From @Jimbowie (long) @jimbowie Looking at the potential for the lag gravels at Egina and elsewhere, a good start of understanding of how Novo plans to mine it and what the benefits are, are addressed by Rob Humphryson of Novo in a Q & A written response to the Hedgeless Horseman from last year. Read the Q & A first and at the end I will discuss cost, potential yearly ounces produced and projected time frame of Egina mining. Here'ssss Rob:
Depending upon the size of the unit and configuration, sorting units can be purchased from between $600k and $1.5m AUD, a figure which could be doubled per unit to account for mobilization costs and crushing and screening infrastructure. Other than crushing and screening costs, operating costs largely center around compressed air consumption and hence are dependent upon mass pull into concentrates or ‘accepts’. For mass pulls of around 50% costs are typically of the order of $5/t down to very low costs of well less than $1/t for mass pulls of only a few percent, such as we see for Egina and Comet Well / Purdys. Mechanical sorters require the rock to be presented in size fractions, broadly in a rule of threes to ensure effective scanning and particle ejection. The key to the overall costs of the system are related to productivities at various size fractions, with economics similarly impacted by gold recoveries at each size fractions. Note than when you screen and / or crush a body of rock to say a top size of 50mm, you will inevitably generate an amount of fines (around 30% is a typical outcome). So mechanical sorting is less likely to currently be a suitable solution for gold systems characterized by fine gold particle sizes and where a great deal of the gold is contained within the finest size fraction. Conversely, where coarse gold can be found within larger dimensions of rock, the results are likely to be more favorable. This is why Novo is particularly excited about the results we have seen for Egina and Comet Well / Purdys as they tend more towards this latter category. Comet Well / Purdys is an interesting case as we believe the vast majority of the fine gold to be encased within a halo directly surrounding the coarse nuggets. So the game here is trying to keep the primary feed to the sorters as coarse as possible to maximize capture of fine gold proximal to the nuggets, which is a stark change to the usual goal of crushing being to make the rock as small as possible for the least total cost.
So what concerns me about mechanical sorting ? That the existence of an abundance of very fine gold that cannot yet be recovered by sorting may still require either conventional forms of processing with chemicals and water, or other forms of wet or dry alluvial processing. If we generate too many fines through screening and crushing the productivities will suffer, requiring more sorters and hence more capital – though it would be inconceivable that this could tote up to the cost of a conventional processing facility. With nuggety gold systems such as Egina and Comet Well / Purdys, it may yet be the case that scalping off the nuggets greater than 1mm with sorting technology could recover the vast majority of the gold by weight and represent the optimal financial outcome for the deposit.
When it comes to the less nuggety deposits, we’ve been greatly encouraged by the ability of sorting to increase gold grade. We’ve used Beatons Creek as a proxy for all such deposits as it is the best understood and has areas that can be readily accessed for sampling. We will conduct similar testing on other conglomerates as we learn more about them and are able to select appropriate sample sites. For these types of conglomerates, best results were achieved when shooting on density, targeting denser minerals of the matrix as well as gold itself. Admittedly the concentrating process does leave appreciable gold behind in the reject pile, however despite this we still see significant strategic potential. Increasing the grade increases the effective radius of an existing processing plant, meaning that we can truck material from further away to be processed. It may allow us to undertake early mining from distant conglomerate deposits as a way of quickly mining a very large scale bulk sample to prove up the grade and reduce risk ahead of constructing a processing plant at the site, all whilst generating cashflow. Assuming the economics stack up, the initially rejected gold could then be fed into the subsequently constructed plant. For a company looking to grow its production profile across mutltiple plants from multiple deposits this allows a very intelligent and risk managed approach, whilst maximizing the capital efficiency of the first processing plant. Please note that this represents a conceptual approach only for deposits that we are only just starting to come to grips with such as Contact Creek and Virgin Creek and whilst their strike extents could indeed be substantial, we are at a very early stage of exploration and understanding of these prospects.
Q: How would a theoretical production flow sheet look that involves ore sorting?
A: Ahead of sorting would be crushing and screening operations (or in the case of the Egina gravels likely just screening with a discharge belt detector to capture very large nuggets). The various feed sizes would report to an array of mechanical sorting plants, with the width of the array designed to match incoming mining productivities and the depth of the array to either scavenge missed gold from the primary sorter or further purify the gold from the primary sorter. Depending upon the properties of the resulting concentrate, it could either be processed to a gold bar in-situ (induction furnace or other) to trucked to a distant processing plant as high grade plant feed.
