PERTH (miningweekly.com) – Production from the Mt Morgans gold mine, in Western Australia, is on track to cease at the end of March.

ASX-listed Dacian Gold in mid-2022 announced plans to halt mining at the Mt Morgans operation and exhaust the run-of-mine stocks and low-grade stockpiles. The company is now processing historical dump leach material, which will be suspended at the end of March, and the near 2.9-million-tonne-a-year mill will then be placed on care and maintenance.

“The decision to place Mt Morgans on care and maintenance was not taken lightly, especially given the impact on our loyal employees and contractors, and the community in which we operate,” said Dacian nonexecutive and independent chairperson Craig McGown.

“However, a period of care and maintenance will ultimately benefit all stakeholders by providing time to develop a robust, low risk, sustainable plan, necessary to underpin the future resumption of operations.”

McGown noted that while there would be redundancies, Dacian would work to redeploy employees under a shared management services agreement with its largest shareholder, Genesis Minerals.

The cost of placing Mt Morgans on care and maintenance is estimated at between A$4-million and A$5-million, and will be incurred over March and April and will be funded from existing cash and gold on hand and final drawdown of gold in circuit, Dacian said on Monday.

Capital investment required beyond the June 2023 quarter to expand the water sources and tailings storage facility will be deferred to align with the future recommencement of operations, to further preserve the company’s cash position.

The company told shareholders that the mill was a highly strategic asset, given its status as the only large, low-cost, operating processing plant in the Laverton district not owned by a major gold producer.

Dacian recently sought expressions of interest (EoI) for third-party access to the mill for some or all of the period from the current March quarter through to the September quarter of 2024, as uncertainty has arisen given the potential merger between Genesis and gold miner St Barbara.

Genesis holds a 78.3% interest in Dacian.

Comments from Genesis and St Barbara have suggested that ore from the Ulysses gold project could now be re-directed to St Barbara’s Gwalia mill, rather than Mt Morgans mill. In the event that the merger does not proceed, Genesis and St Barbara are also working on an ore purchase agreement, which would potentially see Ulysses or other Genesis ore being processed at Gwalia.

“The uncertainty surrounding the processing of Genesis’ Ulysses ore has increased the minimum threshold required by the company for near-term volumes from third parties to optimise mill throughput, while industry-wide shortages of people and equipment place pressure on near term ore delivery.

“The EoI process has not yet identified an equivalent replacement ore source and risks around approvals timing and general project delivery for multiple third-party ore sources complicate scheduling. Consequently, the company has decided to pause the EoI process and complete its transition to exploration and development during March 2023,” the company told shareholders.

Dacian on Monday also reported that gold production in the December quarter had reached 12 039 oz, down from the 21 525 oz recovered in the September quarter of last year, at an all-in sustaining cost of A$2 099/oz.

At the end of December, Dacian had some A$44-million cash and unsold gold on hand, before creditor and accruals of some A$19.8-million.