Hillgrove Resources and the copper mine that keeps on giving

They say nothing lasts forever. Well . . . they have never owned a good cast iron pan, or walked drunkenly into a tattoo shop late at night. They have never spilt red wine on a white carpet, or tried to read War and Peace. Indeed, they probably couldn’t tell you much about the Kanmantoo Copper Mine in South Australia.

Located 55km south-east of Adelaide, the original Kanmantoo mine was discovered as far back as the 1840s. It was active from 1846 to 1874, but sat mostly idle for almost 100 years until Kanmantoo Mines — a consortium of North Broken Hill, South Broken Hill and EZ Industries — took over and developed an open pit in 1970. Over the next 6 years, the mine produced 4.1 million tonnes at 0.9% copper, but was ultimately shut down again when copper prices suffered a slump.

In 2003, along came Hillgrove Resources (ASX:HGO), which found additional resources surrounding the Kavanagh zone, completed a Definitive Feasibility Study in 2007, and set about open pit mining at the Kavanagh, Valentine, Matthew, Emily Star, Spitfire and Nugent zones in 2011. Mining at the primary Giant open pit was completed in 2019, while the processing of stockpiled ore concluded — once again — in 2020. All up, the Kanmantoo Mine produced 137,000 tonnes of copper and 56,000 ounces of gold from 2011 to 2020.

“First copper production from the Kanmantoo underground operation, and the transition to cash flow generation, is a watershed moment for the company

Now, Kanmantoo is enjoying another breath of life, this time at an underground mine that was developed in the 1970s by Kanmantoo Mines but never took off. In an announcement on 12 February, 2024, Hillgrove heralded the successful commissioning of the site’s processing facility and the subsequent production of copper concentrates.

“First copper production from the Kanmantoo underground operation, and the transition to cash flow generation, is a watershed moment for the company,” Managing Director and CEO Lachlan Wallace said at the time.

“Over the next few months, the mine output and copper production are expected to ramp up as the planned additional work areas are established underground.”

Indeed, Kanmantoo is the mine that keeps on giving. Few active projects in Australia can claim such a storied history. But with a current exploration target of between 60 million and 100 million tonnes, Kanmantoo isn’t finished yet.

Australia’s newest copper producer

It’s thanks to this extended history that the geology of the region is very well understood. Hillgrove was able to move remarkably smoothly from exploration to development to production, but would nevertheless not be where it is today had 2023 not been so productive.

Listed on the ASX since 1994, the company published an updated economic assessment for Kanmantoo in February last year. In March, it raised $38 million to fund the restart, and began underground development in May. A positive final investment decision was made in June, and a crusher was commissioned in conjunction with the start of bulk mining in December.

“Everyone was pretty comfortable that we were going to reach that final investment decision relatively shortly after starting in May,” Wallace, who joined Hillgrove in 2012 as General Manager of the Kanmantoo mine before taking on the role as CEO in 2019, tells Mining.com.au.

“It just meant we could effectively accelerate the implementation of the development and get going a bit quicker than otherwise would be. And because we had holding costs associated with preserving the site assets, in particular the processing plant on care and maintenance, it just meant the earlier we could start, the earlier we could get into copper production and reduce that cash burn.”

According to last year’s economic assessment, Kanmantoo’s underground operation is expected to produce 43,500 tonnes of copper and 11,500 ounces of gold over an initial 4-year period, generating roughly $205 million in post-tax free cash flow. 

They’re good figures for an asset humans have had their hooks in, intermittently, for the last 178 years. But Hillgrove, presumably, did not go through all that effort to enjoy just 4 years of production. For Kanmantoo to really live up to its potential, it needs to do some growing.

The monster asleep at Kanmantoo Deeps

In March 2023, Hillgrove outlined an exploration target based on 6 of the 9 highest-grade copper-gold zones at the Kanmantoo Mine. Measuring between 10 million and 20 million tonnes — at 0.9% to 1.3% copper and 0.1 grams per tonne (g/t) to 0.3g/t gold — the target shone a light on the potential to materially increase the underground resource at the mine.

