Kalgoorlie, Australia — If history is any guide to the future, the story behind the discovery of the Kanowna Belle gold deposit in the Eastern Goldfields of Western Australia is a key factor driving
Despite hosting more than 5 million oz. hold and being subjected to extensive exploration work, the Kanowna Belle deposit eluded geologists for more than 100 years. Historical workings dating back to 1893 were discovered only 2 km east and northeast of the current property site around the townsite of Kanowna. This sparked a mining frenzy, with production from the area peaking in 1898 at just over 150,000 oz. However, the rich orebody remained hidden beneath some 45 metres of sand just 18 km northeast of here.
In 1982, Delta Gold, which merged with Goldfields late last year to create AurionGold, acquired the property covering Kanowna Belle. The exploration arm of Australian-based North Broken Hill Peko farmed into the property in 1983, and by late 1987, an amalgamation of tenements held by the two companies formed a 50-50 joint venture dubbed Golden Valley. The primary purpose of the venture was to mine the deep vein systems known as the Kanowna deep leads.
Kanowna Belle, which is topographically recessive, lies off the prospective trend of the famous Boulder-Lefroy Corridor and, with no outcrop or geochemical signature at surface, continued to be walked over by the modern explorers. Making the find even more challenging was that the deposit was marked by a highly leached, gold-depleted saprolitc zone above the well-developed gold-bearing supergene blanket.
The first real hint of discovery came in a 1987 when rotary-air-blast (RAB) drilling cut 2 metres grading 11 grams gold per tonne at a down-hole depth of 52 metres, and 4 metres of 3 grams gold at 28 metres down-hole. The companies followed up these intercepts, but only anomalous gold values were obtained. As it turned out, the widely spaced holes tested too far to the east and not deeply enough in the western holes to intersect Kanowna Belle.
In January 1989, a 500-by-500-metre program of soil sampling yielded an anomalous sample of 110 parts per billion gold immediately above the Kanowna Belle deposit. Perseverance by the field geologists prompted a follow-up soil geochemical survey at a sample spacing of 80 by 40 metres. The results outlined a 400-by-300-metre area with more than 40 parts per billion gold. Later that year, a 24-hole RAB drilling program tested the geochemical anomaly, returning a best value of 8 metres grading 4.5 grams gold.
Based on the drill results and the gold-in-soil anomaly, the company’s elected to drill 2 reverse-circulation holes, which returned high-grade intersections near the base of oxidation (at around 40 metres) of 19 metres grading 17 grams gold and 12 metres averaging 34 grams gold.
By the mid-1990s, a supergene resource of 1 million tonnes grading 3.5 grams gold was defined using a cutoff grade of 1 gram gold per tonne. Despite lying only 30-50 metres below surface, the resource was economically marginal with a high stripping ratio.
Finally, during delineation drilling, holes collared to the west cut primary sulphide mineralization, returning several tens of metres grading between 2.3 and 5.2 grams gold. Further drill testing yielded intercepts of 26 grams gold over 61 metres and 25 metres grading 78 grams in what was to become known as the Troy shoot. All of the deeper holes drilled into the deposit cut primary pyrite-associated mineralization, sowing the seeds for a major find.
Kanowna Belle lies within the Boorara domain of the Archaean Kalgoorlie Terrane. Mineralization is hosted by coarse felsic fragmental mass-flow sediments, interbedded with ultramafic clast-bearing polymict conglomerates and felsic fragmentals, all of which are intruded by quartz and feldspar-phyric porphyries. Structurally, the Fitzroy fault is the dominant controlling factor of the mineralizing fluids. Movement along the fault generates fine “crackle brecciation” textures in the felsic porphyries and fragmentals and more ductile shearing in mafic-rich, matrix-dominated fragmentals and chloritic fragmentals in the footwall to the fault.
Sulphides are dominated by pyrite, which comprises 1-5% of the rock by weight. Gold mineralization occurs with disseminated pyrite on and within discrete grains. Generally, the bulk of the ore-grade material is associated with crackle-brecciation. The deposit is marked by widespread carbonate-sericite, sodic and minor silicic alteration.
Open pit operation
By May 1992, a measured, indicated and inferred resource of 15 million tonnes grading 5.33 grams gold was tabled. Mining began in 1993, with the development of an open-pit operation that continued to a depth of 220 metres. Underground mining, using bench and sublevel open-stoping methods, commenced in July 1998 at a production rate of 1.4 million tonnes per year. After nearly 10 years of mining, reserves now stand 11 million tonnes grading 5.52 grams gold, with resources coming in at 16.4 million tonnes averaging 6.22 grams gold.
Delta Gold acquired North’s half-stake in the project in 1999, and following the 2001 merger with Goldfields, Kanowna Belle is now a wholly owned AurionGold operation. For the quarter ended June 30, the operation produced 62,360 oz. from 296,973 tonnes of material grading 4.7 grams gold. Recoveries averaged 90% and total cash costs rang in at A$336 per oz., while total costs hit A$473 per oz. The company expects to produce 270,000 oz. from the operation next year at cash cost of less than A$300 per oz.
The deposit continues to show reserve potential at depth, with mine development currently at 1,000 metres below surface. Exploration also indicates good potential for increasing the reserves further. Drilling just east of the deposit indicates potential for a mineralized zone between 500 and 1,000 metres below surface. Hole 1463 cut 27 metres grading 4.8 grams, hole 1461 cut 44 metres grading 5.4 grams gold, hole 1460 cut 8 metres grading 16.1 grams gold, and hole 1425 hit 79 grams gold over 5 metres.
