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Craig Nolan
Kaiser Reef has kept the good times rolling at its Henty gold mine in Tasmania, pumping out a stellar $14.28 million in net cash from operating activities and boosting its cash stash by more than 5 per cent to $45.6 million at the end of the March quarter.
The company has continued its golden run by cashing in on the surge in the gold price over the past 12 months, which has risen more than 40 per cent year-on-year to today’s current US$4600 (A$6420) per ounce.
Kaiser revealed a solid underlying cash flow of $7.9 million for the quarter, driven by gold sales greater than $35 million. It sold a combined 5561 ounces from its two operations at an average realised price of $6296 in local currency.
The healthy set of March numbers followed on from the eye-opening December quarter figures, which illustrated Kaiser’s ability to make a killing in the current high-priced gold environment.
Booming December quarter numbers of $48.45 million in gold sales and cash of $24.35 million generated from operating activities proved to be an excellent result for a small, yet growing gold mine, pointing to a set of exceptionally positive circumstances.
‘Kaiser delivered 5534 ounces of gold production across Henty and Maldon during the quarter.’
Kaiser Reef managing director Brad Valiukas
A runaway gold price, touching near US$5600 (A$7800), along with mining activities hitting the sweet spot with the grade of the gold mined, may have proven to be an outlier in the short term, or at least until the mine reaches its next growth stage.
The March figures are likely more normalised returns based on its current production profile, which still provides more than ample justification for the decision in May of last year to swoop on the now wildly cash-flow positive asset.
Production for the quarter resulted in 5534 gold ounces, down from December’s record of 6526 ounces. The bulk of the March ounces came from Henty, with 5188 ounces pumped out, with its Victorian Maldon operation churning out the remaining 346 ounces.
The headline number came in slightly below expectations at Henty due to softer stoping grades late in the quarter, according to management. A silver lining was the pouring of 4810 ounces of its precious metals counterpart – silver – not insignificant at today’s price of US$74 per ounce.
Management says it has already moved to tighten grade control, with corrective measures implemented and performance expected to rebound in the June period to target levels.
Kaiser Reef managing director Brad Valiukas said: “Kaiser delivered 5,534 ounces of gold production across Henty and Maldon during the quarter, closed out call options to become fully exposed to the gold price, repaid debt, continued reinvesting into the business and grew the cash balance by $2.5 million.”
Valiukas said a second shift is about to kick off at Maldon to effectively double throughput, with the operation expected to be near self-funding, even after factoring in ongoing exploration costs.
Notably, the Maldon region is considered significantly underexplored, having historically produced 1.75 million ounces of gold at an eye-watering 28 grams per tonne (g/t).
Kaiser says highlights for the March quarter included the highly anticipated moment it waved off its last gold delivery, capped at a pre-arranged A$5300 per ounce. The company is now in the enviable position of being fully unhedged, giving it greater leverage to the prevailing spot price for future production. This should provide accelerated positive cash flow momentum based on the yellow metals’ current pricing, which most market pundits expect to remain stronger for longer.
At Maldon, refurbishment of the decline has moved the underground works into a position to begin in early May, coupled with additional significant activities taking place, including resistivity surveys to map historical workings. Management says it’s also progressing with the permitting and drilling at the company’s Nuggetty and Nuggetty South prospects, in addition to plans for airborne magnetic and radiometric surveys scheduled for the July quarter.
Kaiser revealed its Union Hill stockpile at Maldon sits at 566,000 tonnes grading 0.48g/t for 8649 ounces of gold. The company plans to process about 10,000 tonnes per month at its Porcupine Flat facility until 2030 to supplement production coming from its Henty gold bounty.
Henty’s March production came in at 62,260 processed tonnes grading 2.94g/t gold, with reported gold recovery returning an excellent 88.2 per cent.
Henty’s underground mine has an existing mineral resource of 4.11 million tonnes grading a solid 3.32g/t gold for 438,000 ounces. It holds a mineral reserve of 1.89 million tonnes at 3.28g/t gold for 199,000 ounces.
Although the mine was initially slated to have a five-year mine life, it continues to produce and find a way to breathe new life into a longer-term outlook.
Kaiser appears to be on the right track by pursuing its two-pronged, two-state approach to gold production, setting the company up for a win-win outcome.
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