Hill End to proceed with sale of gold assets following strategic review by PCF
Hill End Gold (ASX:HEG) advises that the Company will proceed with its plan to sell its gold assets.
The decision follows the results of a strategic review conducted by PCF Capital Group (PCF). The review included a full assessment of the extensive database on the assets and recommended that there is likely to be strong interest in their sale.
Hill End’s decision also comes in light of the strong results of the recently completed Pre‐feasibility Study (PFS) on the company’s Yendon high purity alumina project in Victoria.
The PFS found that Yendon will generate outstanding financial returns, with low production costs underpinning exceptional margins and generates a net present value of US$692 million with an internal rate of return of 34 per cent (see ASX release dated June 14, 2018).
Hill End intends to focus on advancing Yendon and as a result, will move ahead with the sale of its gold assets.
PCF will now prepare documentation to facilitate a formal sales process that will commence in early July and which will seek to secure an outcome for the assets during Q3 2018.
Pre‐feasibility Study finds Yendon High Purity Alumina Project generates outstanding financial returns
Low production costs underpin exceptional margins, resulting in potential EBITDA** of $133m/annum
Results of the Pre‐feasibility Study
Hill End Gold Ltd (HEG) is pleased to announce that a Pre‐feasibility Study (PFS) of its Yendon High Purity Alumina Project (Yendon) in Victoria is technically and financially robust.
The PFS demonstrated that Yendon delivers strong financial returns, underpinned by a low capital cost of $271 million on projected annual production of 8,000 tonnes of HPA grading 99.99% aluminium oxide.
Production costs are expected to be extremely competitive at just $7,668 a tonne. This will ensure Yendon enjoys robust margins, approaching 70%, based on a conservative sale price of $25,200/t.
The internal rate of return is forecast to be 34 per cent.
Hill End believes the revenue assumptions contained in the PFS are conservative. This view is supported by the test work which showed that HPA produced from kaolin mined at Yendon comfortably exceeds the 99.99% alumina specification and pricing assumed in the PFS.
The price of HPA rises as purity increases, meaning that revenue from HPA produced from Yendon may exceed that assumed in the PFS.
HEG intends to conduct further test work on the HPA produced from Yendon to establish if a 99.999% (5N) specification can be achieved. Insights gained from test work undertaken for the PFS have provided confidence that the steps needed to produce 5N HPA can be incorporated in the process flow diagram for Yendon.
In light of these outstanding results, Hill End will now commence planning for a Definitive Feasibility Study (DFS) on Yendon.
Hill End Managing Director Martin McFarlane said, “The PFS showed Yendon was well‐placed to meet the growing demand for high purity alumina, including that from the lithium battery industry."
“The outlook for the HPA market is very strong, with the rapid growth witnessed over the past decade expected to continue due to the solid outlook for LEDs and other markets for synthetic sapphire derived from HPA, as well as the booming market for lithium batteries,” Mr McFarlane said.
“To satisfy the rapid growth forecast in HPA demand, new production capacity is required”.
“The PFS shows Yendon is on track to help meet that demand with a high quality product produced at a low cost.”
Mr McFarlane said “Hill End would now use the information derived from the PFS to help secure offtake agreements for Yendon over the coming year.
To facilitate this, planning is underway to construct a locked‐cycle pilot plant to enable commercial samples of Yendon HPA to be trialled by potential customers.
Hill End NSW
The Hill End Project is located approximately 50 kilometres north of Bathurst in New South Wales and was the focus of intense and widespread goldmining during the nineteenth century. The first gold rush in the 1850s mined out the rich surface gold and then a resurgence of activity occurred in the 1860s and 70s when very rich hardrock deposits were discovered in the Hawkins Hill, Reward, and Red Hill areas. These were only mined to a shallow depth and Hill End Gold commenced work in the area in 1994 to explore beneath the old workings. HEG has since built up its resources through surface and underground drilling and underground mining of 35,000 tonnes at 11g/t from the Reward deposit.
This bulk sampling exercise in 2008-10 identified the geological, mining and processing parameters of the mineralisation as having good continuity over a kilometre scale, and that it is easily mined and processed. The gold is quite coarse grained and high grade zones are predictable and continuous, and as an added bonus, simple gravity processing recovers approximately 95% of the gold.
The total Hill End Project mineral resources at November 2010 are 336,000 ounces gold including 900,000 tonnes at 8.6g/t in the Hawkins Hill – Reward deposit.
HEG has 100% benefical interest in all granted tenements, while the Hill End tenements encompassed by the previous EL2037 are subject to a 15% right to contribuute triggered by an 'economic feasibility study'.
Our focus in the Hill End Project area is to increase our resources, to identify the scale of the mineable resources along strike and at depth, and to bring a significant project into production.