Drilling throughout 2023 — roughly 25,000m in total — eventually led to the discovery of the Kanmantoo Deeps zone, which in turn led to a heavily revised exploration target in October of between 60 million and 100 million tonnes at 0.9% to 1.2% copper and 0.1g/t to 0.2g/t gold.

“Kanmantoo Deeps, in its own right, is sitting there with an exploration target of 50 million to 80 million tonnes,” Wallace says.

“It’s returning a very similar resistivity signature to what we see in the main ore lodes. So what we’re expecting, what we’re theorising, is that we have our main Kanmantoo lode that’s been mined for 15 or 20 years, and this looks like a northern extension. Obviously, we need to drill down into that to determine whether that theory is correct and see what we’ve actually got at depth. But if we can see any of that exploration target convert, it’s potentially a material change to our business.”

“Kanmantoo Deeps, in its own right, is sitting there with an exploration target of 50 million to 80 million tonnes

Though significant, the exploration target represents just one of the two categories Hillgrove uses to define exploration opportunities at Kanmantoo.

“We’ve got things that are immediately around the processing plant, that’s the 60- to 100-million-tonne exploration target. But more broadly, we hold about 6,000km-square of exploration tenements that go all the way from Kanmantoo down towards Narracoorte in the south-east,” Wallace explains.

Within those regional tenements are an estimated 70 exploration opportunities. Over the years, Hillgrove has undertaken soil sampling work and geochemical studies — both heliborne and ground-based — and sourced historical drilling data for review. But fresh drilling is the only way to sufficiently test those targets at depth.

“They’ll be sort of secondary things we’ll be looking at. I mean, first and foremost, we’re focused on getting to steady-state production and getting regular cash flow from the operation,” Wallace says.

“In addition to that, we want to expand the mine life. That’s where we’ll chase Emily Star, Spitfire, Nugent, and Kavanagh at depth. Then obviously we’ll be drilling that bigger target which is immediately adjacent, at Kanmantoo Deeps. That’ll be the first priority.”

While the discovery of Kanmantoo Deeps was the cornerstone achievement of Hillgrove’s drilling efforts in 2023, the drilling results themselves are just as impressive, and are expected to form the basis of an updated mineral resource estimate.

Some of the most notable results include 71.7m at 0.89% copper and 68.8m at 0.9% copper in down dip extensions at Emily Star, 36.6m at 3.35% copper at East Kavanagh, and 45.4m at 1.19% copper and 0.12g/t gold in a step-out hole — more than 100m from any previous intercept — at Spitfire.

Since 2019, Hillgrove has drilled — according to its website — 136 holes and had 158 intercepts of economic grade and width.

“What that means is that every time we drill, we’re effectively hitting this target. We’ve basically hit over 100% of the time, which is an exceptional strike rate,” Wallace says.

“But importantly, every time we’ve run a drill program, we’ve also seen the mineral resource estimate increase, from less than a million tonnes in 2019 to now almost 7 million tonnes, and it’s about to be upgraded in the near term. Every time we drill, we hit a target. Every time we run a program, we see a material increase to the mineral resource estimate, and that’s quite exciting.”

The bigger picture

The Kanmantoo Copper Mine is the apple of Hillgrove’s eye, yes. But that doesn’t mean Wallace is without a bigger picture in mind. There are, he explains, two avenues of growth: growing organically through exploration on-site, and inorganically through mergers and acquisitions.

“What we have in the marketplace at the moment are some projects which are potentially becoming distressed, but may be good assets in their own right. So we’re keeping an eye on quite a few different projects in the area, and as we come into cash flow, as our scrip value improves, we’ll be looking to basically increase through inorganic means, through M&As,” he says. 

“It’s much better, from a risk point of view, to have more projects generating revenue than less. So that’ll be something that we’ll be actively looking at doing as we enter into positive cash flow.”

It’s a longer-term plan given some buoyancy by the success of the Hillgrove team’s work at Kanmantoo, having gone from exploration to production in less than a year.

“There are plenty of projects out there,” Wallace adds. “What people are looking for is a group that can deliver and put those projects into operation.”

Whether any of those projects can give as long and as generously as Kanmantoo has is, of course, the very nature of the resources game.

Write to Oliver Gray at Mining.com.au

Images: Hillgrove Resources
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.