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1 QUARTERLY REPORT IIIIIIIIIIII PERIOD ENDING 30 JUNE 2017 Hillgrove Resources Limited (ASX: HGO) reports for the quarter ended 30 June 2017 HIGHLIGHTS Operations a quarter focused on waste stripping has progressed the Giant Pit cutback to near completion and leaves the operation with a remaining strip ratio of below 1.8 to 1 (compared to the original project strip ratio of 5.5 to 1). Despite some operational challenges during the quarter: Quarterly mining unit costs decreased for the third consecutive quarter. The improved mining production rates seen since December s capital raise were maintained. Midlife rebuilds to both primary excavators were successfully completed after being brought forward from mid-year following premature failure. These resulted in lower than planned mining production. The mill continued to perform with the quarter averaging 3.3Mtpa annualised throughput. This is lower than the previous quarter due to reduced online milling rates as the hardness of the ore increased. Changes to the mill circuit saw throughput rates pick up towards the end of the quarter. Site rehabilitation continued with an additional 18.5 ha shaped to the final profile and planted with locally collected and cultivated native seeds. Hedging - the Company has locked in sales revenue until mid-october 2017 at an average price of A$7,553. LOOKING FORWARD Liquidity the lower than planned mining production has extended the tight cash position until copper production begins ramping up from the end of the September quarter, after which we expect to see a steady improvement in the Company s liquidity with lower waste removal costs and the generation of positive cash flows. Growth there are significant opportunities for organic growth which will continue to utilise the Kanmantoo copper processing facility, and which include: A potential underground mining operation at Kanmantoo, where Hillgrove has approximated an Exploration Target 1 of between five and ten million tonnes with a target grade of between 1.7% and 2.2% Cu and 0.4g/t to 1.0g/t Au and which has the potential to significantly increase the current mine life, A regional exploration project, where Hillgrove has identified a 3.7km long, 600m wide, copper-gold zone at its wholly owned Kanappa Project, which is 44kms from the processing plant, and Other regional exploration projects including Mt Rhine, with previously reported gold zones 2 of 15.9g/t Au in channel sampling of surface outcrops. 1 The Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code (JORC 2012). The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve. 2 ASX Release High grade gold zones identified at Kanmantoo 14/12/2006.

2 MANAGING DIRECTOR S STATEMENT The second quarter was challenging from an operational perspective with midlife rebuilds of the primary excavators, dealing with rock movement on the eastern wall and finishing the higher strip benches in the Giant Pit Cutback. By the end of the quarter stripping ratios were lower, meaning ore is starting to be stockpiled at the mill and this adds resilience to the operation. In the coming quarter the Giant Pit cutback will be behind us meaning; Waste to ore ratio for remaining mine life is now below Copper grade will increase as we can access deeper higher grade ore, and The operations will be significantly de-risked, with multiple work areas and the ability to selectively and preferentially feed higher grade material from stockpiles. With this improved outlook, we expect to see a steady improvement in liquidity over the remainder of 2017 which will result in reduced creditor balances by year end. Our full year guidance remains unchanged, although likely to be at the lower end of the previously announced range of 18,000 to 20,000 tonnes of copper and 5,500 to 7,500 ounces of gold in concentrate. We have commenced evaluating growth opportunities which leverage Kanmantoo s existing asset base. These exploration opportunities include a potential Kanmantoo underground operation, and further afield evaluating the potential at the Mt Rhine and Kanappa exploration targets. These projects are being advanced internally in preparation for geophysical and drilling programmes towards the end of the year. KANMANTOO COPPER MINE, SOUTH AUSTRALIA Mining Lease 6345 (Hillgrove 100%) Safety and Community The Total Recordable Injury Frequency Rate (TRIFR) reduced to 19.7, following one injury in May to an operator who sustained a cut finger requiring sutures, whilst straightening a sign in the pit. FIGURE 1. TOTAL RECORDABLE INJURY FREQUENCY RATE Operations Note: injuries in September and November reclassified from reported TRIFR in Annual Report The improved mining production rates seen since December s capital raise were maintained despite both primary excavators being down for extended periods to complete midlife rebuilds during the quarter, and unplanned operational delays associated with wall movement and rock falls above the main access ramp. The midlife rebuilds to the excavators are expected to improve reliability which negatively impacted production in 3 Strip ratio : (tonnes of waste) / (tonnes of Mineral Resource) above cut-off grade of 0.2%Cu 2.