The Hargraves Project is located approximately 35 kilometres north of Hill End in central New South Wales, and was the site of Australia’s first reef gold mining operation. The Company wholly owns Exploration Licence 6996 which covers multiple parallel old-mineralised structures with historical gold production.
Hill End and Hargraves tenements New South Wales
Most work to date has focused on the Big Nugget Hill structure where HEG has so far defined a resource of 221,000 contained ounces of gold at the Big Nugget Hill Deposit. The 2011 JORC resource estimate, which relates to only an 800 metre portion of the overall deposit, is as follows:
Indicated Resource 1,262,000 tonnes at 3.5g/t gold for 143,300 contained ounces
Inferred Resource 944,000 tonnes at 2.6g/t gold for 78,000 contained ounces
Big Nugget Hill Long Section showing resource blocks and extension targets
Big Nugget Hill North and Gundowda targets
Strong potential exists for definition of several multiples of the Big Nugget Hill resource through additional drilling along strike and at depth. The 2011 Big Nugget Hill resources are for only a 800m strike length of the mineralised structure to approximately 200m below surface and drilling is planned to extend the resources to the north, and to test the adjacent Gundowda zone.
The Gundowda zone is a mineralised structure parallel to the Big Nugget Hill deposit, and 100 metres to the west. It is over 1000 metres long and 80 - 100 metres wide and hosts many old workings, including the Eureka Mine which was reported as the richest mine on the Hargraves field.
The 2011 Big Nugget Hill resources are in a 800m strike length of the mineralised structure. There are extensions to the north and south of another few hundred metres which have been sparsely drilled and which are expected to contain significant additional resources.
Board of Directors
Mr Eadie is a geologist/geophysicist with extensive experience across many commodities and as a Company Director. He is currently a Non?Executive Director of ASX listed companies Strandline Resources, Alderan Resources and New Century Resources. Mr Eadie was the founding Chairman of Syrah Resources (ASX: SYR). During his time in this role, Syrah discovered and began the development of the world?class Balama graphite project in Mozambique. Prior to this, Mr Eadie was Executive General Manager of Exploration and Technology at Pasminco Limited, at the time the largest zinc producer in the world. This came after technical and later management responsibilities at Cominco and Aberfoyle in the 1980s.
Martin McFarlane, B.Eng., B.Bus
Mr McFarlane has more than 25 years resources experience with major resource companies including Minerals and Metals Group, OZ Minerals Limited, Zinifex Limited, Pasminco Limited and Conzinc Rio Tinto of Australia including successfully holding senior roles for the past 13 years either as CEO / President of the company or being responsible for major business units reporting directly to the CEO.
David Leavy, B.Ec., M. App. Fin.
Mr Leavy has over 25 years of experience in the banking and mining industries covering a wide range of commodities. He has significant experience in debt and equity markets, physical and derivative commodity markets, specifically in gold, bauxite, iron ore, base metals, oil and LNG. Recent roles have included CFO of several mining companies undergoing project development, requiring implementation of appropriate business processes, government negotiations, team establishment, logistics etc. in Australia, Ghana, Guinea and Sierra Leone. Prior to this Mr Leavy held a number of roles at Westpac through financial markets (FX and commodity derivatives), project finance, relationship management, credit analysis and capital solutions. A significant focus for these roles was on the Mining and Oil & Gas sectors.
Graham Charles Reveleigh, M.Sc., MAusIMM, CPMan, MCIMM
Mr Reveleigh has wide experience in the mining industry, covering exploration, development, construction and mine operations including Mine Manager at Noble’s Nob, where he ran the operations for seven years. He has worked as a consultant on numerous projects both in Australia and overseas such as at Hill End in New South Wales, Red Dome in Queensland and as Project Manager at the Moline Gold Mine in the Northern Territory, at Gold Ridge in the Solomon Islands and as part of the Kennecott team at Lihir and in other assignments in the Philippines, New Caledonia, Siberia and most States in Australia. Mr Reveleigh was the Site Manager for Nugget Resources Inc at Hill End NSW since the commencement of the project, and for four years was Managing Director of the Company.
Mr Boston is an experienced resources corporate executive having worked in legal, business development, strategy, marketing and commercial positions with BHP Billiton (Nickel West), Rio Tinto Exploration and Poseidon Nickel Limited. Robert holds a law degree having worked for national law firms Freehills and Mallesons Stephen Jaques. Robert has multi commodity expertise in particular exploration, early stage resource development, M&A, joint ventures and marketing. Robert also holds a Bachelor of Commerce, Bachelor of Laws, a Post Graduate Diploma in Applied Finance (FINSIA), and a Diploma of Management. Robert is admitted to the Supreme Court of Western Australia and High Court of Australia.