Horizon poised for $30m payday from WA gold play

Horizon Minerals says it expects to rake in at least $30 million in free cash flow from its Boorara gold project, 15km east of Kalgoorlie-Boulder in Western Australia’s Goldfields region.

After giving Boorara the green light just two months ago, the company has wasted little time getting its shovels into the ground for the project that is set to produce 49,500 ounces of gold.

The 1.24 million-tonne deposit grading 1.24 grams per tonne gold is spread across a 1.5km north-west strike as a string of four open pits. It sits adjacent to Northern Star’s massive Super Pit mine in Kalgoorlie that has produced more than 60 million ounces of gold.

The company’s estimated $30 million free cash flow forecast has been made using a conservative gold price assumption of AU$3600 per ounce, seven per cent shy of the current AU$3863 level.

The mining contract was awarded to Hampton Transport Services under competitive terms, with a smart payment structure to safeguard cash flow by ensuring zero contractor payments are made until the first gold is sold and funds are banked.

With plans to mine across a 14-month period, it will also simultaneously process the ore at Norton Gold Fields’ Paddington plant, which is expected to take 19 months.

It is very pleasing that Boorara is on track for first ore delivery this month, with pouring of gold occurring in this high gold price environment delivering first revenue from Boorara very shortly. Despite some labour shortages at site and in the general market, the work is progressing safely, efficiently and on schedule.

In preparation for mining, the company has been preparing its deposit with a grade-control program that is now 80 per cent complete. Actual mining operations to remove the overburden then kicked off in August using single shifts, before work began late last month to attack the gold-laden ore. To ensure increased output, Horizon says it will soon be moving to night shift operations to build an ore stockpile of between 40,000 and 50,000 tonnes before haulage begins.

First ore deliveries to the Paddington processing plant are scheduled for later in the month and the first gold pour is expected by the beginning of November.

With the current price of gold at AU$3863 and consistently crashing through new all-time highs, Horizon has recognised the importance of quickly cashing in while the iron is hot.

Notwithstanding the lack of its own processing plant or mining equipment, the company has been able to gain a crucial early advantage by locking in not only joint venture (JV) partners with mining and haulage expertise, but also toll milling contracts with local mills to access stranded gold assets with easy-to-access ounces.

By now, the rush is well and truly on, with many others looking to replicate the model. Auric Mining is one such example, now shifting dirt at the once unloved Jeffreys Find deposit near Norsman to produce an expected 20,000 ounces before moving onto its next much bigger play at Munda near Widgiemooltha, which hosts up to an estimated 129,000 ounces.

Not to be left behind, Horizon has also recently locked in its phase-two plans by confirming a JV agreement with Kalgoorlie-based contractor BML Ventures – Auric’s partner at Jefferys Find – to mine 200,000 tonnes of ore from its Phillips Find gold project near Coolgardie. The ore will be toll treated at the nearby Greenfields Mill during the next 11 months to produce almost 15,000 ounces of gold.

As the saying goes, cash is king. So, if Horizon can successfully execute the toll treatment of ore from Boorora and Phillips Find in a timely fashion, it will be able to set its sights on deploying the free cash flow into exploring some of its other assets.

In particular, Phillips Find has shown considerable exploration potential for more gold at depth, while management has also dusted off its long-idled Nimbus zinc-silver project – which it inherited in a recent merger with Greenstone Resources – after higher prices for both metals prompted a review. Plans are now underway for a drilling campaign next year to chase up the exploration target, as the company looks to ramp up its resources for an upcoming feasibility study.

There is no doubt that it is a good time to be a junior gold miner, especially the ones which have managed to secure contract mining partners and toll milling deals. Horizon appears to have the bit between its teeth and can now see across the brow of the hill towards what may be some much greener – or golden – pastures.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au