Kin Mining NL has revealed the reasons for its successive upheavals and outlined a new operating strategy for its Leonora gold project in Western Australia as it works on an optimized definitive feasibility study ahead of a resource upgrade expected in the next fortnight.
At Kin's Sept. 3 general meeting in Perth, Australia, Managing Director Andrew Munckton spelled out exactly what went wrong since the first board upheaval in regards to the definitive feasibility study delivered in October 2017 that contributed to its share price plummeting from 39.1 cents on May 8, 2017, to 12 cents on Sept. 3.
Munckton, who was appointed managing director effective Aug. 1 after construction work on the Cardinia plant was curtailed in April then suspended in May, told the meeting that Kin had now moved away from fasttracking and a owner-builder strategy, towards with a more conventional construction approach for estimating costs and schedule to complete the project.
Leading up to the curtailment, Kin's Sprott debt facility had been drawn to US$5 million and a A$3.2 million rights issue was undertaken to fund the initial construction works and exploration. Any differential between the facility and the costs to complete had to be made up from its equity before any further tranches of the facility could be drawn.
Munckton told the meeting that Cardinia was suspended due to cost over-runs, the mining plan focused on near-surface oxide ores as the deposits were not drilled to depth, power and water supply was uncertain and high risk, and mining approvals were not secured. The company is now moving to address each of these issues, it said.
While Sprott had confirmed there was no event of default and an independent engineers report said there had been no fatal flaws in the plant construction by that point or in the scope of what was planned to be built, costs had increased about 30% over the original DFS estimate of A$35.4 million. This figure was lower than the May 2016 scoping study figure of A$55 million, and the December 2016 pre-feasibility study's A$57 million.
The original DFS had been delivered by former Managing Director Don Harper and metallurgist David Sproule who were appointed in a Feb. 13, 2017, restructure that saw chairman Terry Grammer and nonexecutive director Fritz Fitton, both of whom co-founded Kin with Trevor Dixon, resign.
Grammer, Fitton and contractor Orbit Drilling took action under Australia's Corporations Act against Sproule in February, but this was withdrawn after Harper resigned on Feb. 13, at which point Talisman Mining Ltd. Nonexecutive Chairman Jeremy Kirkwood was appointed as Kin's independent nonexecutive chairman on Feb. 28.
Kin also had to build its own mill as the closest one is St Barbara Ltd.'s Sons of Gwalia mill which is operated at a head grade of about 10 g/t, so to start blending Kin's much lower-grade dirt with that may upset the plant's metallurgy and recovery.
Dixon told S&P Global Market Intelligence that the previous DFS had lots of oxide at the front end of the plant's sequence, which, while "natural enough … you cannot put that much soft dirt through the mill that's being contemplated. Most of these mills need a mix of 70% hard dirt, 30% soft."
The hard dirt has come at the Helens prospect, where a Sept. 3 exploration update from the phase one drill program completed in July revealed further deep mineralization including 3.9 meters at 10.1 g/t from 170.9 meters depth, and a new mineral resource estimate is now due out within a fortnight.
The project's two pits — Helens and Helens South — will now be larger than initially thought, and Dixon said Kin can get good water at Bummer Creek to the south of the project, as opposed to the DFS plan to pipe water 25 kilometers from Mertondale, and that supply only had an eight to 10-month life span. The current indicated and inferred gold resource sits at 22.3 million tonnes at 1.43 g/t gold for 1.02 million ounces.