Quarrying & Mining Magazine
Mining

Perseverance wins the Gold

 
 

At a time when goldmines the world over are shutting up shop, a new one is starting up in New Zealand. HUGH DE LACY goes in search of bullion.

The slump in the gold price a couple of years ago should have killed off efforts to re-open the historic Talisman mine near Waihi in the Bay of Plenty, but in the teeth of all the obstacles and naysayers it’ll be in production by Christmas this year and should be in surplus 18 months later.

At the portal from left: Wayne Chowles, principal mining engineer; Ian Pringle, company director; and Matt Hill; chief executive.
At the portal from left: Wayne Chowles, principal mining engineer; Ian Pringle, company director; and Matt Hill; chief executive.

Part of that golden mound, Mount Karangahake, whose quartz veins have yielded millions of ounces of gold in the vicinity of the river of the same name, the re-opening of the Talisman is the achievement of New Talisman Gold Mines and its predecessor, Heritage Gold.

New Talisman is listed on both sides of the Tasman, and the final endorsement of shareholders for the strategy came with a recent successful rights issue, combined with a funding agreement from an as-yet-unnamed Australian financier.

The mining will be on a small scale, beginning with half a dozen staff producing about 400 tonnes of ore a month with an expected yield across the whole of the project of 10-to-12 grams per tonne, plus about four times that amount of silver.

After 18 months the total capital invested by New Talisman will be $1.7 million, but by then the mine would have yielded a surplus of $1.3 million.

The overall strategy is to start small and expand with cashflow.

Between Heritage and New Talisman, the total amount of capital spent on getting the Talisman working again will have been in the region of $15 million.

New Talisman chief executive Matt Hill says the exact amount of capital spent so far is; “hard to break out, but just over the last two years we’ve probably spent $3 million on developing our pre-feasibility study, and preparing and upgrading the road and all the work that’s been required to get it to the state it’s in today.”

Level eight of the old Talisman mine. Production peaked in 1914 at 52,000 tonnes of ore mined, but after producing 3.5 million ounces of bullion in 26 years, it closed in 1920 for want of further areas of payable ore.
Level eight of the old Talisman mine. Production peaked in 1914 at 52,000 tonnes of ore mined, but after producing 3.5 million ounces of bullion in 26 years, it closed in 1920 for want of further areas of payable ore.

In appearance that state isn’t much different from what it’s been since the 1930s: the mine entrance is just a two metre by two metre tunnel going more or less straight and level into the side of the mountain, and the new round of mining won’t initially change it much.

Mining will be carried out by a Terex compact track loader (PT-30), small enough to spin on its axis inside the mine, which will cart the ore to a truck near the portal.

Negotiations are still under way with both of the country’s big goldmining companies over who will process it.

Just up the road from New Talisman is the Martha Pit at Waihi where global giant Newmont is operating and has a large processing facility, but down in West Otago there’s mid-sized company Oceana Gold Corporation with its autoclave.

“We are not at a stage at this point to be confident [which processor it will be],” Hill told Q&M.

“What we can say is that testing has been done on our ore and continues with those parties.”

Hill said preliminary testing had not revealed any “nasties” in the ore, and a deal will be inked with one or other company within three months.

Nor can Hill yet reveal the name of the Australian financier that’s funding the company over the mountainous hump from exploration to production, but it’s not the Chinese interests that were still seeking to become involved a few months ago.

In appearance the current state of the mine isn’t much different from what it’s been since the 1930s: the mine entrance is just a two metre by two metre tunnel going more or less straight and level into the side of the mountain, and the new round of mining won’t initially change it much.
In appearance the current state of the mine isn’t much different from what it’s been since the 1930s: the mine entrance is just a two metre by two metre tunnel going more or less straight and level into the side of the mountain, and the new round of mining won’t initially change it much.

The Chinese wanted to operate the mine rather than just invest in it, but Hill said that brought a strong reaction from shareholders who thought the company was in danger of ‘selling the farm’ if it turned the project over to the Chinese.

So, with the shareholders indicating they were prepared to put up more money through a rights issue, it was not too difficult to find finance for production.

An indication of the nature of the funding agreement is that a letter of offer has been signed relating to a converting rate facility.

“It’s simply a non-bank financing deal, a case of money being provided on a convertible basis, with our options being to repay it in full, repay it in part and convert the balance to shares, or continue to roll over the facility,” Hill says.

“In our view our job as directors and the board is to extract value for shareholders, not necessarily a finance company.”

The Talisman mine has a long history.

Its first ore was mined in 1894 near the top of Mount Karangahake on the original 18-hectare Talisman claim by a locally funded company, and processed at the neighbouring Crown Mines battery.

By 1905, however, a series of acquisitions saw the tenement extended to 302 hectares with the addition of the Woodstock, Ivanhoe and Kenilworth mines, among others – mostly named after novels by Sir Walter Scott.

Production peaked in 1914 at 52,000 tonnes of ore mined, but after producing 3.5 million ounces of bullion in 26 years, it closed in 1920 for want of further areas of payable ore.

It re-opened in 1930 under the auspices of the Talisman Dubbo Gold Mining Company in an area previously held, but not worked by Crown Mines, and continued profitably for eight years.

By that stage virtually all the ore won during the previous 34 years of operation had come from shoots worked from 16 levels, plus several intermediate levels, over a total vertical interval of 580 metres.

In 1971 the Southern Cross Minerals company, later called Southern Gold, began a re-appraisal of Talisman’s potential that resulted in the formation of a joint venture operating company called New Zealand Goldfields, supported by British capital, and limited amounts of ore were produced until 1983.

Goldfields entered a joint venture with Freeport Australia Minerals in the mid-1980s which carried out an intensive programme of sampling and testing, later supplemented by further work by Southern Gold, but in 1993 the latter’s licence lapsed.

It was quickly taken up by another local explorer, Heritage Gold, which carried out a review of all historical data, and added an aeromagnetic survey to it.

Heritage then launched a new two-phase exploration programme in 2003, the first of which culminated in the declaration of a 109,600 ounce gold resource.

The second phase, completed in 2005, identified a JORC-compliant resources of 205,000oz, prompting the launch of a third phase aimed at increasing the resource to at least 500,000oz, but funding could not be found for it.

The result was that Heritage was restructured in 2012 as New Talisman Gold Mines with a specific focus on the small-scale development of the old Talisman mine, beginning with a pre-feasibility study, and from that has followed the imminent start to actual mining.

The financials of the New Talisman venture are based on a global gold price of US$1200/oz, against which the current level of US$1300/oz looks positive, even in the wake of the recent slump from nearly US$2000/oz to around US$1300 today.

And Hill sees plenty of upside in the price.

“It’s in a depressed and quite volatile state, but it’s started to show it’s coming back as a safe haven.

“There is a base to gold predicated on supply and demand and we’ve got a view that in 18 months, when we complete our bulk sampling, gold will be in a very different state than it is today.

“We’ve seen a lot of supply turn off even though gold is required in many industrial processes, retail buyers like those in India are finding it not so readily available, and reserve banks are starting to invest heavily in gold,” Hill said.

So, counter-cyclical as the re-opening of an historic gold mine might seem from the current perspective, Hill and New Talisman may well be starting production, however modestly, at the right time.

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