mount Belches: From the Dec quarterly “Santaproduction in FY21 is expected to be 26,000oz, increasing production from theMount Belches Mining Centre to 70,000 – 75,000 ounces in FY21”. Assuming the mid-point of 72,500oz and grade of 4.5 g/t (Santa reserve grade is less than Cock-Eyed-Bob and Maxwell’s), implies ore delivery to the mill of 500,000kt.
2) Easter Hollows: Has an inferred resource of 155,000oz between 520 RL and 660 RL levels which SLR anticipated in 2019 it could be mining from for 1-2 years. Interestingly, Daisy Milano produced 1,658 ounces per vertical metre between 500 RL and 700 RL (Aug 2015 presentation). At this stage and until the Indicated Resource is announced, I assume Easter Hollows will produce 300kt @ 6 g/t for 55-60,000oz per annum in FY21/22 after ramp-up.
3) Tank & Tank South: Open pit and UG inferred resource of 1.2 Mt for 100,000oz, which the company is currently updating to Indicated status and increasing the open pit resource to the north. In 2019, the company envisaged it could be mining from Tank South for 1-2 years. I can easily see mill feed of 400kt per annum (3 g/t) with further additions to the stockpile over this time.
These three ore sources above total 1200kt and would therefore be sufficient to feed the 1.2 Mt pa plant, although some ore may be replaced with lower grade stockpile to maintain 93-95% recovery. Beforepotentially increasing mill capacity, I expect SLR to first achieve at Easter Hollows what it has accomplished at Mount Belches: “Future drilling at Mount Belches will continue to target a rolling 3-4year Ore Reserve as both mines have sufficient visibility and geologicalinformation for mine scheduling and planning” (Aug 2019 reserve update).
In my opinion, this 3-4 year confidence could largely be achieved throughout the course of FY21: “Easter Hollows is expected to provide a shallower mining front, withthe dual purpose development drive to provide access to defined lodes and thenecessary drill platforms for further Resource definition and infilling thebroader mineralised system of lodes defined over 1,000m of plunge” (Feb 12th announcement).
Note also that last year SLR added 60,000oz at $A 2,070/oz to its hedge book, specifically for de-risking margins on ounces produced from Karonie, with delivery in 2021/22.
I have some comments on the Dec quarter operating margins at Mount Monger with regard to outlook in the first half of FY21, specifically gold price, hedge book and mining costs.
In the Dec quarter, net cash flow from Mount Monger = 38,702 ounces sold x gold price received of $A 2,028/oz minus AISC (non-adjusted, includes royalties and corporate overheads) of $A 1,647/oz = $A 14.7 million, which went straight to the bottom-line increasing the company’s cash position (no financial shenanigans going on here, very transparent and easily understood).
In the first half of FY21, the SLR hedge book improves significantly (38,068oz @ $1,884/oz delivery), representing approx. 30% of production. If spot prices are above $A 2,300/oz the company will receive nearly $200/oz more for its gold sales. I also expect Mount Monger mining costs to improve significantly from $A 927/oz in the December quarter as shallower Easter Hollows production ramps up. In time we could see a $200/oz reduction there although non-adjusted AISC will remain high as Karonie production will be mainly stockpiled in FY21 instead of processed through the mill. In short and as things currently stand, I see quarterly net cash flow at Mount Monger doubling during the course of FY21 from $14.7m to $29m.
As a long-term holder I’m finally enjoying the benefits of the merger with Integra Mining which promised so much in 2012!Like everyone else, I’m looking forward to the next exploration update at Deflector, particularly with regards to what Luke Tonkin stated at the Denver Gold Forum last year (2,000oz per vertical metre along 600m of strike with a potential 50% increase to 900m being a “game changer” for the company):
http://www.goldforumamericas.com/archived-event/gold-forum-americas-xpl-dev-2019/
