A shift in focus to Australia’s red centre has proved invaluable for base metals junior KGL Resources.

The company’s newly updated pre-feasibility study for its 100%-owned Jervois copper-silver project in the Northern Territory reveals a robust, low-cost project with plenty of upside.

“Jervois is pretty unique in an Australian context in that it starts off as a high-grade, low cost open pit copper project, and transitions to an underground project with multiple by-product credits,” KGL managing director Simon Milroy said of the project, 380km from Alice Springs.

According to the new PFS, Jervois has very low C1 cash costs of $US0.88c/lb over its 8.2 year mine life and a payback period of 3.2 years.

“These C1 costs put us in the lowest quartile of costs around the world,” Milroy said.

“Our original PFS in December 2014 highlighted several areas where we could improve value.

“So in 2015, we’ve increased and upgraded the mineral resource, fine-tuned geotechnical work, simplified the metallurgical processing and reduced operating costs.

“Our team has met or exceeded each of the targets we set and we knew once we crunched the numbers, the updated PFS would be a fantastic result – and we’re very happy with it.”

Jervois’ total resource to date from 5 orebodies is 30.5Mt containing 327,000 tonnes of copper, 22.6 million ounces of silver, 143,000t of lead and 47,000 of zinc.

Starting in 2018, it is expected to produce 21,000t of copper and one million ounces of silver plus lead and zinc each year from a series of open pit and underground mines.

They will feed into a 2.2Mtpa flotation concentrator and, with the transport infrastructure in place, the product will be trucked to Alice Springs then sent by rail to Darwin for export.

Milroy also expects Jervois to grow substantially as each resource is open at depth and along strike, plus an innovative survey has led to strong mineralisation discovered outside the known resource at Rockface.

KGL was one of the first companies in Australia to use a new 3D induced polarisation and magnetotelluric survey method to search for additional sulphide mineralisation.

The Orion 3D method was developed by Canadian company Quantec Geoscience.

The method worked a treat and KGL quickly identified conductivity and chargeability anomalies in new areas, and drilling into one of them hit a 13m broad intersection of high-grade copper mineralisation below the known deposit at Rockface.

The results of this diamond hole were announced in late October and included 13m at 2.14% copper, 12.5gpt silver and 0.10gpt gold from 255m.

“Rockface appears to be improving with depth,” Milroy said.

“As we continue drilling I’m confident we’ll continue adding to the known resource – we’ve got 12km of this prospective strike and we’ve really only explored a fraction of it, so there are great swathes that remain to be explored.

“We now know that this geophysical tool works well on our licence area.”

KGL now plans to expand the 3D IP survey over its entire exploration licence to help pinpoint more polymetallic potential.

KGL’s 3D survey follows another innovative exploration move in 2013, when the company co-funded a project with CSIRO to characterise the style of mineralisation at Jervois. 

At the same time, the Northern Territory Geological Survey remapped the Jervois Range to improve the geological understanding of the region.

“We’ve been one of the most active explorers in the Northern Territory in recent years,” Milroy said.

“While the bulk of juniors have been battening down the hatches, we’ve been very busy advancing the project and we’ve achieved some great numbers as a result.”

KGL has been in an enviable financial position to progress Jervois, thanks to the sale of its copper-gold assets in the Kyrgyz Republic and lower industry costs associated with the downturn.

“Everything’s been cheaper, it’s allowed us to get a lot more done than we would have previously with the same amount of cash,” Milroy said. 

Development at Jervois will hinge on future funding but Milroy is confident of attracting backing.

“We’ve had strong interest,” he said.

“We’ve made it very clear we’re looking for a project partner to assist us in developing our project and our ideal partner is one who wants copper concentrate – a smelter or trading company who will have a vested interest in the project going ahead.”

KGL plans to complete its definitive feasibility study next year, start construction in 2017 subject to funding and then be in production in the fourth quarter of 2018.

The timing is likely to coincide with an anticipated copper deficit, as grades decline at existing mines and many new projects face infrastructure or technical challenges.

“There is no doubt copper will be in shortfall when this project comes on stream and prices will be heading higher,” Milroy said.

“This copper project has very good economics – its C1 costs are very good on the world stage and its C3 cost (including depreciation, amortisation and royalty) of $US2.13/lb is very competitive. 

“It would be making money at today’s copper price.

“The C3 cost will reduce if, as we expect, the mine life of Jervois is extended through more exploration success.”

Milroy added that the project’s capital intensity was also well below many other developing copper projects.

“Most projects developed these days have a capital intensity of about $15,000 per tonne of annual copper capacity,” he said. “Jervois with its $189 million capital expenditure puts our capital intensity between $6000 to $7000 per tonne of annual copper capacity.

“Capital-wise, this is a relatively cheap project.”

Aside from further exploration potential within Jervois, KGL has also looked a little further afield and in April picked two exploration licences with similar mineralisation 100km away.

Initial results from Yambah were due around the time of going to press.

Earlier surface sampling at Yambah returned 19% copper, 0.26gpt gold and 25gpt silver. 

“We’re trying to capitalise on what we have learnt at Jervois and apply that to other areas of similar geology,” Milroy said.

“We are looking to acquire additional ground in the region that’s prospective for copper, lead and zinc.”

Any new discoveries will further improve the value and potential already established at Jervois. 

“Jervois is very high grade, it has lots of by-product credits and it has great potential for growth,” Milroy said.