Just over a week ago the company’s joint venture partner at the Havieron discovery in Western Australia, Newcrest Mining Ltd (ASX:NCM) commenced construction of a decline that’s designed to go down all the way to the top of the mineralization.
Lest there be any doubt, this is not just a mere exploration decline.
Rather, with dimensions of six metres by five point seven meters, this is a decline that’s designed ultimately to facilitate mining.
No decision to mine’s yet been made, but the pieces of the jigsaw are falling into place such that it’s pretty clear now what kind of picture Newcrest thinks it’s putting together.
Newcrest, after all, has been pushing ahead at breakneck speed ever since it bought into the Havieron project, and the latest set of drill results, published on 10 June give a pretty clear indication as to why.
Among the highlights from this latest batch of assays was 85 metres at 11 grams per tonne gold and 0.29% copper – an exceptional result that would be the standout intercept at any other project. But Havieron has been yielding up results of that ilk or better almost since day one, when Greatland first punched its maiden hole down through the overburden all those years ago.
Now, with the decline moving ahead and down, mining’s effectively underway, and it’s no wonder that Greatland chief Shaun Day is in upbeat mood.
“The opportunity here at Greatland is tremendous,” he says.
“The decline’s going down to the orebody, and with those dimensions it’s cavernous.”
It’s expected to take around 24 months before the decline reaches the top of the orebody, but when it does, you would typically expect to move quickly to developing access so that the mining of ore can commence.
After all, Greatland is getting to the point where it’s comfortable that the size and scope of Havieron is sufficient to merit a green light – there’s been a total of 164,420m of drilling from 190 holes to date, and a pretty steady hit rate of mineralisation.
“Every hole we drill into this is hitting mineralisation,” says Day.
“This potential of the orebody continues to grow.”
How big it will ultimately turn out to be remains an open question, but Cannacord speculates that production could run at the order of between 400,000 ounces and 700,000 ounces per year, and the talk is that Havieron could end up being another Telfer in terms of its size and longevity. Telfer is the nearby Newcrest mine, which is only now beginning to come to the end of a prolific 45-year life. The Telfer infrastructure is one reason why Havieron makes such good economic sense, since processing facilities and plant are all already in place.
“It’s unique in the world that I’m aware of to have an asset of this quality next to existing infrastructure,” says Day.
Given the emergent size of Havieron, which is already pushing past 4.2mln ounces of gold, it would probably have got built anyway, but the existing plant means that the internal rate of return is going to be several orders of magnitude better than it otherwise would have been.
“The expectation,” says Day, “is that a final investment decision would follow relatively closely on the completion of a definitive feasibility study that’s due in calendar 2022.”
This uncommon run of successful exploration, skilful deal-making and continuing and ongoing upside in spite of the immense value that’s already been delivered is what lies behind Greatland’s punchy £850mln-plus market capitalisation.
Newcrest is proving to be a great partner for the company, and has provided loan finance to allow it to keep up its end of the development costs. But once the decline reaches its objective and the time comes to start mining into ore, what will the future hold for Greatland.
Some analysts think that at that point, or possibly even before, Newcrest will make a generous bid for the company, and pull the whole show 100% in-house. But the offer would have to be pretty good, because Greatland has reached a size and scale now that it could quite easily participate in any development, especially given how low the costs are going to be as a result of the proximity of infrastructure. This is not a company that is going to be scrabbling around for funds any more.
So there’s a lot still to play for. What we can be fairly sure of at this stage is that the resource is likely to grow even larger, and that Newcrest is unlikely to slacken the pace of its work.