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PERTH (miningweekly.com) – ASX-listed Southern Cross Goldfields has announced it would spend A$375 000 to acquire the Wonawinta silver project, in New South Wales, from the now defunct Cobar Consolidated Resources.
Cobar was placed in administration in March, after failing to raise funding.
The Wonawinta project includes a process plant and infrastructure with a capacity of more than two-million tonnes a year, as well as a 60-million-ounce Joint Ore Reserves Committee-compliant silver resource and 840 km2 of exploration ground.
The A$60-million project poured its first silver in 2012, but the orebody proved more complex than first thought, prompting Cobar to make adjustments to the processing plant, and which resulted in a A$28.5-million impairment for the now defunct company.
Southern Cross said it would spend about A$2-million on plant upgrades at Wonawinta to deliver profitable silver production by December this year. The miner said that it would install a larger 1 500 kW ball mill to resolve grinding and recovery issues that hampered production, and which would result in immediate improvements in capacity and operating costs.
Southern Cross would initially focus on easily winnable, low-cost ounces available for processing, including about 350 000 t of stockpiled ore, before mining is resumed from two existing pits at Wonawinta.
“Acquisition of Wonawinta adds a substantial silver project to our gold portfolio and enables us to start generating cash very quickly. It also provides an innovative and creative path for processing Mt Boppy ore at minimal capital costs and with reduced development risk,” said Southern Cross CEO Frank Terranova.
The Wonawinta plant would be used to process ore from the Southern Cross’ Mt Boppy gold mine, some 100 km north-east. Ore would be trucked to the Wonawinta plant for processing, eliminating the need for an upgrade at the Mt Boppy plant and reducing up-front capital expenditure (capex) by some A$9-million.
Mt Boppy was forecast to produce about 67 000 oz of gold over a two-year period, starting in mid-2015.
Terranova pointed out that the Wonawinta plant solution resulted in substantially lower up-front capital requirements for Mt Boppy, and enhanced the project’s production profile, while uplifting the company’s net present value.
“And there is potential upside from exploiting the full existing Wonawinta reserve, upgrading some of the 60-million-ounce resource to reserve, as well as from exploration success,” Terranova added.
As a result of the reduced capex required, Southern Cross had revised its A$60-million funding transaction with investor TrailStone Group.
While TrailStone would continue to provide a total A$60-million debt package, the previous requirement for Southern Cross to raise a minimum A$5-million in new equity had now been reduced to A$2-million, and was no longer a precondition to the funding availability.
Subject to the completion of certain administrative preconditions, the funding would be made available to complete the Wonawinta acquisition by September 19.