Crescent Gold Is The Low-Grade King Of Australia By Our Man In...

Crescent Gold Is The Low-Grade King Of Australia

By Our Man In Oz

If grade is indeed king in the mining world, then emerging Australian gold producer, Crescent Gold, need not apply for the job. With an ore reserve of less than two grams a tonne, a quality which might also be called “needle-in-a-haystack”, Crescent has been largely ignored by local investors in Australia who prefer their gold in richer servings. The problem with that approach is that it overlooks two rather important business facts, one timeless and the other historic. The timeless feature is that grade actually becomes irrelevant if the ore is easy to treat and the mine is highly profitable. The historic feature is that Australia has travelled the low-grade gold road before, with some success, and Crescent might be the first case of a re-run thanks to the high Aussie-dollar gold price which remains close to the A$800 an ounce market despite the recent slide in the U.S. dollar price.

“The game really is all about the profit, not grade,” said Crescent chief executive, Andrew Haythorpe, when Minesite tracked him down to his furnitured office in central Perth. “We’re very confident that we can lock in a profit margin of around A$250/oz for the life of the project.” The mine Haythorpe refers to is actually a series of pits which sit under the umbrella name of the Laverton Project. Best of the nine deposits identified for mining is called Sickle. It contains 2.21 million tonnes of material averaging 2g/t. The “skinniest” is Admiral Hill with 1.96m/t at 1.1g/t. In total, Laverton is currently calculated to contain a probable ore reserve of 6.milloin tonnes at an average of 1.8g/t and an indicated mineral resource of 18.7m/t at 1.5g/t. “It’s profitable to work with material like that if the ore is soft, and the strip ratio low,” Haythorpe said. “If it gets any harder, or deeper, forget it.”

Haythorpe has a keen eye on the financial fundamentals at Laverton, which is located in a region of Western Australia’s eastern goldfields with a century-old track record of throwing up prolific goldmines. In his former life he was a resources analyst, most recently with the Perth-based brokerage, Hartley Poynton. It is his financial nous which has encouraged him to look beyond the low-grade issue, and get the money-side of the business equation in good order, including something rarely seen in a small Australian miner – a “diesel cap”. Essentially, Haythorpe has locked in for a fixed price an essential ingredient in remote area mining, diesel fuel. In the case of the Laverton project, diesel represents 22 per cent of total costs.

Other Australian miners, and number of international investors, are looking closely at what Crescent is doing. The Australian outback is littered with low-grade gold deposits. What they need is a big mill, a low-strip ratio, soft ore, and it’s money for old rope. In Crescent’s case the start-up equation looks like this: it plans to produce 90,000oz of gold a year using conventional gravity and carbon-in-pulp processing which will yield gold at a cost around A$582/oz (US$436/oz). The gross profit margin on those 90,000oz, if Haythorpe can lock in his target of A$850/oz through forward selling, or with some other financial instrument, is around A$22.5 million a year, a handsome margin for a business currently capitalised at A$65 million.

The issue which seems to worry local investors, apart from grade, is mine life. On current reserve figures, Laverton will last just over four years – a blink of the eye in mining terms. But, on that charge, Haythorpe has a convincing retort. “This is a starter project,” he said. “It’s all about getting into production, and then growing the project.” To do that, he needs to find more ounces, grow the grade, and perhaps add a few sweeteners in the form of additional metals to the Crescent inventory.

A fresh look at Crescent shows that he is ticking all those boxes, which is probably why the gold investment specialists at Dundee Precious Metals held their hand up on September 13 for a series of placements aimed at giving them a stake of around 15 per cent in Crescent, with the first issue of 17 million Crescent shares passing to Dundee at a price of A35 cents, around A6.5 cents, or 23 per cent, above the current market for Crescent of A28.5 cents – what even the most churlish of observers would call a vote of confidence.

Funds raised from the Dundee placement will be used to re-organise Crescent’s gold book and accelerate exploration in the Laverton area where recent drilling has been throwing up tantalising results. The latest gold assay, which defied the company’s low-grade tag, was an impressive 11 metres at 7.1g/t starting at a depth of 155metres in the Bells prospect. Located just 4.5kms from Crescent’s processing facilities, the fresh discovery has the potential to be a useful feedstock provider. The same structure at Bells has previously yielded a hit of 5metres at 16.8g/t.

But the drill result which might be the pointer to something even better is in a different metal altogether. Copper grades as high as 11.5 %, with associated rich gold grades as high as 12.6g/t have been obtained from a hole testing a 6kms long copper/gold soil anomaly adjacent to Admiral Hill. The copper intercept came from an area up to 62metres wide which contains visible chalcopyrite (an ore of copper). It’s early days for Crescent to be thinking about future copper production, given that it won’t even pour its first gold until later this year – but the copper hit, and an increasingly active gold search, is a pointer to what might be achieved once production starts on the low-grade resource, and the cash starts flowing.