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Newcrest considering its Havieron options

Is Newcrest Mining (ASX:NCM) having some second thoughts about the development of the promising Havieron copper gold deposit in the East Pilbara, or is the seemingly rapid growth in the size of the possible resource forcing a rethink on mining plans?

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The questions arise after the September quarter report from Newcrest late last week. Newcrest owns 70% of the prospect and the quarterly – along with an update from the other 30% holder, London-based Greatland Gold – confirmed the delay to the feasibility study for the proposed mine (on which over $150 million has already been spent).

Newcrest said in its report “we extend the Havieron Feasibility Study to allow time for further project optimisation”, a line echoed by Greatland which said:

“Work to support the development of the feasibility study also continued. While the study remains in progress, it will now be extended beyond the December 2022 quarter to allow further time to maximise value and de-risk the project.

“Further optimisation work is already underway. The company said this would contribute to offsetting “any potential impact of inflation”.

That’s understandable but the new drilling results reported in the exploration reports from Havieron for the quarter by both companies suggest it is a larger and deeper orebody than previously thought.

The orebody could be 1,500 metres deep from the bottom of a significant amount of overburden – that is much larger and deeper than previous suggested by assays and drilling patterns.

Working out how to mine this has driven the extension of the feasibility study and forced both companies to temper the enthusiasm they have for the project.

The exploration decline was at 916 metres on October 12, which puts it around half a kilometre under the bottom of the overburden and in the upper levels of the mineralised area. The new drilling results suggest the mineralisation continues at depth, perhaps down as far as 2,000 metres.

Perhaps Newcrest showed its hand on the pace of the project’s development when it decided not to buy an extra 5% in Havieron earlier this year, which would have taken its stake to 75%.

The price was $US60 million, against a cheaper price months earlier. The $US60 million put a value on the project of $1.2 billion, according to the price Greatland wanted – two months earlier (ie late 2021) it had a value of just $US228 million in the first stage of the Havieron pre-feasibility study.

Now Newcrest is talking about “de-risking’ the project – you would have though that’s exactly what a pre-feasibility and feasibility studies would have been looking to sort out.

One of the problems that stands out from the continuing flow of assays is the huge depths the promising ore is being located at – more than 2,000 metres makes for a deep, high-cost underground mine.

Newcrest pointed out that some of the latest results suggest that mineralisation could extent 1,400 metres or from the base of the Permian overlay at Havieron around 420 metres or more under the surface to more than 1,400 metres deep:

“Testing for system depth extents, HAD156 successfully intersected mineralisation 450m below the current Mineral Resource extents on the 3,400mRL returning 30m @ 1.5g/t Au & 0.18% Cu from 2,079m. Further analysis is required to confirm if this intercept links up to the South East Crescent, or Eastern Breccia, or if it is a separate zone, but it demonstrates the Havieron mineralised system has the potential to extend over 1,450m from the base of the Permian cover sequence,” Newcrest explained.

That makes for an enormous mineralised zone to work and to plan to mine and could very change the attractiveness of the project and its costs, hence the slowing in the pace of work on the feasibility study.

In its statement in London on Thursday, Greatland Gold said there was potential for further resource growth at Havieron with recent results from the growth drilling program having shown new high-grade mineralised intercepts in the Northern Breccia target region, and between Eastern Breccia and the South East Crescent.

Greatland Gold said the findings increased the possibility of linking the two zones.

“Significant results from two holes drilled at Northern Breccia include 81.3 metres at 3.2 grams a tonne of gold and 0.3% of copper from a depth of 1,357.2 metres.

“Development of the exploration decline continued, with 916 metres complete as of October 12. Record daily average rates of advancement were recently achieved, which Greatland Gold attributed to the transition to drill and blasting of the development face.

“It is particularly pleasing to observe the acceleration in the advancement of the decline, which provides increasing confidence of the project being delivered on schedule.

“The Havieron feasibility study will be extended with a view to maximise value and further de-risking the project as our understanding of the Havieron orebody continues to evolve,” said Managing Director Shaun Day.

In March, Greatland had announced an update to the mineral resource and reserve at the project. The resource increased 50% to 5.5 million ounces of gold and 218,000 tonnes of copper and the reserve to 2.4 million ounces of gold and 109,000 tonnes of copper.

Greatland also noted “great progress” on its second joint venture with Newcrest – the Juri JV. The exploration programme in the first year has revealed “broad intersections and continuity of gold mineralisation” at Black Hills, in the same area of Australia.

“I am delighted with the progress of Greatland Gold…in what has been a landmark year for the company. We achieved several key milestones at our flagship asset Havieron, including delivery of a pre-feasibility study followed by our own independent mineral resource update that substantially increased the Havieron resource.

The decline construction and other surface infrastructure activities continued at pace and we have taken major steps towards bringing a tier-one gold-copper project into production,” according to Greatland chair, Alex Borrelli.

Newcrest shares eased 2.5% on Monday to $17.35, not because of the Havieron news but because of the slide in gold prices on Friday night and early Monday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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