3 the June quarter. The wall movement has been arrested and is not expected to cause any further concerns. Geotechnical engineering controls, including rock catch fences and meshing, was established during the quarter and will continue into the September quarter to maintain a safe work environment. The quarter continued to focus on flattening the pit to make the work areas more efficient. During the quarter the focus was predominantly on mining waste (strip ratio 4.5 waste tonnes for each tonne ore) bringing the Giant Pit cutback close to completion. The mill continued to perform during the quarter at an average annualised throughput of 3.3Mtpa. This is slightly down on the previous quarter, driven by a decrease in grinding throughput rates as harder ore was processed. The lower throughput increased processing residence time, leading to an increase in copper recovery from the previous quarter despite the lower feed grade. The grade of the ore processed was lower than expected due to the lower than planned mining rate which limited high grade ore supply to the mill. Gold recovery also increased due to the flash flotation cell being optimised, despite gold feed grades remaining at relatively low levels. Site rehabilitation continued with an additional 18.5 ha shaped to the final profile and planted with locally collected and cultivated native seeds which is in line with the planned rehabilitation schedule. TABLE 1. KANMANTOO COPPER MINE PRODUCTION STATISTICS FY16 MAR-17 QTR JUN-17 QTR Ore to ROM from Pit kt 2,838 1, Ore to long term stockpiles kt Mined Waste kt 12,332 4,413 3,821 Total Tonnes Mined kt 15,171 5,453 4,669 To ROM from LT Stockpiles kt Mining Grade to ROM % Ore Milled kt 3, Milled Grade - Cu % Au g/t Recovery - Cu % Au % Cu Concentrate Produced Dry mt 59,842 16,223 15,203 Concentrate Grade - Cu % Au g/t Contained Metal in Con. - Cu t 13,624 3,727 3,392 - Au oz 11,518 1,060 1,100 - Ag oz 104,042 27,254 25,986 Total Concentrate Sold Dry mt 60,213 15,939 15,865 3.

4 FIGURE 2. KANMANTOO COPPER MINE PEFORMANCE FIGURE 3. KANMANTOO QUARTERLY MILL TONNES, COPPER RECOVERY AND MILL RUN TIME Costs Quarterly mining unit costs decreased for the third consecutive quarter to $12.18/bcm as a result of the increased efficiencies resulting from the opening up of multiple working areas and the reduction in mining rates negotiated with the Emeco / Andy s Earthmovers merger. Processing unit costs increased to $7.45/tonne, largely driven by the increased cost of electricity and the lower throughput rate for the quarter. 4.

5 FIGURE 4. KANMANTOO QUARTERLY MINING UNIT COSTS FIGURE 5. KANMANTOO QUARTERLY PROCESSING UNIT COSTS C1 unit cost for the June quarter was US$2.40/lb virtually unchanged from the March quarter despite the quantity of payable copper being 9% lower. The portion of mining costs deferred in the June quarter was increased in line with a higher strip ratio during the June quarter and updating the standard costing model for the remaining benches now there is more certainty with ore reconciliation. The ore inventory adjustment in the June quarter reflects the NRV write down of stockpiled lower grade material which is yet to be processed. 5.

6 TABLE 2. KANMANTOO COPPER MINE COSTS (USC/lb) CY16 Total Mining Cost Deferred Mining Pre-strip Ore Inventory Adjustment 12 MTHS MAR-17 QTR 3 MTHS Mining Costs Processing Costs Other Direct Cash Costs Total Onsite Costs Transport & Shipping Treatment, Refining & Smelter Charges Total Offsite Costs Precious Metals Credits US cents per lb Total Direct Operating Costs (C1 Cash Costs) Royalties D&A TOTAL COSTS JUN-17 QTR 3 MTHS NOTES TO TABLE 2: Deferred Mining: Within each pit, the cost of higher waste benches, proportional to the copper contained in the ore, is normalised for the impact of strip ratios and copper grades over the life of specific pits. Pre-Strip: Upper levels of pits where the strip ratio is greater than 10:1 (waste:ore) are capitalised and amortised over the life of the mine based on metal. Ore Inventory Adjustment: Mining costs per tonne of ore added to (- ve) or processed from (+ ve) long term stockpiles. Revenue Revenue for the quarter (including precious metals credits and amortised hedge gains) was $29.9 million. The average realised price for copper was A$7,649 per tonne or US$2.60 per lb. 6.

