Greatland Gold (AIM:GGP| FRA: G8G) is on course to become the world’s second-lowest-cost gold producer.

Alongside joint venture partner and mining behemoth Newcrest Mining (ASX: NCM), the company is working to unlock the potential of Havieron – an exceptionally low-cost project in Western Australia’s highly prospective Paterson region.

In what can only be the beginning for the asset, Greatland last week unveiled the extraordinary results of a pre-feasibility study for a fraction of the ground it covers.

The work revealed that mining just this one small part of Havieron would cover the entire capex for the project, creating a launchpad for future growth and early cash flow.

Here, CEO Shaun Day walks Mining Maven through the significance of the study for both the project and for Greatland itself.

Timing proves “just right” to develop Havieron

The stage 1 pre-feasibility study ("PFS") covers just a fraction of Havieron, known as the South-East Crescent.

Day suggests thinking of the Havieron ore body as a “big cylinder” , and the South-East Crescent as the cylinder’s “high-grade backbone”.

Although the PFS assesses only “a small part" of that South-East Crescent, he adds that this area of the Havieron ore body alone offers an exciting 27% internal rate of return with a short payback period of only three years.

Indeed, with the Newcrest-owned Telfer project based just 45km away, the partners plan to use its existing processing facility and infrastructure when developing their own project

It all combines to mean that the South-East Crescent starter mine alone will carry the full project capex for Havieron, making it that much easier for the project to grow over the long term and hit early cash flow.

As Day puts it:

“It's actually extraordinary that this small fraction of the ore body not only generates this high IRR, but does so carrying 900 meters of the decline going down into the mine as well as the road all the way back to Telfer, power lines coming from Telfer, plus developing the camp on a permanent basis.

When Havieron is fully developed and takes advantage of all that infrastructure at Telfer, the incremental ounces you add to this are going to be even more profitable.”

As Day explains, typically, when optimising a mine, there is a limit to the tonnage miners can take out of the ground since it requires building a processing plant that can handle the larger tonnage.

However, since Telfer has a “colossal 20 million ton per annum processing plant” and is set to hit its end of life come 2024, the infrastructure becomes available at the perfect time for Havieron to benefit.

Day points out that:

“What's almost unique here is the confluence of not only finding this world-class ore body next to existing infrastructure but also finding it just as that existing infrastructure is becoming available at the end of the Telfer mine life.

“You find it in five years’ time, Telfer's decommissioned and you've lost the 1,200 people who have all the Paterson experience. You find it five years earlier and presumably [Newcrest] want to sequence Havieron behind Telfer. We really did get the Goldilocks timing here, not too early, not too late, just right to develop Havieron.”

Havieron also benefits from Newcrest’s funding.

In order to earn up to 70% interest in the joint venture (“JV”), the mining giant must complete various exploration and development milestones across a four-stage farm-in. Once the farm-in completes, it can then acquire another 5% interest at fair market value.

With Newcrest’s backing and the “Goldilocks timing” with Telfer, everything has lined up perfectly for Greatland – especially when it comes to cost. Indeed, the total development capex for Havieron is A$529 million, with Greatland’s share of upfront capital coming in at only $73 million.

“One of the big takeaways is, if Havieron is executed as planned, Greatland would be the second-lowest-cost gold miner on the planet,” says Day.

Havieron study is just the beginning

The recent PFS is the first step towards something even more powerful at Havieron. Indeed, Greatland has everything here to build a successful project, including a high grade of 4.58g/t gold equivalent.

In its recent release, the company highlighted that the PFS is at a ‘point in time’, with a cut-off for drilling information of February 2021. The significant additional information obtained since then will be included in future studies.

“The key message is that the best of Havieron is still ahead of us,” says Day.

The PFS also only considers the indicated mineral resource of 1.9 million ounces of gold and 99,000 tonnes of copper for the South-East Crescent. It does not include 37 million tonnes of the inferred mineral resource in the area, nor does it include any potential new resources for other areas of Havieron, such as Northern Breccia and Eastern Breccia.

The indicated mineral resource is where the grade, quantity, and other aspects are established enough to support evaluating the economics of the deposit. With an inferred mineral resource, factors like quantity and grade are estimated but not yet verified.

All-in-all, for Havieron to still have a A$706 million net present value without even including these other regions and resources is truly impressive.

For the initial mine life, the PFS estimates 14 million tonnes of probable ore reserves mined over a nine-year initial life, with a 2 million tonnes per annum (“Mtpa”) throughput.

Studies are underway already to assess production rates of more than 3Mtpa, and the JV partners have also set a target for substantial further drilling at Havieron. As Day explains:

“We're going to put another 90,000 meters of drilling into Havieron in the year to June 2022.”

Even beyond Havieron, Greatland is developing other areas across Western Australia – using everything learned so far to seek out additional opportunities there. As Day says:

“The great competitive advantage of Greatland was to have the technical capacity, and also the conviction, to drill Havieron under cover. We continue to try to apply that competitive advantage in this incredible Paterson district.

“I don't think there's a better way for us to unlock shareholder value than finding another Havieron or even another half-Havieron.”

In particular, the CEO highlights Greatland’s plans for the Ernest Giles, its 100%-owned project in Western Australia’s Archean goldfields:

“Ernest Giles is in this Archean Greenstone belt associated with a lot of the Australian gold discoveries. It’s under cover, and really underexplored because of that. We're just trying to get a first nations agreement and then apply those same techniques, that same competitive advantage, to unlock value for our shareholders in Ernest Giles. And I think the amount of option value that we create for shareholders with a discovery is tremendous.”

With Greatland, then, investors not only access the principal Havieron asset but also projects like Ernest Giles and Juri – another JV with Newcrest.

Low cost and capex unlock growth for Havieron

With Havieron’s economics now so well established, the investment case for Greatland is stronger than ever. Indeed, given all of the positives around the study, it’s unsurprising that shares are up 10% on a one-month basis.

Still, the opportunity on offer here goes far beyond the scope of the PFS.

As Day comments:

“If you're bought Greatland stock a month ago, you bought it because you believed in the overall size of this ore body and the opportunity that is still sitting there. You just now know it's going to be low cost and low capex.”

The CEO notes that the low cost and low capex, combined with low risk, will, in turn, drive free cash flow generation and “unlock the forward growth of Havieron”.

For those who haven’t yet invested in Greatland, the opportunity remains significant and this recent announcement is definitely worth considering. It is emblematic both of the potential on offer with Havieron, and for the company as a whole.

Author: Anna Farley

The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

MiningMaven Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

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