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260 Minerals employees inspecting core samples at the Bullabulling project. Credit: Kristie Batten.
Minerals 260 (ASX: MI6) is starting its own studies at the newly acquired Bullabulling project in Western Australia’s Goldfields, targeting a final investment decision next year and first production in 2028.
The company, a 2021 spin-out of lithium producer Liontown Resources (ASX: LTR), last month closed the A$166.5 million ($106 million) acquisition of the 2.3-million oz. brownfield project outside Coolgardie, a small town founded off the back of the state’s late 1800s gold rush.
Within nine days of taking ownership of Bullabulling, Minerals 260 completed a heritage study and kicked off an 80,000-metre drilling program – the first meaningful exploration program at the project since 2011. Managing director Luke McFadyen says it may cost A$70 million to A$80 million to reproduce the previous exploration and study work on the project.
“We’re building off that,” McFadyen said during a site visit in May. “That’s why we can have a 15-month study period, because we’re not starting from scratch.”
About 40% of the drilling program will be infill around the five existing pits, while the remainder will focus on strike and depth extensions. The results are to feed into a resource update at the end of the year.
Five times
Minerals 260 paid more than five times its market capitalization at the time, requiring the company to raise A$220 million.
“I think some people were surprised when we announced it, because at that time, we were only capitalized at A$30 million and they thought that it was beyond audacious,” Minerals 260 chairman Tim Goyder said. “But once they started looking at the project and saw the opportunity like we did, they became interested, and ultimately we raised the A$220 million as we said we would.”
Bullabulling has a current pit-constrained resource of 60 million tonnes at 1.2 grams per tonne gold for 2.3 million oz. of gold over an 8.5-kilometre strike, which the company is confident of growing.
“An underexplored asset starting at 2.3 million oz. is rare,” McFadyen said. “And when you put someone like Tim, who will say he’s got exploration in his DNA, that’s why we’re drilling 80,000 metres, because there’s a lot more gold to be found with the ownership of the asset in a company like this.”
Bullabulling was acquired from Chinese major Zijin Mining, which owns the nearby Paddington gold operation but had carried out little work on Bullabulling in the past decade. Junior Bullabulling Gold had delineated a resource of 3.9 million oz. and completed a feasibility study before being Zijin bought it in 2014.
The site was briefly in production in the late 1990s, producing 179,000 oz. of gold under Resolute Mining (ASX/LSE: RSG), but it was suspended due to the weak gold price at the time.
Crown jewel
Goyder described Bullabulling as the “jewel in the crown of Coolgardie.” Its acquisition was the result of a process that assessed 60 projects.
The well-known Australian mining entrepreneur, who founded and also chairs Liontown, subscribed for A$12 million of shares in the placement and holds just under 7.3% of the company.
Minerals 260’s share register now comprises 37% institutions, including North American long-only gold funds. Sydney-based boutique investment fund Samuel Terry Asset Management has been buying shares in recent weeks and is now the company’s largest shareholder with 7.4%.
After finalizing the acquisition last month, Minerals 260 still has A$50 million cash on hand to advance Bullabulling.
While Resolute operated Bullabulling as a heap leach, Minerals 260 is contemplating a carbon-in-leach plant.
The metallurgy is well understood, with 20 metallurgical reports completed up until 2021 and Minerals 260 has already identified an opportunity to lift recoveries to 94-95% by decreasing the grind size.
More than 530,000 metres of drilling had previously been completed at the site.
Existing infrastructure
Located less than an hour’s drive from Kalgoorlie, Bullabulling has existing access to power, water and an experienced workforce. Onsite infrastructure includes an exploration camp, offices and storage.
The Great Eastern Highway, the main road from Perth to Kalgoorlie, runs through the project.
The entire resource already sits on granted mining leases.
A Native Title Land Use Agreement is in place with the Marlinyu Ghoorlie People, the same group that has the claim over Northern Star Resources’ (ASX: NST) nearby KCGM operation.
“They’ve been good to work with,” Goyder said. “We speak to them every week.”
Growing resource
“Clearly, this is the most exciting period for gold for the last 70-80 years,” Goyder said.
“The gold price has risen since we’ve done the deal by about A$700 an oz. in a matter of three months, so it is exciting.”
McFadyen described Bullabulling as a great project held by the wrong owner, given Zijin’s lack of work over the past decade. Despite the period of inactivity, he said the project’s technical merits were well understood.
“What’s not understood is, what does it look like in today’s gold price environment? So again, recutting everything in a different setting, in a different context, means you would assume it’s going to be upside,” McFadyen said.
Even so, Minerals 260 sees the opportunity with Bullabulling as more than a gold price story.
“You build a plant, spend your A$450 million for a 15-year operation. You’re going to go through some cycles, so you need a project which can handle those cycles,” Goyder said.
“We won’t be using A$5,000 an oz. for our studies – we’ll be using something more realistic or long term. We’ve really got to do the work so that we can then set up the sizing of the plant, and what’s best suited for the project, but our aim would be producing in the order of 150,000 oz. per annum.”
Regional consolidation
The original acquisition comprised 127 sq. km, but with an option secured last week over Belararox’s (ASX: BRX) neighbouring Bullabulling project and recent tenement applications, Minerals 260 has already increased its tenure to 577 square kilometres.
“A lot of the region is not well-tested,” McFadyen said. “Unless you owned Bullabulling, everything else was too hard. You need Bullabulling to make those satellite pits work.”
Minerals 260 has identified further opportunities for regional consolidation which McFadyen said the company would “continue to chip away at”.
“You don’t often see two-plus million oz. one hour’s drive away from Kalgoorlie Airport, so we see Bullabulling as the foundation of a big, fantastic company that Tim and I are trying to build.”
