Toronto-listed Karora Resources on Tuesday announced the A$80-million acquisition of the one-million-tonne-a-year Lakewood Mill gold processing facility, about 60 km from the Beta Hunt mine, in Western Australia.

Chairperson and CEO Paul Andre Huet described the acquisition as a “transformational step” for the company, similar to the Higginsville mill acquisition three years ago.

“Not only is the Lakewood mill closer to Beta Hunt than Higginsville, but the acquisition would provide several immediate strategic and operating benefits to Karora,” he said.

The mill acquisition would derisk Karora’s growth plan to increase production to between 185 000 oz and 205 000 oz by 2024, by eliminating the procurement, schedule and construction risks associated with the expansion of the Higginsville mill.

“In the current highly inflationary capital environment, which is negatively impacting many of our peers, we expect this acquisition to take that risk completely off the table. We would also reduce our reliance and exposure to a single milling solution, further derisking our future growth,” Huet said.

The addition of a second mill will increase Karora’s nominal processing capacity by more than 60% from 1.6-million tonnes a year to about 2.6-million tonnes a year. A second ball mill is already in place at the Lakewood site that is expected to increase capacity to 1.2-million tonnes a year once commissioned.

Karora plans to fill short-term spare capacity through toll milling arrangements at one, or both, the Higginsville and Lakewood mills until the Beta Hunt expansion is completed.

Huet reported that expansion to double production from Beta Hunt to two-million tonnes a year was well under way and, that the development of the second decline was tracking ahead of schedule and on budget.  

The potential to expand the Higginsville mill to 2.5-million tonnes a year on its own remains, should Karora find the requisite feed sources and once the current inflationary environment has passed.

“With this acquisition, we expect that our milling bottleneck days will be well and truly in the rear-view mirror. I am thrilled to be able to announce this transaction to our shareholders,” said Huet.

The acquisition price comprises A$70-million in cash and A$10-million in shares. Karora on Tuesday announced a C$50-million bought-deal financing to fund a portion of the cash consideration due for the Lakewood mill.

The underwriters have agreed to purchase, on a bought deal basis, 10 417 000 common shares in the capital of the corporation at C$4.80 each.