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Burbanks Mill

Auric Mining

Libre Franklin

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Auric Mining (ASX: AWJ) has wrapped up due diligence on the Burbanks gold mill in Western Australia and is now preparing to snap up the plant for the bargain price of $4.4 million.

The company says the acquisition aligns with its long-term plans to improve gross profit margins by doing its own processing and ultimately increasing gold production.

The sale was organised by Macquarie Auctions Group with Andrew Fielding, from BDO Queensland, acting as a vendor’s agent for the mortgagee in possession.

The 180,000 tonne per annum plant (tpa) is 15 kilometres south of Coolgardie and has been non-operational since 2019 but remains fully equipped with crushing, grinding and carbon-in-leach (CIL) processing machinery.

Although both parties agreed on a price in mid-December, the sale was subject to a period of due diligence, later extended so that Auric could assess the potential for refurbishing the plant and increasing its capacity to 500,000tpa or more.

Rather than repairing the existing facility, given it age and time out of commission, another option may be to knock it down and start afresh.

The decision is backed by sound logic. Management says the true value of the deal lies in its time saving credentials and the plant’s strategic position close to Auric’s new gold mining operation at Munda, 65km further south.

It would usually take five or six years to set up a new mill with all the required environmental, water, power, mining and processing permits.

Auric already has all those components in place at Burbank, including a permit to expand the operation’s capacity and 10 granted infrastructure leases. This means construction time could potentially be cut down to as little as two years.

Existing access to water and power at the site is another major selling point. Auric would not have had much change out of $5m if it had needed to connect a new power line from Coolgardie, 15 kilometres away. New water access would potentially come with a similar prices tag.

The package also comes with four granted mining leases, which share a boundary with Horizon Minerals’ high-grade 520,000-ounce Burbanks gold project grading 2.4 grams per tonne (g/t). The local miner holds the gold project after it merged with Greenstone Resources a year ago.

Auric’s proximity to the fellow ASX-listed junior could lead to mutually beneficial discussions between both parties further down the road.

Horizon’s mining centre covers 5km of the highly prospective Burbanks Shear Zone, which has historically been the most significant gold-producing structure within the Coolgardie goldfield.

From 1885 to 1961, underground mining produced a remarkable 324,479 ounces of the yellow metal at an impressive 22.7g/t grade, mostly from depths of less than 140 metres.

Since the early 1980s, a series of intermittent open pit and underground mining campaigns have pushed total production in the area to 420,000 ounces.

Auric’s immediate mining plans are about to get another boost after completing a highly successful operation at its Jeffrey’s Find deposit to produce 27,640 ounces of gold and generate almost $20m in free cash flow.

The shovels are now moving to Munda, its next development, near Widgiemooltha in WA. The company plans to toll treat and produce 6100 ounces of gold from a starter pit at site to spit out a useful $5.3m in free cash, assuming a $3500 per ounce gold price and a $2635 per ounce all-in sustaining cost.

Now that Australian gold prices are fast approaching $5000 per ounce, the net result could be substantially higher.

Auric has also secured staff, equipment and water rights for the project - an often-overlooked but critical factor, especially in the Widgiemooltha region.

To reach initial production targets and get a better grip on the geology of the broader deposit, Auric is kicking off with a staged toll-treating operation, starting with a 125,000-tonne reserve at 1.8 g/t gold and an expected 83 per cent recovery rate. The ore will be trucked 95km for processing via carbon-in-leach.

The company is also taking the opportunity to strip off 339,000 cubic metres of overburden for $4.86m. This should lead to cheaper mining costs in the future.

Auric then plans to move to full-scale mining of the larger 3.65-million-tonne resource grading 1.23g/t gold for 145,000 ounces, with production targeted for 2026.

Beyond Munda, Auric has also recently picked up the Lindsay’s gold project in the Eastern Goldfields. The new project hosts the Parrot Feathers deposit, which was partially mined for 6153 ounces in 2013 by KalNorth Gold Mines. After a slump in the gold price, mining operations were abandoned, leaving 75 per cent of the resource still waiting to be dug up.

The company says the project bears all the hallmarks of a quick smash and grab while the gold price is humming and could be another short-term cash generator.

With so much on its plate, some might consider the acquisition of Burbanks a bridge too far. But if Auric moves forward with the construction of a new 500,000tpa processing facility - now considered the industry standard - it could unlock an annual gold production of 35,000 to 50,000 ounces.

Auric appears to be positioning itself as a formidable force in the gold industry, with well-planned acquisitions, a strategic approach to exploration and an aggressive path to production.

Auric Mining locks in dirt-cheap WA Burbanks gold plant for $4.4m