Q: Are there any mineral sands operations akin to what could be expected at Egina that are permitted in WA? What mining techniques are being considered for Egina?
A: Yes, WA has significant mineral sands deposits, which like Egina and the marine terrace geology models are typically spatially expansive and flat, shallow lens-like features. These are typically mined with either scrapers or conventional digger / truck configurations and regularly involve progressive rehabilitation practices concurrent with the mining.
At Egina, there exists potential for remote continuous miners to be deployed for the marine terrace gravels, depending upon the grade and continuity of the mineralization. The golden rule in low grade alluvial systems is to handle the dirt as little as possible (ideally only once), thereby minimizing labour and operating costs. Our base case would be the conventional use of diggers or scrapers, indeed any trial mine is likely to involve this conventional technology and require rehandling of the waste to rehabilitate the mining areas. During initial mining we would gain a better understanding of gold deportment and shape and continuity of the geology, which we can then use to assess the potential for continuous miners. Conveyors linking an excavation unit and a non-mobile processing facility are also under consideration to remove the need for trucking, which also better allows for a larger more permanent plant to be constructed should the degree of fine gold in the system warrant it. The use of continuous miners is something that we have been considering as it removes one element of rehandle and we would regard this as an engineering upgrade over a simple and conventional solution. If continuous miners and mechanical sorters can be combined into a mobile production unit, the waste material can be returned to directly the ground behind the unit without the need for rehandling.
All options are the subject of ongoing scoping study level financial assessment in parallel with geological exploration works.
Q: What are the requirements in order to be allowed to start large scale bulk sampling or mining any of these conglomerate/lag gravel deposits? Do we need 43-101 reserves and a Feasibility Study for example?
A: ‘Bulk samples’ of up to around 20,000t for a tenement can typically be undertaken through a system of Program of Works approvals, approved by DMIRS generally within the same month as application, which come with a list of operational compliance requirements provided all heritage clearances are in order. As a general rule, the more advanced you are with your environmental studies and the better you have established credibility around professional land care and rehabilitation processes the more likely you are to receive a positive result. Complications arise where crushing and / or chemical processing is required at site, necessitating approvals from both DMIRS and DWER, often with long lead times of well over a year. Hence despite mechanical sorting not requiring water or chemicals, if it requires a crushing plant it attracts a higher level of approval scrutiny and can result in significant approval delays. Approvals for more substantial bulk samples or trial mining packages of around 100,000t would require special ministerial consent, of which there are numerous examples in WA and should not be overly controversial for deposits such as ours. Novo regularly engages the regulators to keep them informed as to our exploration progress and likely development pathways. As a result, our relationship with the relevant regulators remains positive and constructive.
People are often mistaken that a resource report is required to advance a project. In fact a mineralization report is the minimum requirement when applying to change the lease status from exploration to mining. It should be remembered that when companies publish traditional resources, they are extrapolating data from sparsely located and infinitesimally small data points from which to assess critical geological and metallurgical information, with results frequently vastly different once in production. Having a resource statement is the more traditionally understood path to production and arguably lowers project risk, however Novo’s projects are far from traditional and inherently reduce operating risk owing to the unique geometry and metallurgy of the deposits. In their favor, they are typically outcropping (allowing bulk sampling) shallow and shallow dipping (not requiring large pre-strips) and have substantive outcropping strike lengths (annual vertical drop down is reduced so any changes to metallurgy and grade with depth can be managed). Further, in deposits where the nuggety nature appears to be more extreme (Egina / Comet Well / Purdys so far) and does not reward conventional exploration by drilling, it appears that these prospects are more amenable to simple, modular, relocatable low cost processing routes. (End of Q and A)
Great stuff from Rob. When looking at whether or not the lag gravels are economical to mine, the most obvious point is how much does it cost to dig up, crush, screen and sort the gold out of a cubic meter of lag gravels. Once you know that cost, you can calculate the minimum gold amount contained in a cubic meter of ore to breakeven. At $1,900 an ounce U.S. for gold, the breakeven grade based on total U.S. costs (Everything including gold recovery percentage from sorting and final recoveries at the mill and Royalties) per cubic meter follows:
Cost Per Required Gold
Cubic Meter Content Per Cubic Meter
$ 5 .08 of a gram
$10 .16 of a gram
$15 .24 of a gram
$20 .32 of a gram
$25 .40 of a gram
$30. .48 of a gram
Projections from Bob M are less than $15 a cubic meter U.S. and from Keith Barron’s U.S costs for sapphire mine of $25 a cubic meter. Mining costs in Australia are very high so I would tend to go with Barron’s cost of $25 per cubic meter. The $25 projection would include everything except taxes on profits. The $25 is just a guess so feel free to disagree and do your own projection.
