Western Australia (WA)plays host to some of the world’s major gold fields. Gold regions such as Kalgoorlie, Leinster and Laverton contributed to the state producing 6% of world gold production in 2015-2016. Gold ranks third in the list of resources exported by the state, after iron ore and petroleum, and at a value of AUS$10 billion and employing nearly 20,000 people the WA gold mining industry is one of the central planks of the state’s economy and prosperity. Junior explorer Ausgold (ASX:AUC) believes it could be on the verge of opening the door to a significant new belt in WA if it is successful in regional exploration at the Katanning tenement.
Ausgold picked up the Katanning project through an alliance with the University of Western Australia’s Centre for Exploration. Ausgold commissioned the geoscientists to complete a data search on prospectivity for gold and copper in Australia. On the results, Ausgold began to apply for a significant number of exploration licences in Australia and some in WA and Katanning was identified as a greenstone anomaly.
“When we looked at the Katanning area we started to see greenstone that had not been previously mapped and the more we looked at it the more interesting it became,” says Denis Rakich, Ausgold executive director and company secretary.
The Katanning gold project has vast exploration potential. Ausgold began exploration in the area in 2010 but it wasn’t until 2012, following drilling and a geological survey, that the area demonstrated how significant it could be.
The company noticed features that represented different formations to what they had first thought in 2010. There was formed mineralisation that occurred in tight folds within the rock. In 2014, Ausgold appoint SRK Consulting to develop a model for how to identify further mineralisation in this type of folding in the rock.
The main target at Katanning is the Jinkas deposit which holds around 268,000 oz of gold and it sits within a 15km mineralised zone which contains several further prospects and deposits. Ausgold’s approach of using geophysics unlocked the door to the potential targets north and south of Jinkas.
Ausgold is planning to utilise the extensive database it developed with the University of WA and the innovative exploration model to identify and refine new targets and simultaneously re-evaluate historic prospects.
The explorer’s short term aim for the project is to accumulate defined ounces in order to accelerate mine development as described in the scoping study the company delivered in November 2015.
The scoping study indicated a technically low risk project with the potential to generate significant cash flow from modest gold production. It is based on preliminary open pit mining designs from SRK and suggest initial gold production of 189,370 oz at operating cash costs of AUS$928 per ounce.
Exploration scale up
However Rakich’s focus for the next 12 months is to upscale the recovered resource to reach a target of 1 million ounces. The programme commenced with a drilling programme in November.
“The whole aim of the project is to get to a scale where you can turn it from exploration to production. The largest prospect we have is Jinkas and what we are trying to do is develop the other prospects to get to a critical mass of around 1 million ounces.”
The prospects Ausgold are prioritising include Datatine, situated 7km north of Jinkas, White Dam and Jackson. The programme will employ geophysics to identify mineralisation within folds that the company can pursue.
“In the next 12 months we will try to add ounces as quickly as we can and the best way to do that is to go to the areas where we see mineralisation.”
Datatine will undergo a programme of RC drilling starting in November. Ausgold has already completed aircore drilling at the target which produced mineralisation of 22m at 3.6g/t from surface. The RC drilling is aiming to discover what Datatine will show at depths of 120m.
“There is a large geochemical anomaly over Datatine so it is definitely open we are just not sure which way it goes. The RC drilling will look at whether it is mineralised at depth and which direction it goes in.”
With Datatine remaining a priority in the coming months, Rakich said Ausgold will also be focusing on developing the company’s knowledge of White Dam’s resource potential. A recent drilling programme has confirmed a high grade shoot at the prospect a Rakich says the company will commission further 6,500m of RC drilling in the next year.
“Because White Dam is mineralised and open it is the sort of deposit that could change everything for Katanning as a project.”
Ausgold has a busy timetable to build both existing mineral resource potential and bolster exploration upside in the next few months which will culminate in a pre-feasibility study for the Katanning gold project planned for Q4 2017.
In the meantime it is undertaking the exploration drilling programme this year and will be continued in the last six months of 2017. There is significant surface geochemistry, geophysics and metallurgical test work which will be progressed before Q1 2017.
If Ausgold can build up the existing mineral resources and identify significant mineralisation at its exploration targets the Katanning gold project will become a project that could change the landscape for the gold mining industry in WA.
“[Katanning] becomes very valuable if we can find something regionally, it will open up a new door in terms of gold prospectivity in Western Australia because it is a significant belt,” notes Rakich.