7 Exploration Programme Hillgrove has commenced internal studies to evaluate growth opportunities that utilise the existing Kanmantoo infrastructure and which have the potential to extend the mine life at Kanmantoo. To date Hillgrove has advanced two of its higher priority targets, To investigate the continuity of the higher grade copper-gold mineralisation below the existing Kanmantoo Copper operation, and To investigate the extent and tenor of the copper-gold mineralisation at the Kanappa and Mt Rhine exploration projects (as previously reported by HGO in 2004 and 2006 respectively2). During the quarter Hillgrove issued two updates on its exploration activities at Kanmantoo and Kanappa (both on 25 May 2017). None of the exploration work involved the use of external contractors. Location of Hillgrove exploration projects including Mt Rhine Kanmantoo Underground Copper Mine Growth Opportunity Over the region of the Kanmantoo Copper Mine that falls outside of the current final pit design, nine potential higher grade copper-gold target zones have been identified which will be the focus for future exploration efforts. The identification and location of the target zones is predominantly based upon depth and strike extensions of copper-gold zones that have been outlined at a 1% Cu cutoff grade from blast hole production assays and mined within the open pit. An analysis of the large drill hole database of the Company, in conjunction with the open pit production data and geologic knowledge gained from mining of over 200 vertical metres of the main orebodies at Kanmantoo, shows that a number of higher-grade copper-gold zones do extend to depth beneath or along strike from the Giant open pit. The analysis of the drill hole data base also shows the lack of drilling below the open pit to assess these higher grade zones. The figure below shows the location of the higher grade copper-gold zones and the table lists the diamond drill hole intercepts within these zones. As a result of this compilation and assessment Hillgrove has approximated an Exploration Target at the Kanmantoo Copper Mine of between five and ten million tonnes with a target grade of between 1.7% and 2.2% Cu and 0.4g/t to 1.0g/t Au, containing approximately 80,000 tonnes to 160,000 tonnes of copper metal and 60,000 ozs to 120,000 ozs gold. The size and grade of this underground Exploration Target suggests that a significant increase in mine life may be possible at Kanmantoo given that the zones are all within 250m of the existing in-pit haul road and they are all proximal to the existing low-cost4 processing plant. 4 the existing copper-gold processing plant at Kanmantoo operates at a very efficient $7.30/tonne milled 7.

8 Longitudinal section (looking west) of the undergound exploration targets at Kanmantoo Drill hole intercepts within the Exploration Targets as shown in the table below. 8.

9 High Grade Copper Gold Results at Kanappa The Kanappa copper-gold exploration project is within the Kanmantoo Trough and hosted by similar geology as that at the Kanmantoo Copper-Gold Mine. The Kanappa project is located approximately 60kms by road from Kanmantoo. The entire zone of anomalous copper geochemistry is over 600 metres wide and 3.7 kilometres long. The geochemical zone is open both north and south, with copper mineralisation still outcropping at the northern and southern extremities of the gridded area as evidenced by the presence of historic workings and rock chip samples with > 0.4% Cu at the grid extents. Field mapping at Kanappa has identified several zones of high chlorite-garnet-biotite alteration over widths in excess of 50m, as at Kanmantoo. Rock chip sampling has confirmed the high grade tenor of the outcropping copper mineralisation with rock chips to 34.8% Cu. Field mapping has identified in excess of 100 sites of outcropping copper and copper-gold mineralisation, some of which have been previously exploited by historic mining. Further exploration activities are in progress to continue to sample and map the zone to the north. This is expected to be followed by a programme of electrical and magnetic geophysical surveys to define drill targets. Hillgrove estimate that drill testing of the copper-gold exploration zone may be able to commence in the last quarter of 2017, depending on the required funding being available, and the success of the geophysical work confirming quality drill targets. Contoured soil copper assays and rock chip results for Kanappa High Grade Gold Results at Mt Rhine The Mt Rhine copper-gold exploration project is also within the Kanmantoo Trough and within 70kms of the Kanmantoo copper mine. In 2006 Hillgrove completed and reported5 preliminary rock chipping and mapping at Mt Rhine for the following outstanding results; Peak rock chips at surface of Channel trenches of 7.1% Cu 15.9g/t Au 49.8g/t Au 15.4g/t Au 13.1g/t Au 5.4g/t Au Further work by Hillgrove is now being planned with results expected in the next quarter. 5 ASX Release High grade gold zones identified at Kanmantoo 14/12/2006. This information was prepared and first disclosed under the JORC Code The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. The company confirms that the form and context in which the Competent Person s findings are presented have not been materially modified from the original market announcement. 9.

