A rite of passage in Australia’s Gold Industry

Located 30 kilometres north of Kalgoorlie, Western Australia, is the Paddington Gold Mine. It’s somewhat of a rite of passage for many working in Australia’s gold mining industry today, as Mark McCauley, CEO at Norton Goldfields, Paddington’s owner, says that, “most people that are associated with the Australian gold industry have been at or worked with Paddington at some stage in their career.” This alone is enough to warrant further investigation into this historic project, which has produced a lot of gold since it was initially opened by Goldfields Limited back in 1985. But what is perhaps more engaging today is the great amount of development Norton has done on the mine.

McCauley’s time with Norton begins back in April/May 2007 when the Norton board brought him in to advise on gold mine acquisitions the company endeavoured to make from mining giant Barrick Gold.

“As a consequence, I helped to put that transaction together and raise funding. Then I was invited to join the board soon after that transaction closed, which was in September 2007,” he recalls.

“During that period the company raised $70 million through equity and convertible notes and purchased 100 per cent of the Paddington goldmine from Barrick.”

The rest, as often seems to be the case at Paddington, is history; a history well worth telling as Norton moves towards stepping up production at Paddington in 2011.

Operating Paddington to the mill’s advantage

Before purchasing Paddington, Norton had the Norton Gold Mine in Central Queensland which was a very small high grade gold mine on care and maintenance, and had also just purchased the Mount Morgan processing project which the company was working on developing. McCauley says that Paddington has been Norton’s primary asset ever since.

“It’s produced all of our revenue, with production of around 140,000 ounces in 2010, and is a substantial project in the Australian gold industry,” he says.

“It’s been around for a long time, and we see it as being around for a long time to come.”

Paddington has already produced a lot of gold in its lifetime, starting out as a large open pit operation located nearby to the mill. This pit eventually ran out and ore was sourced from the surrounding pits and further afield. Simultaneously, the Paddington mill has had two major upgrades in the last 25 years taking it from an initial capacity of around 1.6 million tonnes up to its capacity today which is around 3.3 million tonnes per annum. This is where Norton came in and put different mining methods into play.

“When we approached Barrick and Barrick decided that it wanted to sell Paddington, it was then operated as a series of small pits surrounding the mill, and the most difficult aspect was actually keeping the feed up to the mill,” McCauley says.

“It’s a big mill. When we came in we had an idea of how to try and consolidate that and run it more as a small-to-medium size operation instead of a large operation as Barrick was running it.”

The company was able to do so because of the first-class existing infrastructure offered by the upgraded mill. McCauley says it is probably the most efficient, lowest cost facility in the region and a key asset for Norton’s projects today.

Norton’s current and future pits

Norton is currently about to complete work on two of its smaller pits in the next couple of months; Havana and Waldon. The company has also begun development and pre-strip at what it calls its large base load projects; at Navajo Chief and Janet Ivy. McCauley says that these are large-scale pits with a much longer mine life.

“Navajo Chief has around six million tonnes at around 1.55 grams per tonne in reserve and it’ll be a three or four year mine life which will give our operators the opportunity to get in there and optimise their mining methodology; to optimise the way that they work that pit,” he explains.

“They use a larger mining fleet and we’ve commissioned a 300 tonne digger, loading 150 tonne trucks there and that has been operating for the last two months with productivity up around where we expect it should be.”

In fact, by targeting these larger areas with larger mining fleets, Norton expects to be able to reduce its overall operating costs –something which McCauley says the company is currently looking forward to doing.

“We’ll be down there with Navajo Chief and Janet Ivy for the next three or four years and that’s also where we’ll be focusing our exploration dollars and drilling out incrementally from those large pits, extending their lives anything up to three years,” he says.

“That’ll be a large focus for the open cuts going forward.”

Meanwhile construction has begun underground with a $25 million project, named Homestead, which saw the primary ore body intersected in December, 2009. Upon intersection Norton found that the ore body behaved differently to how the company had anticipated, and after indicating this to the market, elected to reduce development rates until diamond drill rigs were onsite for further drilling and understanding of how the ore body is really behaving.

“The development project itself was very successful and came in on time and on budget. We’re very happy with that,” McCauley says.

“At the moment the drilling has firmed up a 15 month mine plan and we are back at full development rate, anticipating production stoping in July this year. So we’ll be lifting production over the next couple of months and it’ll make a big impact to gold production for 2011 at Paddington.”

However, this is not the sole activity going on within the Norton camp today.

The Enterprise Sub-level Cave — adding higher grade

Norton has been busy working away and assembling a crack team for another location; the Enterprise Sub-level Cave project.

“Enterprise is actually our biggest ore body, it’s around 15 million tonnes at around 2.1 grams per tonne and we’ve been looking at both open cut and underground. We think that at the moment a sublevel cave underground operation will optimise that ore body,” McCauley explains.

“For $30 million dollars capital, in 18 months we can have a project in production, producing about 650,000 tonnes per annum at about 2.8 grams per tonne. The final feasibility study for that will be completed in the next month or so and we hope to take that to the board for discussion in July.”

McCauley says that Enterprise will assist in getting the mill grade up and lowering Norton’s overall operating costs. This is where it all begins to come together within Norton. The company has relatively low-grade but long-life projects, a resource base of more than six million ounces, over a million ounces of reserves and 1,200 square-kilometres of exploration ground, plenty of which is highly prospective.

“That’s our key advantage and we’ve got some good projects in Enterprise,” McCauley says.

“We’ve got prospectivity for extending the life at Homestead, and some good potential for getting our costs down when we get into Navaho Chief and Janet Ivy.”

As all of the projects are pieced together, the overall strength and potential of Norton’s Paddington operations becomes clear.

Making new history at Paddington

McCauley explains that if Norton is indeed able to turn its open cut operations into consistently performing, almost bankable projects, then add Enterprise to improve upon grades and provide some good margins, the company will likely enjoy an advantageous position to look for consolidation opportunities both in the region and the wider gold industry.

“We also have our Mount Morgan project which I’d love to get off the ground,” McCauley adds.

“Stage one is a $30 million dollar eight-year life tailings treatment project which will produce about 30,000 ounces of gold a year, and [if] we can get stage two away, which is producing pyrite on top of that to go into the sulphuric acid manufacturing industry, I think that would make this a very exciting little project.”

Essentially, Norton is ready and capable of accomplishing these goals within the next two or three years, and if (or when) it does, the company will be in a very enviable position.

“I’m hopeful that people are watching what we do and will be presently surprised when we start to deliver over the next six months,” McCauley says.
It appears that given Paddington’s healthy history of gold production, Norton’s proven and effective methods for mining the location and the company’s various mutually-beneficial projects poised for success at their respective stages today, Paddington will treat Norton well and provide a rite of passage for Australia’s gold industry for many years to come.

nortongoldfields.com.au