May/June 2013 - The ASIA Miner

Mining Success Stories
The community is kept well informed about Ballarat operations through consultative committees and regular open days.
but Lihir was getting half that and the economics
were not there, so they ran the ‘For
Sale’ flag up the pole in 2009.
“Meanwhile, up the road Castlemaine Goldfields
was watching this unfold and threw
their hat in the ring when they saw it was for
sale. Castlemaine made a non-binding bid of
a value a number of times more than its market
capitalization. Lihir was trying to sell as a
big company does with a data room of information
and all the things you would expect
to attract interest but it was the GFC and
people were keeping their hands in their
pockets. At the time Bendigo Mining was
having problems and if Lihir couldn’t make
Ballarat work, people queried what were its
chances of success.
“There was very little interest and Castlemaine
was successful, paying $4.5 million in
cash, which represented 1 cent in the dollar
for Lihir’s investment. Castlemaine backed
the environmental guarantee with a $4 million
bond to the government and there is a 2.5%
net smelter royalty, capped at $50 million,
now payable to Newcrest, which bought Lihir.
The sale included $1 million in stores inventory
and a team of 6 people from Lihir, and
Castlemaine then sold more than $2 million
worth of surplus plant and equipment. It was
a transformational year for Castlemaine, moving
from small explorer to a near-term producer
and there are not too many juniors that
can boast a head-start into being a near-term
producer like we received, picking up plant,
infrastructure, permits, licence, the whole lot.”
A different strategy
Matthew Gill says Castlemaine was never
going to take up the Lihir strategy and saw
that you could spend a lot of money to produce
a lot of ounces but the amount of profit
could be quite small. “We decided to aim for
quality over quantity, to be a 50,000
ounce/annum producer not 200,000 ounces,
to treat 220,000 tonnes/annum not 600,000
tonnes and to run the mill three days a week.
Our key focus was to ensure the yield – the
gold grade of the ore – was as high as reasonably
achievable, delivering a good margin
between the cost of mining and the revenue
received from sale of the gold.
“We put two drill rigs underground and
drilled for nine months to determine that there
was enough mineralization for at least two
years. The rigs are drilling as we go because
it’s not possible to drill from surface owing to
the mine being more than 600 metres underneath
the city. We drill for structure as it’s problematic
to fully drill out a resource above the
inferred category, and this gives us a rolling 2-
year mine life. Working to a 5-year mine life
would mean spending tens of millions and this
is not the space Castlemaine is in. We need to
justify where we spend capital and are now
extending the tails dam – this next stage will
add another 2 years storage capacity because
we believe this gold-bearing system will keep
going to the north with at least 1.5km ahead of
the 3.5km we have already advanced and
which has yielded 1.5 million ounces to date
from underground. The structural continuity
and robustness of what we have mined to
date supports this expenditure.”
Castlemaine Goldfields completed its ninemonth
drill program, conducted its own feasibility
study, and commenced mining
underground at Ballarat in March 2011 by extending
the decline, mined its first gold bearing
ore mid-year, poured first gold in
September 2011 and ramped up to steadystate
production by mid-2012. Matthew Gill is
proud to state, “From acquisition to gold producer
in 18 months is a tremendous credit to
our workforce and support from the community,
local authorities and shareholders.”
He says, “Exploration is important and we
are drilling underground at Ballarat as well as
regionally. We have a processing mill that is
more than twice the capacity of what we are
using so if we can discover other deposits we
have the spare capacity. What we are doing
shows there is room for small players as the
50,000 ounces produced annually would not
interest big players. With cash operating
costs under $1000 an ounce, it’s not a bad
margin at current gold prices and a lot of juniors
would be happy with that.
“If the Chewton drilling upgrades the resource
we will consider a feasibility study for
underground operations, but this is some
years away. To complement the timeline, Tarnagulla
has near-surface open pit potential.
We are doing soil and augur sampling, and
planning RC drilling. The turnaround should
be a lot quicker than an underground operation,
even considering environmental and
permitting issues.
“We are also planning preliminary drilling from
underground to intersect the Ballarat West
goldfield, about 1.5km west of the mine. It produced
almost 1 million ounces in its own right
at twice the gold grade of the Ballarat East field
where we are working now. It’s on our
doorstep and has potential to be accessed
from current underground operations. We have
potential north, which is where we are heading,
we will test west and 25km away to our
south is Berringa which was mined until the
1980s and has possibilities as an underground
operation and potential source of mill feed.”
The Ballarat Goldfield has produced about
12 million ounces since the 1850s and if
Castlemaine and Tarnagulla are added, is the
fourth most prospective gold holding in Australia
behind Bendigo, Kalgoorlie’s Super Pit
and Boddington. “While past performance is
no guarantee of future performance,”
Matthew Gill says, “we’ve got tenements that
6 | ASIA Miner | May/June 2013