STAWELL - Stawell Gold Mines has confirmed it will cease underground operations at the end of next year.
General Manager Troy Cole said the mine's owner, Crocodile Gold, had advised of its intent to cease underground mining activities when it released its first quarterly report of the combined Victorian and Northern Territory gold mines earlier this week.
Within the report, Crocodile Gold released a statement confirming that the company had completed operational reviews with Stawell Gold Mines management and had supported the decision to transition the operation of Stawell Gold Mines which would see underground mining activities being completed by the end of 2013.
"The decision to cease mining activities at Stawell Gold Mines (SGM) after 2013 will result in significantly reduced capital expenditures at SGM starting in the fourth quarter of 2012 and continuing throughout 2013," the statement said.
"This should result in material free cash flow generation from SGM in this period during which gold is being produced, but no development capital is being spent."
Mr Cole said the decision to cease underground mining followed extensive exploration of the lower Golden Gift (-1700m RL) and Magdala lodes (-1200m RL). This exploration has proved that the ore bodies are cut off by fault systems at depth, with the remaining extensions in the existing lodes unviable due to low gold reserves.
“In 2011, we believed that we discovered deeper extensions of the Magdala lodes by drilling through these deep fault systems,” Mr Cole said.
“However these discoveries were offset from existing workings by 1.6 kilometres to the east and commencing at a mine depth of two kilometres. A three to four gram per tonne ore body, at those depths and offsets, would not support investment for such a project.”
Mr Cole said at the time of acquisition of Stawell and Fosterville mining operations, Crocodile Gold was very aware of the possible direction Stawell Gold Mines was taking.
However, the company, in particular its Chief Executive Officer Chantelle Lavoie, saw value in the operation’s people, skills base, assets and regional exploration potential.
“We now have consultative and steering committees established across the different business units of the Crocodile group,” Mr Cole said.
“Both technical and management teams have already travelled to the Northern Territory. As a result, employee interaction and group sharing is showing a positive direction thus far.
“Exploration programs at Stawell Gold Mines have been revisited with tenement activity re-organised following disappointing results at Wildwood earlier this year.
“What we will see is a heightened level of geochemistry programs for the remainder of 2012 which shall assist target setting going forward.
“The company will also carry out some surface drilling south of the mine at the end of this year. It will be a case of going back to ‘first pass’ exploration techniques which have a longer term strategic consideration as opposed to immediate operations support.”
Mr Cole said that he anticipated employee movements at Stawell would commence from September this year, with downsizing occurring as underground mining activities were completed.
“In approximate terms, our workforce will be halved by mid 2013,” Mr Cole said.
“At present we have a total workforce of about 340 employees. This will be reduced to levels in the order of 160 by mid next year. We anticipate a further 60 reductions as underground numbers close out by the year end.
“These movements will remain subjective to remnant and salvage mining plans. There is a lot to do in closing an underground operation that has been in place for 30 years.”
Mr Cole said while the closure of the mine’s underground operations had been confirmed, he and the company could see potential opportunities for mining to remain in Stawell beyond 2013.
“All options are under consideration,” he said.
“We believe that we have approximately one million tonnes of low grade oxide stocks in Mt Micke that we intend on producing and utilising as tailings dam cover materials.
“This presents another year of production opportunity to processing teams and support personnel.
“Operations activity at Stawell beyond 2014 is subjective to remaining surface resources and whatever opportunities may present.”