Hillgrove Resources Ltd (ASX:HGO) finished the December quarter with multiple wins under the belt - completing an underground mineral resource estimate (MRE), a detailed economic assessment and a successful capital raising for the Kanmantoo Copper Project in South Australia.
The mineral resource estimate brought the total Kanmantoo resource to over 5.6 million tonnes at 1.1% copper and 0.33 g/t gold for 62,500 tonnes of copper metal.
Hillgrove says the resource estimate was constrained by drilling, rather than the presence of mineralised geology. Drilling resumed in late October 2021.
“It was an exciting quarter for the company and the Kanmantoo site, which has seen us complete an updated mineral resource estimate (MRE) that increased copper metal by 82% from 34,400 tonnes to 62,500 tonnes of copper as a result of the 2021 drilling and re-optimisation of the copper cut-off from the mining studies,” managing director and CEO Lachlan Wallace said.
“Importantly, the updated MRE also improved the geological confidence, with the proportion of the indicated category of the resource’s copper metal increasing from 46% of the total resource to 72%.”
Economic Assessment
Hillgrove undertook a detailed economic assessment that identified strong potential project economics for stage one of the project, predicting:
- Post tax-free cash flows of $196 million;
- Net Present Value (discount rate of 8%) of $166 million;
- Internal rate of return of 389%; and
- Payback period of seven months post the completion of pre-production works.
“Off the back of the updated MRE, we were also pleased to present our detailed economic assessment during the quarter, which highlights the strong potential economics of Stage 1 of the Kanmantoo Underground project, including free cash flows of A$196 million from an initial three-year plan, at a low capital cost of only A$26 million, and at an all-in sustaining cost of A$6,991 per tonne of copper,” Wallace said.
“These strong economics are further strengthened at the corporate level, with a tax shield of over A$190 million through carried forward tax losses and A$17 million of franking credits.”
The company believes Kanmantoo will be one of the lowest capital intensive projects in the world and is continuing to examine further improvements to the economics of the project.
Hillgrove is currently aiming to fund development, begin underground mining and produce first ore this year.
“Continuous mining technology”
“This economic assessment reinforced the decision earlier in the year to commence the underground decline development ahead of the final investment decision using transformational continuous mining technology in the form of the Komatsu MC51 mechanical cutting machine, which promises to change the way industry approaches underground development, making it safer, faster, more efficient and greener,” Wallace explained.
“The portal to the Kavanagh lodes is complete. In addition, we have commenced a further 16,000 metres of drill program, focused on other lodes within the permitted mining lease, with a view to bringing these areas into the early stages of mining at Kanmantoo.
“This drill program will also aim to improve the geological confidence and expand the resource base ahead of commencement of underground mining.
“Looking forward, we will continue to refine the plan as we pursue the optimal funding mix which will minimise costs with due consideration to the financial risks.”
Hillgrove successfully raised $14 million in funding during the quarter, constituting $2 million from an oversubscribed share purchase plan and $12 million from a share placement.
Exploration surveying at the Stella Project, some 350 metres from the main Kanmantoo mining lease, has now been completed, with the final petrology and multi-element geochemistry results received.
About Hillgrove Resources
Hillgrove Resources is the owner of the Kanmantoo Copper-Gold Mine, which is 55 kilometres from Adelaide in South Australia.
The company is investigating underground development of the high-grade copper-gold lodes that continue beneath its Kanmantoo open pits.