Special Report: Laneway Resources is poised for a significantly bigger windfall than initially expected from the next mining campaign at its Agate Creek gold project in Queensland, which is set to begin this quarter.
Before starting a drilling program in June, Laneway (ASX: LNY) had anticipated mining 20,000-25,000 tonnes of high-grade material from the Sherwood pit at Agate Creek in the upcoming mining campaign.
But the results of the drilling have expanded the Sherwood high-grade zone and remodelling has indicating the company will now be able to extract 45,000 tonnes at a grade of 6.74 g/t gold.
“We are naturally very pleased with the outcome of the drill program and the impact it has had on the size of the Sherwood high grade zone able to be mined this campaign,” executive chairman Stephen Bizzell said.
“The Whittle Pit Optimisation has yielded a pit shell two times larger than we had previously expected and we are moving to produce gold from this area in the very near term.”
Laneway is progressing negotiations with the owners of three processing facilities in the area as it seeks to settle on a toll treatment agreement for the ore from Agate Creek.
An initial campaign of mining at Agate Creek under the company’s ownership took place from April to September last year with ore treated through Maroon Gold’s nearby Black Jack facility.
Under that toll treatment agreement, Maroon Gold covered all costs and received a share of the gold produced as reimbursement.
Laneway’s share of production – 5,242 ounces – delivered approximately $10.6 million in revenue at a time when the gold price was about $500 an ounce lower than it is currently.
Gold price working in favour
The company indicated on Monday there was significant scope for additional high-grade mining campaigns at Sherwood, with one pit optimisation exercise generating a shell containing 120,000 tonnes at 5.7 g/t gold for 22,000 ounces.
At the current gold price, that would generate approximately $60 million in revenue.
Mining of this larger pit would require amendments to the currently granted Environmental Authority conditions associated with the Mining Lease, with studies underway to aid in securing them.
Laneway also said that given the high gold price, more of Sherwood’s high grade 205,000 tonne resource may be able to be incorporated into economic pit shells for future mining and that it expected to identify further resources by targeting depth extensions of the known high-grade zones with more drilling.
The company’s strategy at Agate Creek is to have the mining campaigns self-fund exploration of the broader project, limiting shareholder dilution.
The project contains a global resource of 471,000 ounces that Laneway wants to grow beyond one million ounces, at which size it should be able to justify the development of a processing facility on site.
This story was developed in collaboration with Laneway Resources, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.