Kingston Resources (ASX: KSN) has confirmed that a ramp-up of production from a tailings operation at the Mineral Hill gold mine in New South Wales is expected to deliver positive cash flow this month.
The ramp-up follows completion of the Mineral Hill acquisition in January from US-based Quintana MH Holdings for an upfront consideration of $1.33 million in cash and 54.9 million Kingston shares.
Further deferred consideration includes a 2% net smelter royalty on future production volumes and additional payments of up to $10.66 million relating to gold production milestones from the tailings project.
The Mineral Hill acquisition transformed Kingston into a producer with a diversified asset base in the Asia-Pacific region which also includes the 3.8 million ounce Misima gold project in Papua New Guinea.
Kingston is aiming to ramp-up production from the Mineral Hill tailings facility to 700,000 tonnes per year in line with feasibility design.
The company said the mined material is “reconciling well” against the project’s resource block model with a positive 1% variance on tonnage and a positive 3% variance on grade for the areas mined to date.
Gold recoveries have reached 87% of the feasibility design, impacted by processing the oxidised tailings on the surface of the storage facility.
Metallurgical testwork has indicated that recoveries are expected to improve over the next quarter as mining progresses deeper into the facility.
Kingston managing director Andrew Corbett said the company was working steadily towards increased production.
“During February, we saw the results of several steps taken to ensure that throughput increased to targeted rates, and this month we are seeing an increase in recoveries associated with processing ore from deeper in the tailings facility,” he said.
“During the June quarter we expect to maintain current throughput rates, while recoveries are expected to continue to climb as we move away from the oxide layer on the surface of the [storage facility].”
Mineral Hill exploration
Current exploration at Mineral Hill is aimed at resource development to support a restart of the open pit and underground mines.
To date, Kingston has completed five diamond holes at the Pearse North target and four at the Southern Ore Zone A Lode.
Pearse North hosts a resource of 300,000t at 2.7 grams per tonne gold for 26,000 ounces including a reserve of 180,000t at 2.5g/t gold for 15,000oz.
The mineral resource at Southern Ore Zone stands at 1.78Mt at 1.79g/t gold, 18g/t silver, 1.2% copper, 1.2% lead and 1% zinc.