Havilah's Portia project in South Australia after just 6-weeks of construction. Photo: Havilah & CMC

Havilah's Portia project in South Australia after just 6-weeks of construction. Photo: Havilah & CMC

Havilah Resources: Kangaroos
at Kalkaroo

Issue 127, June 2015

In South Australia, a sheep station has been overrun by marauding kangaroos. It is a fittingly folksy backdrop for the sheep station's owner, Havilah Resources, Australia's best loved but least well-known gold mining company.

“Getting a mine permitted and underway is a bit like baking a cake,” says managing director Chris Giles. “You follow a recipe and it takes a fair while, but you get there in the end and once you've done it, you can do it again.”

Havilah is one of South Australia's most successful explorers, counting 70 tenements and at least 10 sizeable discoveries in copper, gold and iron ore, a rate of nearly one a year since the company listed in 2002. But due to “red and green tape” (one of the company's mine lease applications is 1,400 pages, longer than Glencore's prospectus), Havilah has been slow to convert JORC resources into cash flow.

That is about to change: the company has found a way to finance a 67,000-ounce gold mine for around A$1m. Earthmoving began in March and Havilah is due to pour gold from its Portia project in 12-months time.

Portia Gold Mine

“We've been punching pretty hard,” Broken Hill-based contractor CMC recently told local newspaper, the Barrier Daily Truth. Revenue from the mine is being shared 50:50 with CMC, which is funding construction and will mine the deposit over a rapid-fire 18-month mine-life.

Havilah's costs are confined to the plant, which it has rented for a peppercorn rate. “It's just a big trommel, a great big heavy barrel with high pressure water jets,” Giles explains. “The clay material comes in one end and just gets completely disaggregated, rolled around like clothes in a washing machine and it separates the free gold particles from the clay.”

“Our cost is in refurbishing it, making sure everything works, pulling it apart like a big Meccano set and transporting it up to site. We have a bit of expense in that. We think it will be about A$1m to get it up and going.”

Including operating costs, Havilah's total outgoings at Portia are projected at A$3m, versus revenue of A$40m and the company's A$48m market cap. Around 10,000 ounces are due to be sold forward and free cash flow will be rolled into its larger Kalkaroo project, hosting 622,000 tonnes of copper and 2m ounces of gold.

“If you can't make a profit at the current gold price in Aussie dollars, you probably shouldn't be mining gold,” Giles says, “so we think it's prudent to lock in a bit of the production at current prices to underwrite the project, even though we don't have a lot of outgoings.”

Casino or Bus

Havilah is an anomaly in the mining industry: its statements are modest and realistic, often on the edge of self-deprecation. “Our mineral resources have limited value without both mining permits and native title agreements, regardless of the in-ground metal value,” chairman Ken Williams told the company's AGM last year, in comments typically free from hype.

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“Getting a mine permitted is a bit like baking a cake. It takes a fair while, but you get there in the end.”

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