Kingwest Resources delivers positive open pit mining and toll treatment scoping study for Menzies Gold Project

Kingwest Resources Ltd (ASX:KWR) has delivered a positive scoping study for the Menzies Gold Project (MGP) in Western Australia based on open pit mining and third-party toll treatment of resources. The study presents a strong economic case for recommencing open cut mining at Menzies with the total net revenue for the project estimated at $330 million using gold prices of A$2,300 per ounce and 95% recovery. Total costs for the project were estimated as $250.4 million with total operating unit costs of $104/tonne processed and $1,688/ounce produced.  Estimated free cash produced is between $95 million and $64 million with the maximum negative cashflow of $13.5 million occurring in month five with the mining lasting 31 months in total. “Milestone moment for company”  The positive results support further work on assessing the potential economic exploitation of the MGP.  Kingwest chief executive officer Ed Turner said: “This is a milestone moment in the short history of Kingwest.  “We have now demonstrated the potential economics of the Menzies Gold Project and the near-term production possibilities which have attractive profit margins using the current gold price.  “This is a culmination of dedicated and focussed exploration over the last 18 months by our small team who will continue to search for further additions to these near-surface resources in order to continue to add value to the project.”   Third-party processing Around 63% of the proposed mined material is in the measured or indicated JORC category, with the first year of production to include 76% of the material in the indicated category. Total production will be 3.15 million tonnes at 1.7 g/t gold for 174,700 contained ounces gold. Of the total production, the company plans to send high-grade (HG >1.2 g/t) and medium grade (MG 1.2 g/t - 1.0 g/t) material for third-party toll treatment of 2.39 million tonnes at 2.02 g/t for 147,200 recovered ounces. Kingwest has already entered into negotiations with multiple parties in relation to third-party treatment of the ore.  Some initial indicative terms have been received which form the cost basis for the processing unit rate in the scoping study.  Pre-existing access roads will be used where possible and the mining leases overlap the Goldfields Highway which enables transport of ore to toll treatment facilities. The remaining low-grade (1.0 g/t – 0.7 g/t) material is planned to be stockpiled for treatment in the future, possibly via a newly built plant at Menzies. Eight open pits The mine plan consists of mining eight separate open pits across Kingwest’s numerous Menzies gold resources over 31 months. A Whittle 4D pit optimisation process was used to create designs for eight separate open pits, four of which are new open pit designs (Pericles, Stirling, Bellenger and Warrior) and four are further cut backs to existing open pits (Lady Shenton, Lady Harriet, Yunndaga and Selkirk). The early mine plan focuses on the Pericles and Yunndaga open pits which are both the two largest sources of mined material. Other smaller pits at Lady Harriet, Warrior and Selkirk have been left to mine late in the schedule to provide additional mining areas towards the end of the project life. Mine plan layout showing open pits, access and infrastructure -assuming the toll treatment option. Funding capital works To achieve the outcomes indicated in this study working capital in the order of $20 million is likely to be required for capital works and pre-production working capital.  This funding could be available through a variety of debt or equity sources, royalty streaming or joint venture mechanisms.  On the basis that Kingwest chooses to progress through a 100%-owned basis, given the nature and size of the operations and the funding required it is anticipated that this would be sourced through a mixture of debt and equity funding from a combination of existing and new equity sources. Given the current project duration as outlined in this scoping study, it is likely that the funding will be dominantly equity-based.  Next steps Further exploration and evaluation work and appropriate studies are required before Kingwest will be in a position to estimate any ore reserves or to provide any assurance of an economic development case.  The company will now look to undertake a detailed hydrology, geotechnical assessment, and detailed waste dump/ore dump planning which will be incorporated in more detail in the planned follow up pre-feasibility study.