Capricorn Eyes Big Jump in Gold Output
Gold miner delivers ‘company-making body of work’
Low-cost Australian gold producer Capricorn Metals (ASX: CMM) has outlined plans to take annual production to 500,000 ounces of gold per annum.
The company owns the Karlawinda open pit operation in Western Australia’s Pilbara region.
Karlawinda produced 123,589oz of gold in the 12 months to June 30, at the upper end of the guidance range of 115,000-125,000oz and within cost all-in sustaining cost guidance of A$1530-1630 per ounce.
An expansion at Karlawinda, comprising the upgrade of the 4 million tonne per annum plant to 6.5Mtpa, will be commissioned later this quarter and take annual production to around 150,000ozpa of gold.
Capricorn also holds the advanced Mt Gibson gold project, in WA’s Mid West region.
On Monday, Capricorn reported updated resources and reserves, economics for Mt Gibson and longer-term growth aspirations.
“These announcements are the culmination of a significant amount of work and progress at both our projects and mark a very important inflection point in where Capricorn is headed in the next five years,” Capricorn executive chairman Mark Clark said on a conference call.
“I think we’re on the cusp of a very exciting time for the company.”
Larger Mt Gibson
Capricorn had previously promoted Mt Gibson as an open pit development which would produce 150,000ozpa of gold at AISC of A$1650-1750/oz.
Today, the company released an updated prefeasibility study, which also incorporated underground feed for the first time.
Capital costs for a 5Mtpa operation were forecast at A$474 million, higher than the A$346 million estimated in the November 2024 PFS.
The project is forecast to have a 19.25-year mine life, averaging 190,000ozpa for 18 years at AISC of A$1870/oz, including 260,000ozpa from concurrent open pit and underground mining for four years.
“We have a development plan that allows the underground mine to commence contemporaneously with the open pit operation, allowing forecast gold production to ramp up to 260,000ozpa within two and a half years of the start of the project,” Clark said.
The study was based on an updated resource of 188.9Mt at 0.9 grams per tonne gold for 5.67 million ounces of gold, including underground resources of 9.6Mt at 2.9g/t for 886,000oz of gold and an updated reserve of 119.3Mt at 1g/t gold for 3.67Moz of gold, including a maiden underground reserve of 5Mt at 2.3g/t gold for 365,000oz.
Based on a gold price of A$5500/oz, the project has a post-capex, pre-tax net present value (7.5% discount rate) of A$6.1 billion, an internal rate of return of 124% and a payback period of 14 months.
“With our strong balance sheet and cashflow from Karlawinda, Capricorn expects to be able to fund the development of the project internally and the low operating cost of the project, we believe will see Mt Gibson become one of the standout gold mines owned in the Australian mid-tier industry,” Clark said.
The project has been delayed by the need to go through a federal permitting process.
Federal approvals were received last month, allowing state approvals to be finalised, with Capricorn targeting the start of construction in the December 2026 quarter.
Clark said the lengthy delays had a silver lining.
“It’s worth reflecting on the huge value to the project that the last two years of drilling on the underground targets has delivered and noting that a lot of this work would not have been contemplated for a number of years post-startup had it not been for the time we had available to us whilst we were progressing federal permitting for the project,” he said.
“I don’t think there’s any doubt that we’ve delivered a company-making body of work today that’s born out of turning frustration into opportunity, which is something internally that we’re very proud of.
“So, we’re in a position today where Capricorn’s production outlook is 400,000ozpa, which is a great position for the company to be in.”
Range 500
Today, Capricorn also unveiled its ‘Range 500’ plan to take production to 500,000ozpa of gold within five years, based on a 33% jump in group reserves to 5.24Moz of gold and a 29% increase in resources to 8.66Moz of gold.
The goal is underpinned by a potential second mill at Golden Range, 65-100km north of Mt Gibson.
Golden Range, with a resource of 1.38Moz of gold, was acquired through the A$188 million takeover of Warriedar Resources last year.
“This project articulates our belief that in the medium term, the underground inventory at Mt Gibson will continue to grow,” Clark said.
“We see the potential that we’ll reach a tipping point where we’ll have more underground inventory than we can process annually through the Mt Gibson mill, without constraining the open pit contract beyond disruption point, so this brings into focus the 1.38Moz of resources, tenure and processing site at Golden Range.”
Clark said it may make more sense to truck excess higher-grade Mt Gibson underground ore to Golden Range, rather than trucking lower-grade Golden Range open pit ore to Mt Gibson.
“Obviously, this strategy is built on understanding the extent of underground resources at Mount Gibson that will underpin it,” he said.
“We’re very conscious that it takes time to drill underground resources into resource categories sufficient for production forecasts.
“With this in mind, Range 500 reflects the board’s confidence to commit time and money to evaluating the non-resource aspects of a second process hub at Golden Range in parallel with underground drilling.”
A PFS on a second processing hub will run in parallel with aggressive underground drilling.
Capricorn is aiming to make a final investment decision next year.
“We really look forward to delivering the results of those work streams over the next 12 months to fulfil that aspiration,” Clark said.