Wiluna net profit up 43% ahead of move to sulphide gold development

High gold prices and a reduction in All-In Sustaining Costs have combined to deliver a 43% increase in net profit to $20m for Wiluna Mining in the 2021 financial year.

The company achieved a 23% increase in average gold price to $2,627 per oz while AISC fell 8% to $1,794/oz, delivering an 8% increase in revenue to $131m and a 143% increase in net cash up to $34m.

Gold production fell by 17% to 51,552oz due in part to Wiluna Mining Corporation (ASX:WMC) ceasing open pit mining in February 2021 and deferring planned open pit mining at the Golden Age North Extension to focus on its underground strategy.

While this production is lower than its initial guidance of about 62,000oz due to lower than expected tonnes processed, it achieved this result at a lower cost while amassing a significant free milling stockpile that will drive production in the lead-up to the Stage 1 flotation concentrator commissioning in the current financial year.

Sulphide development

During the 2021 financial year, the company invested $99m into site-based infrastructure – primarily the concentrator – and underground development and pre-production mining activities at the project.

This is aimed at driving the company’s sulphide development, which represents the next stage of its evolution by tapping into the substantial sulphide gold resources present at the Wiluna Mining Centre.

Stage 1 of the development targets the mining of about 750,000 tonnes of underground ore per annum to produce about 120,000oz per annum of gold dore and gold in concentrate.

As at 30 June 2021, the company had delivered 66% completion on the construction of the concentrator, and 6,274m of underground development and rehabilitation through the underground sulphide and free milling deposits.

A feasibility study into Stage 2, which will take production up to 250,000oz of gold per annum, is currently underway and is expected to be completed to a bankable level by the third quarter of the 2022 financial year.

Conclusions from this study will drive the final shape and size of Stage 2 development activities.

Offtake for 100% of the gold concentrate production for the first three years of production have already been secured with Trafigura and London-listed Polymetal Group.

Wiluna exploration and resources

During the 2021 financial year, Wiluna delivered a 142% increase in underground ore reserves to 4.33 million tonnes grading 4.74 grams per tonne (g/t) gold, or 661,000oz of contained gold while overall ore reserves now stand at 37.6Mt at 1.09g/t for 1.32Moz of contained gold.

Resources are currently sitting at 153.5Mt at 1.63g/t for 8.04Moz of contained gold including a higher grade resource of 26.93Mt grading 4.89g/t gold for 4.24Moz at the Wiluna Mining Centre.

There is already potential for improvements with drilling delivering numerous high-grade intercepts within both sulphide and free milling zones, including “bonanza-grade” results in the Happy Jack and East Lode zones, both of which are initial mining areas in the company’s Sulphide Development.

Increasing the gold grade is a big deal as every 1g/t increase in grade adds a further 25,000 ounces per annum to production in Stage 1 and 50,000 ounces per annum in Stage 2.

Additionally, 2D seismic surveys have confirmed prospective large-scale structures at the Wiluna Mining Centre, indicating that gold structures extend well beyond the current defined resource limits, and highlighting multiple parallel Wiluna lookalike structures.

Multiple drill rigs are currently carrying out infill and extensional drilling at Wiluna with the company aiming to update resources and reserves as part of the Stage 2 feasibility study.

The company is also planning to carry out a 3D seismic survey with the goal of identifying drilling targets to test its 5Moz to 7Moz Exploration Target.