Dacian Gold will reassess its operating model after suspending mining at its Mt Morgans project in Western Australia amid rising cost pressures.
The company said since the end of the 2020–21 financial year, it had experienced a 68 per cent increase in contractor load and haul rates (excluding fuel) with a further 17 per cent increase forecast for the 2023 financial year, while the diesel and gas prices have risen 42 per cent and 40 per cent, respectively, in that time.
Dacian said rising costs had been compounded by supply chain challenges and approval delays.
“The operating model Dacian has been running for the past five or six years is not viable in this increasing cost environment,” Dacian non-executive director Mick Wilkes told investors in a conference call.
So what’s the plan from here?
While Dacian will suspend open-pit mining operations at its Jupiter deposit at the end of the 2021–22 financial year to preserve the asset’s value, underground operations will continue until previously developed stopes have been mined.
Dacian will capitalise on its existing stockpiles (approximately five million tonnes) as the main source of ore feed for the Mt Morgans processing plant and look to commence open-pit mining at the Hub deposit of its Redcliffe project once approvals are received (the proposal was submitted in January 2022).
Building the Jupiter resource will be another key priority for Dacian moving forward, with exploration to focus on significant potential beneath and alongside the deposit.
All the while, the Dacian management team will look to create a “leaner” operating model that reduces costs and maximises future cash flows. This is not only centred on expanding Jupiter’s potential but also other frameworks such as improving equipment configurations that can lower unit costs.
Dacian said Jupiter had significant potential for growth, with assay results from the first phase of an extension program confirming gold mineralisation of width and scale over a strike length of approximately 2km.
Initial assay results from the second phase of the Jupiter extension program confirm mineralisation to a depth of 400m below surface.