Ann: Mt Joel Drilling Results, page-33

Echo hurtling towards early gold production
Matt BirneySponsored
Wednesday, 23 January 2019 5:20PM

Echo’s 2Mtpa Bronzewing processing facility at the Yandal gold project

There’s nothing quite like owning your own mill, even if it does need a few bucks spent on it, when it comes to overcoming the traditional financing hurdles for exploration companies that dream of one day becoming gold producers.
Echo Resources is one such ASX listed explorer that appears to have leap-frogged the dreaming stage with early gold production and cashflows now looming large on the horizon at its flagship Yandal gold project about 80km northeast of Leinster in WA.
The Yandal gold project is centred around the refurbishment of the 2 million tonne per annum Bronzewing mining and processing facility, which according to company management, is in surprisingly good condition.


Yandal is surrounded by high quality gold assets too, such as Northern Star’s Jundee operation that has produced more than 10 million ounces since 1995 and Saracen’s 8 million ounce Thunderbox mine.
The historical Bronzewing mine was discovered by Mark Creasy with great fanfare and mined by Joe Gutnick’s Great Central Mines back in 1994.
It subsequently produced over 4 million ounces of the revered yellow metal.
Echo has hooked into that latent potential and the Yandal project, which includes a ground package running to the north and south of the mothballed Bronzewing mine, currently boasts a global mineral resource of 27.4 million tonnes grading 1.9g/t for just over 1.7 million ounces of gold.
Echo has more than 400,000 of those ounces going 2 grams a tonne ready to go and sitting in an ore reserve at its Orelia and Julius deposits.
Those ounces will feed stage one of the mine plan with that reserve number potentially doubling if the proposed stage two checks out.
The two ore bodies are still open too and in an area that is amazingly well endowed with lucrative gold deposits, there is still considerable blue sky to this one.
Echo plans to maximise economic returns at the Yandal project by initially mining and processing the low strip ratio, higher grade ores, which will help deliver a high level of operational flexibility down the track, particularly with potential new gold discoveries in the region.
With the costs to get the cogs turning again at the old Bronzewing mining plant unlikely to exceed a measly $40m, which even includes getting the associated infrastructure up to scratch, the project payback will most likely be rapid.
And with the company’s BFS showing an average annual gold production approaching 100,000 ounces a year within at least the first the 4 years, Yandal looks like it might be able to handle a fair bit of debt, which is far preferable to the dreaded equity.
The formal project financing phase is already well underway with the company saying it has received a number of strong debt financing offers from a group of tier 1 banks to assist with the development of the Yandal project.
According to Echo management, the offers provide financing solutions ranging up to $45m of conventional debt on attractive terms.
The company recently completed a placement of $4m at 11c, which comprised a subscription of $2.5m from its cornerstone shareholder, gold mining hero, Northern Star Resources and $1.5m from respected mining contractor MACA Limited.
Following completion of the placement, Northern Star’s shareholding in Echo will increase from 19.78% to 22.74%.
In late 2017, Northern Star took a strategic 16.4% interest in Echo by purchasing 80 million shares, largely from well-known mining man, Mick Ruane.
It has steadily grown its holding in Echo since then, providing some serious comfort to those that follow Echo and its Yandal project.
Echo also recently signed a letter of intent to award the open pit mining and mill refurbishment contracts to MACA at Yandal after a competitive tendering process.
The Bronzewing plant was decommissioned in 2013 but has stood up well and only requires about $20m of CAPEX thrown at it according to management.
The reinvigoration of the Bronzewing processing facility could be a real boon for the region too with a number of smaller stranded deposits in the area potentially able to cut toll treating deals with Echo.
The company has also just closed out a fully underwritten and over-subscribed 1 for 20 entitlement issue at 10.5c that put another $2.6m in the coffers.
The majority of these funds will be used for pre-development activities at Yandal and a smaller allotment used to fund ongoing exploration and development activities at Echo’s emerging Mt Joel project, which is a third deposit that sits between the Bronzewing plant and the Julius deposit.
The key play for Echo is to become a self-funded explorer that owns its own plant and Mt Joel represents a tantalising opportunity to add more oxide ounces at decent grades in the area.
Mt Joel is 70% owned by Echo and 30% owned by revered “prospector” Mark Creasy who knows the area only too well.
An RC drill program that commenced in October last year at Mt Joel returned some exceptional assays that showed consistent, shallow gold mineralisation, including 16m @ 5.5g/t gold from 8m down-hole and 11m @ 8.1g/t gold from 58m down-hole in separate drill holes.
These assays were backed up by aircore drilling numbers in December that turned up 4m @ 4.74g/t gold from 10m down-hole and 20m @ 5.56g/t gold from just 33m in the same drill hole.
These intersections strongly back up the older results and suggest that Mt Joel could yield significantly more metal than its current JORC-compliant resource estimate of just under 11,000 ounces grading 1.7g/t gold.
The company is looking to Mt Joel as a third potential source of oxide ores after the Orelia and Julius deposits, with potential blending of these ore streams on the cards.
However, the quest for high-grade, underground resources in the region is the real prize, with the historical 1km deep Bronzewing gold deposit that produced at 5-6g/t gold, hinting at Yandal’s real prospectivity.
According to management, the majority of its ground position in the Yandal greenstone belt is barely drilled deeper than about 200 metres, a legacy of the low prevailing gold prices that existed during the main mining period some 20 years ago.
Echo seems to be sitting on something pretty interesting in the northern Goldfields.
With names like Creasy and Northern Star hanging around in a region that is superbly well-endowed with gold, it won’t come as too much of a surprise if Echo manages to discover, develop and deliver considerably more ounces than it is sitting on now.
And with cash flow now within grasp, this story looks to be going somewhere fast.