By Lee Scanlon of the Westport News
File pic Photo: Getty / Bloomberg Creative / Simon Marks
Australian-based Federation Mining is buying the Snowy River Gold Mine near Reefton on the West Coast, where it has been confirming the gold resource for three years.
Federation has had an option to buy Snowy River - formerly Blackwater Mine - since its predecessor, Tasman Mining, signed a project deed with OceanaGold in 2018.
Federation announced today it had agreed to exercise the option.
Certain conditions and regulatory approvals must be met before settlement, the statement said. These included the transfer of permits and consents and Overseas Investment Office endorsements.
Two months ago Federation sold its shareholding in ASX-listed Orecorp for $26 million. Federation said the cash covered operating costs for the first half of this year.
"Federation is currently pursuing a wide variety of additional funding opportunities to assist in the purchase of the asset and construction of the processing plant. These funding options include private equity, debt and streaming along with merger and acquisition."
Federation is seeking to raise over $100m to cover buying the mine, the process plant build and ongoing operational costs.
Managing director Mark Le Messurier said the company was excited to take the next step of buying the mine.
"This is a project which will bring many benefits to not just our company but also our local community and the West Coast."
A leading consultant was managing a pre-feasibility study which was set to be completed by April, he said.
The mine currently employs 60 staff. Another 100-plus jobs are expected in the construction and operation phases.
Construction of the processing plant is due to start in the second half of this year, take about nine months and cost about $60m. Production is expected to start early next year.
The plant will process 300,000 tonnes of mined rock a year, producing around 70,000 ounces of gold which will be melted down to bars.
Federation has spent more than $100m at Snowy River over the last three years.
The company has developed 9km of tunnels since the first cut in December 2020 and completed over 15,000 metres of diamond drilling. Drilling results have been consistent with the historic mining immediately above the drill area.
Federation plans to have an estimate for the gold resource by the end of March. OceanaGold established an inferred resource of 695,000 ounces.
Historic mining produced 700,000 ounces over 40 years of operation. Federation expects to produce a similar amount over the mine life of about 10 years.
The 2018 deal with OceanaGold provided Tasman Mining with US$5m seed funding for 18 months and gave Tasman the exclusive right to buy the mine from OceanaGold. Tasman had to pay back the seed funding if it decided to buy.
In December 2019 Tasman received a $15m loan from the government's Provincial Growth Fund.
Current List MP Damien O'Connor with Mark Le Messurier at the time of the funding announcement. Photo: Supplied
The mine goes beneath Department of Conservation land and does not disturb the surface. It is about 700m below the old Waiuta township.
Blackwater operated from 1908 until 1951. It was abandoned after a shaft collapsed.
- This story was first published by the Westport News.
