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Blackham Resources

Institutional Research Note – Arlington Group, 30th January 2020

By | Media, Reports

Production and growth: unlocking Wiluna’s riches

Having successfully consolidated and re-established production on one of Australia’s most prolific goldfields, Blackham is now well set to progress the next phase of growth from its 6.7Moz Wiluna portfolio.A 2017 PFS demonstrated the merits of expanding into the higher-grade sulphides (70% of resources) and developing refractory processing capacity to increase overall gold production from the current 80-90koz pa rate (all free-milling) to over 200koz pa.

Potentially deliverable for a modest capital outlay of just A$114m, this could see AISC lowered to circa US$800/oz and margins widened to 35-40%. Moreover, with oxide reserve additions, current free-milling operations could be extended, pushing combined post-expansion production closer to 250koz pa.

Yet Blackham’s shares are trading at a heavy discount to peers (2.4x forecast FY2019 cash margin and US$34/oz reserve, vs sector averages of 5.5x and US$339/oz), a hangover from production and financing challenges in 2017. With operations now stabilised and near-term balance sheet pressures alleviated, we feel this mispricing offers a compelling entry point.

Our A$0.18/share diluted sum-of-parts valuation points to 4x upside. And with scope for further optimisation and mine-life extension beyond that considered in our model, upside may be greater still. Achieving operational targets, growing the free-milling inventory and completing expansion study work should kick-start an upwards re-rating, in our view, paving the way for funding and development of the expansion to more fully unlock Wiluna’s undoubted potential.

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ASR Research Note

Blackham shifts open pit focus from Matilda

By | Media

Blackham Resources have re-fired open pit mining at the Wiluna gold mine for the first time in a decade in a plan the recovering producer hopes will secure the long-term future of the operations.

The company is shifting its main source of production from the Matilda open pits, 20km from the 1.8 million tonnes per annum Wiluna processing plant, to higher-grade resources in the immediate vicinity of the mill.

Blackham executive chairman Milan Jerkovic said the Wiluna deposits, starting with the East-West pit, would deliver higher- grade base load feed at lower operational costs than the Matilda pits, which burnt cash early in their lives because of expensive pre-strips.

Blackham has outlined “free-milling” open pit resources around the mill of 5.1 million tonnes at 1.43 grams per tonne for 236,000 ounces.

Blackham shares closed higher yesterday at 4.7¢.

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