Laneway Resources (ASX: LNY) is on the verge of commencing gold production at its wholly-owned Agate Creek project in Queensland’s north following the grant of a mining lease.
The lease, which will allow the company to mine the project’s Sherwood and Sherwood West near-surface high-grade gold prospects along with prospective extensions to the known mineralisation areas, has an anticipated commencement date of 1 March.
Mining operations are expected to commence “as soon as practicable”, which is currently anticipated in April following the recent flooding across the region.
The ore will be processed through private operator Maroon Gold’s wholly-owned carbon-in-leach (CIL) processing plant, in accordance with an existing mining and processing agreement between the two companies.
Laneway said it anticipates material positive cash flow from mining activities at Agate Creek this year will be aided by the recent high prices for Australian dollar-denominated gold.
Along with further exploration of the broader Agate Creek area, this cash flow will help the company progress its other projects including the Ashford coking coal project in New South Wales and its gold assets in New Zealand.
This milestone follows last month’s announcement of high-grade gold assays from a recent drilling program, including several intersections exceeding 100 grams per tonne of gold, with results to be incorporated into the existing resource model.
Ore processing deal
Maroon’s recently recommissioned Black Jack CIL plant near Charters Towers in North Queensland has the capacity to process up to 340,000 tonnes per annum of ore.
Laneway entered into a deal with Maroon last October to process up to 100,000t of high-grade Agate Creek ore at the plant, believing that utilising an existing plant would significantly reduce capital costs and time to first production.
Under the agreement, gold produced will be paid 60% to Laneway and 40% to Maroon above 3.5g/t gold head grade, with the initial 3.5g/t produced to be retained by Maroon.
In addition, Maroon will pay the direct costs associated with the first 100,000t of Agate Creek production, with the exception of mining, transportation, ore crushing and processing, and land rehabilitation costs.
North Queensland floods
While Laneway intends to commence mining as soon as possible, it said the recent severe weather and flooding affecting Townsville and other regions in North Queensland has meant that mining may not be able to start until April.
Although the Black Jack processing plant is undamaged, it is currently shut down due to limited road access from Charters Towers.
“Council and state road damage assessments may take several weeks to complete, which may impact on the timing of mobilisation of mining equipment to site and when road haulage of ore from Agate Creek to the Black Jack processing plant at Charters Towers can commence,” Laneway stated.
Monitoring along with care and maintenance of the plant is being undertaken by a small team and Maroon anticipates the plant will be restarted towards the end of this week, the company reported.
Prior to commencing mining activities, Laneway is also required to make statutory rental payments and lodge a financial assurance under the Agate Creek project’s environmental authority.