10 PUMPED HYDRO POTENTIAL The Kanmantoo Pit will present a potential pumped hydro opportunity at the cessation of mining due to its proximity to the South Australian Electricity Interconnector, water availability, land holding on surrounding properties and the South Australian electricity market requirements. The Board has considered the conceptual potential and considers that the Pumped Hydro concept deserves further investigation. To this end the Company is working with a highly experienced engineering group to further investigate the potential viability of this option. INDONESIAN GOLD AND GOLD/COPPER ASSETS The focus on its Kanmantoo operations means the Indonesian assets are no longer considered core assets. Hillgrove believes there is inherent value in Bird s Head Copper/Gold Project and the Sumba Gold Project. HILLGROVE CORPORATE Convertible Note Interest On 30 June 2017, the Company paid interest on the convertible notes which it issued on 20 December The interest was at 6% per annum and payable from the issue date until the interest payable date of 30 June Director Changes On 31 May 2017, the Company announced Dean Brown AO had stepped down from the Hillgrove Resources Limited Board after more than 10 years as the Chairman, and effective 1 June 2017 John Gooding assumed the role of Chairman of the Board. On 1 June 2017, the Company announced the appointment of Mr Antony (Tony) Breuer as a non-executive director, replacing Dean Brown. Tony holds a Bachelor of Commerce/Laws degree from the University of New South Wales and has over thirty years of experience at Gresham Partners Limited, an investment bank. Annual General Meeting All resolutions were passed at the Annual General Meeting held on 25 May 2017 including the appointment of PricewaterhouseCoopers as the Company s new auditor, replacing Deloitte Touche Tohmatsu. Hedging The Company has taken the opportunity to lock in prices for 4,000 tonnes of future copper revenues to eliminate copper price and exchange rate risk on copper revenues until the middle of October 2017, at an average price of A$7,553. The Company will continue to explore further opportunities to capitalise on favourable copper price movements. CORPORATE INFORMATION Issued Share Capital at 30 June 2017 Ordinary shares Employee Performance Rights Convertible Notes Options 232,919,285 21,188,000 4,910, ,348,723 Share price activity for the Quarter High Low Last 30 June SHARE REGISTRY REGISTERED OFFICE Boardroom Limited GPO Box 3993 Sydney NSW 2001, Australia F: T: (within Australia) T: (outside Australia) Hillgrove Resources Limited Ground Floor 5-7 King William Road Unley, South Australia, Australia E: info@hillgroveresources.com.au T: For more information contact: Steve McClare, Managing Director, Tel:

11 ABOUT HILLGROVE Hillgrove Resources Limited is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused on developing its flagship Kanmantoo Copper Mine and associated regional exploration targets, located less than 55km from Adelaide in South Australia. The Company has approximately 260 site based employees and contractors at Kanmantoo and at its small Adelaide corporate office. Presently the Company is mining at the rate of more than 20 million tonnes per annum and produces up to 20,000 tonnes of copper per annum. Annual export earnings are in a range of $140 to $170 million per annum. The Company's growth will come from the Kanmantoo Copper Mine operation in South Australia and exploration discoveries from its highly prospective near mine and greenfield exploration projects. Mineral Resource Estimate for All Deposits at 30 September 2016 Mine Kanmantoo Copper Mine, All Deposits JORC 2012 Tonnage Cu Au Ag Cu Metal Classification (Mt) (%) (g/t) (g/t) (kt) Measured Indicated Inferred Total Ore Reserve Estimate at 30 September 2016 Mine Kanmantoo Copper Mine JORC 2012 Tonnage Cu Au Ag Cu Metal Classification (Mt) (%) (g/t) (g/t) (kt) Proved Probable Total Competent Person's Statement The Ore Reserve and Mineral Resource estimates were prepared by Competent Persons in accordance with the JORC Code Further information on the Kanmantoo Mineral Resources and Ore Reserves is available in the Hillgrove Updated Mineral Resource and Ore Reserve Estimate released to the ASX on 18 October 2016, which is also available on the Hillgrove Resources website at Hillgrove Resources confirms that it is not aware of any new information or data that materially affects the information included in that market announcement and, in the case of estimates of Mineral Resources and Ore Reserves that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Hillgrove Resources confirms that the form and context in which the findings of the Competent Persons (Peter Rolley in relation to Exploration Results, Peter Rolley and Michaela Wright in relation to the Mineral Resource Estimates and Lachlan Wallace in relation to the Ore Reserve Estimates) are presented, have not been materially modified from the original market announcement. 11.