Large land position
AurionGold holds a significant land position in the Kalgoorlie region. The company has five active satellite pits around its three main operations in the region. The Kundana mine contributed 19,552 oz. during the latest quarter, from 159,485 tonnes of material grading 4.3 grams gold. At its Paddington mine, 75,410 oz. were produced from 826,370 tonnes of material grading 3 grams gold. The company aims to reduce commercial costs of services by A$1.5 million per year. For the 12-month period ended June 30, AurionGold recorded a profit of A$63.2 million.
The Aussie miner also hopes to receive the benefits of the 2001 acquisition of Centaur Mining’s Mt. Pleasant gold assets, north and west of Kalgoorlie. Goldfields picked up the tenements from the receiver and subsequently folded them into AurionGold following the merger with Delta Gold.
The price tag to Goldfields came in at A$42.6 million. The Mt. Pleasant gold assets consist of a package of mining, prospecting and exploration tenements and applications covering an area of more than 3,000 sq. km. The core of Centaur’s holdings is an 800-sq.-km contiguous tenement block encompassing four gold districts, including the Mt. Pleasant and Ora Banda gold mining districts, Grants Patch (between Ora Banda and Mt. Pleasant) and Carbine-Zuleika (northwest of Kundana). This core tenement block adjoins AurionGold’s existing holdings around its Paddington and Kundana operations, giving the company a nearly continuous block of tenements covering the major gold-mineralized systems and prospective ground north and west of Kalgoorlie.
Refractory material
The Kanowna Belle treatment plant is capable of treating refractory material that may be sourced from the Centaur tenements. The resource base at December 2000 was estimated by Centaur to be 39.7 million tonnes grading 3.8 grams gold in various open-pit and underground deposits throughout the tenement pac
kage.
Historical production plus resources at Mt. Pleasant comes in at more than 3 million oz. The Quarters Central mine previously produced 370,000 oz. from an open-pit operation and is currently producing from Quarters Central underground. Some 600,000 tonnes grading 6.5 grams gold could be extracted, providing immediate high-grade feed for the Paddington mill.
Adjacent to Quarters is the Racetrack deposit, also previously mined as an open pit. Production ceased when fresh refractory material was encountered. Prior to receivership, Centaur was developing a plan to develop this resource, which was pegged at 5.4 million tonnes grading 6.7 grams gold. Racetrack is a candidate for processing through the Kanowna Belle facility.
At Zuleika, the high-grade Bullant mine extracted 220,000 oz. gold from an open pit and is now being evaluated for underground development from a resource base of 923,000 tonnes grading 5.6 grams gold. Widespread cover over the tenements indicates prospects for blind discoveries.
“The merger of Goldfields and Delta and the acquisition of the Centaur tenements, combined with recent exciting exploration results at Kanowna Belle, have added value to the organization during the year,” says AurionGold’s managing director, Terry Burgess. “Reserves at the end of June were 7.6 million ounces, an increase of twenty-five per cent in the short time since the merger.”
Takeover bid extended
Placer meanwhile has extended, for the fourth time, the deadline for its takeover offer for AurionGold. The bid is now slated to close Aug. 30. The announcement came after Colonial First State, Aurion’s second-largest shareholder, with a 15.26% stake, and M&G Investment Management, the company’s third-largest shareholder, with 5.82%, stated they will not tender their holdings because Placer’s offer is too low.
“We will definitely reject it,” says M&G Fund Manager Graham French. “The bid doesn’t reflect the greater potential of Aurion. It has good assets and management and has a good future as an independent company.”
Adds Ian Harding, a fund manager at Colonial: “We see AurionGold as a quality gold company with strong prospects. There are limited choices for gold exposure within Australia.”
By Aug. 20, Placer had managed to acquire about 29% of AurionGold’s shares, making it the Australian company’s single biggest shareholder. The major extended its offer in light of an announcement by AurionGold of a final dividend of A7 a share for AurionGold shareholders of record on Aug. 23.
“We want to provide remaining AurionGold shareholders with the opportunity, prior to tendering their shares, to receive the AurionGold dividend,” says Jay Taylor, Placer Dome’s chief executive officer.
Placer also warned AurionGold shareholders that, if they fail to accept the offer, they run the risk of facing sharply lower share prices.
“We urge AurionGold shareholders to carefully consider whether they want to run the risk of getting caught in a potentially less liquid and less appealing investment if they do not accept the offer,” says Taylor. “In Placer Dome’s opinion, there is also the very real risk that the price of AurionGold shares will fall significantly if Placer Dome’s offer closes.”
Placer is offering to swap 0.175 of a shares plus A35 for each AurionGold share.
AurionGold’s management continues to recommend that shareholders reject the offer, arguing that Placer’s bid is too low and that the Vancouver-based company has too much exposure to politically unstable Africa.
“I have no doubt there are some shareholders who do not want to take Placer paper,” says Burgess.
Placer has declared its offer unconditional and final, meaning that under Australian takeover rules the bid cannot be sweetened.
AurionGold, meanwhile, has sought to shore up the support of its Australian shareholders by promising that up to half of the operating profits each year would be passed to shareholders in dividend form.
“In addition, proceeds from sales of non-core assets would also be distributed in full to shareholders in the form of special dividends,” adds Burgess.
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