By Wally Graham, Resources Roadhouse
The Gullewa tenements host Mutiny’s Deflector gold and copper project – which, after years in dry-dock is soon to launch at full sail.
Mutiny originally acquired an interest in Deflector in 2010 from Canadian company Red Hill Resources.
Initial encouraging exploration drilling led to a Scoping Study, which demonstrated the project to be robust and profitable.
Mutiny’s confidence strengthened in late 2011 when world-class gold investment bank, Credit Suisse and Snowdenscompleted project reviews to conclude Deflector had no fatal flaws and supported the Scoping Study.
Credit Suisse then advanced Mutiny an $11 million funding facility.
An important facet of the funding involved a 50,000 ounce Gold Hedging Facility allowing Mutiny to forward sell gold to Credit Suisse from July 2013 to December 2016.
It will do this at an average price of $1,847 per ounce, which is above historical Australian gold pricing.
The forward delivery price for the last delivery of gold is $1,920 per ounce, which is higher than the gold spot price has ever traded.
“The funding deal with Credit Suisse provided the project support from a specialist, gold-project-financing institution,” Mutiny Gold managing director John Greeve told
The Resources Roadhouse.
“It also significantly benefited our shareholders by minimising share dilution and potentially maximising shareholders returns.
“To hedge a small component of our future gold production at record gold prices goes a long way towards de-risking both Mutiny and Deflector as we move towards production in 2013.”
Mutiny quickly put the Credit Suisse money to workcompleting a Bankable Feasibility Study in June, which confirmed Deflector as a low cost, highly-profitable and premium gold-copper development.
The company’s work rate continued and it released a new, substantially increased, Resource in August.
This was followed by a Reserve Statement and Life of Mine Inventory in October of 2.9 million tonnes at 4.8 grams per tonne gold, 0.8 per cent copper and 5.3 grams per tonne silver for 552,000 ounces of gold equivalent.
Mutiny recently released the results of a Definitive Feasibility Study for Deflector, which defined an initial mine life of seven and a half years based on a two year open pit mining operation and a five and a half year underground mining operation.
“Using the upgraded Mining Inventory enabled us to achieve a significant improvement on our previous BFS,” Greeve said.
“There is a lot of potential upside for extension along strike of the open pit and continuation of high-grade mineralisation at depth.
“The ore body is currently drilled to 300 metres but remains open at depth in all directions.
“The ore body grade increases at depth and we are starting with diluted mining grades of around 4.5 grams per tonne moving through to around six grams per tonne.
“This is with a cut-off of two grams per tonne, so it is a massively conservative estimate on our Life of Mine and also in relation to our production profile.”
The DFS forecast increased profits from the BFS by 30 per cent to $223 million at a forecast production rate of 65,000 ounces gold equivalent.
This is broken down to an annual range of 48,000 ounces in the first year working up to 71,000 ounces at an low average operating cash cost of $618 per ounce.
“What wasn’t demonstrated in the current DFS finance model is the very strong possibility we could raise the production from the forecast average of 65,000 ounces of gold equivalent to 105,000 ounces,” Greeve said.
The DFS also upgraded the current design of the processing plant at Deflector to provide flexibility to meet anticipated expansion at the end of the second year of production.
Mutiny conducted supplementary studies in association with the DFS which demonstrated the proposed underground infrastructure and orebodycould combine to allow an underground mining rate of 480,000 tonnes as opposed to the originally modelled 380,000 tonnes.
“The underground development costs are minimised by our method of mining plus the stability of the host rockmeans there is no back filling necessary,” Greeve explained.
“The geometry of the ore body is such that we can actually mine it at plus-500,000 ounces on the current structure.
“What our studies have shown us is that spending another $30 million to add extra mill float cells can increase production to 105,000 ounces.
“Over the next two years we will be aggressively drilling to add some extra ounces so we can justify that increase in production.
“This could be achieved by spending as little as an additional $25 million to $35 million in capital to simply expand the project processing plant with a second line milling circuit.”
Greeve gave credit to the Mutiny metallurgy team highlighting itsachievements in increasing the metallurgy recoveries of the project.
About 50 per cent of the production flow form Deflector emerges as gravity gold with the remainder as a gold-copper concentrate, which is floated and then transported overseas where it is processed in a refinery.
“All up we are getting about 90 per cent recoveries on our gold so the project is very efficient,” Greeve said.
“We still have ongoing work in that department but our big dream at the moment is to get another four per cent out of it.
“We are working on getting more gold out before it goes into the concentrate, because we lose around 3 to 4 per cent in the refinery.”
The Deflector project is anticipated to generate an initial net operating Cash Flow of $425 million, from which Mutiny can readily service its current Project Finance Facility (debt plus interest), government charges and taxes.
A major contributing factor to the increase in the project metrics was a successful drill campaign carried out at Deflector from November 2011 to March 2012.
The drilling culminated in a substantial increase in Deflectors resources to 2.9Mt at 6.4g/t gold, 0.9 per cent copper and 6.8g/t silver for 729,000 ounces gold equivalent.
Of the total resource, 2.02Mt at 6.4g/t gold, 1.1% copper and 8.0g/t silver for 390,000ozgold, 22,000t copper and 521,000oz silver are in measured and indicated resource categories.
The projects Reserves subsequently rose to 2.15Mt at 4.5g/t gold, 0.8 per cent copper and 6.1g/t silver for 403,000 ounces gold equivalent.
“We delivered a substantial gain in project value and forecast returns,” Greeve said.
“We accomplished that with a low budget $3 million drill program, which generated an increase of approximately 100,000 production ounces and an increase to forecast bottom line profits by $55 million.”
Mutiny has set an explorationtarget for Deflector of 9to 14Mt tonnes at 4 to 8 grams per tonne gold for 1.65to 3.5 million ounces of gold and 40,000 to 80,000 tonnes of copper.
The company is currently formulating plans for an aggressive exploration program targetingextensions of Deflector along strike and at depth as well as assessing anomalies within the Deflector corridor to commence next year.
“This is a company that is very serious about what it does and achieves what it says it is going to achieve,” Greeve said.
“We set out from day one to make a profit, we are all about making profits and that’s how we intend building our business.
“We believe this is a significant asset and we intend building it to the benefit of our shareholders.”
Mutiny Gold Limited
(ASX:MYG) HEAD OFFICE
29 Charles Street
South Perth WA 6151
DIRECTORS
Frank Lawson, John Greeve, Allan Brown, Benedict Kusni