Novo published grade numbers in 2019 of a bulk sampling taken from one Egina swale. The grade averaged 1 grams per cubic meter within the swales Outside of the swales, Novo indicates the grade is around .3 grams per cubic meter. We have only two bulk samples from one small area so projections at this point are really just a guess. But from information currently available, it appears that only the swales contain enough gold to be economical to mine. That limits the size of the deposit but also limits the size of the land that Novo will strip mine. It’s hard to see the Australian government approving vast areas to be totally strip mined.
Projecting the size of the swales in relation to the 2,500 square kilometers of Novo owned lag gravel tenements is again just a guess. Here is a projection of the ounces of gold contained in swales as a percentage of the total land package assuming the gravels average 1 meter in thickness:
Swale Size Ounces
5% (125 sq kms) 4 million ounces
10%. (250 sq kms) 8 million ounces
15%. (375 sq kms) 12 million ounces
20%. (500 sq kms) 16 million ounces
25%. (650 sq kms). 20 million ounces
I don’t see the swales averaging over 25% of the land package but again it’s just a guess. My guess is 20% of the lag gravels have swales that average 1 gram per cubic meter. 1 gram of gold is currently worth $61 U.S. So at total cost of $25 per cubic meter, the profit would be $36 per cubic meter before taxes. Take 30% off for taxes leaves $25 per cubic meter profit. To produce 100,000 ounces a year, Novo would have to process 3.1 million cubic meters. (3.1 sq kms of swale per year). The out the door profit would be $78 million per year (less 40% to Sumitomo and other percentages to Pioneer, DeGrey etc, etc). If 20% of the lag gravel land is made up of swales, it would take Novo 161 years to process all of it at 3.1 million cubic meters per year. At a sorter speed of 31 cubic meters per hour, it would take 100,000 hours to process 3.1 million cubic meters. Assuming the sorters run 12 hours per day every day, then 1 sorter could process 136,000 cubic meters per year. Novo would need 23 sorters to produce 100,000 ounces per year. All guess work but gives you an idea of size of the project.
The killer here as far as profits go is Sumitomo’s 40% share and Pioneer’s cut. Hard to see Egina moving the share price with less than 50% of the profits going to Novo. Still, if Novo was to ramp up lag gravel operations in 4 or 5 locations, it could have a meaningful impact of the share price.
As with Beaton’s Creek and Comet Wells/Purdy’s, the lag gravels will be a massive undertaking. Most of the lag gravel tenements are in the middle of nowhere with no infrastructure. Housing facilities have been built at Station Peak but how much territory and what size operation can those facilities support? Capital start-up costs for a 100,000 ounces per year operation will be in the neighborhood of $50 million for the equipment needed plus other costs for housing etc. etc. You need equipment operators , mechanics, people supervising grade control. Probably 25 to 50 staff in total. Not cheap. I project the same timeframe for full scale production at Egina as at Comet Wells/Purdy’s (mid 2023). Both those operations will cost $50 million each in start-up costs. Most of the profits from Beaton’s Creek in 2021 and 2022 will be funneled into the two projects.
In closing, I leave you with these thoughts: Farno/Mc Mahon ran a very small profitable lag gravel operation without the use of sorters or other advanced mining processes. The Farno/Mc Mahon operation used no water or chemicals just like Novo plans to do. If Farno/Mc Mahon can make a profit, so can Novo. You’d expect Novo to make a significantly higher profit. Hopefully, my estimate of $25 per cubic meter of total costs is way too high. Maybe it will be in the $10 to $15 per cubic meter range which will make the swales very, very profitable for a very very long time. QH stated that Egina was a “game changer”. Hope he’s right.