Site visit: NMR seeks Forrest-inspired phoenix at Blackjack in Australia

Native Mineral Resources (ASX: NMR) only recently acquired its primary asset in Queensland, but it has set an aggressive schedule to restart production. 

The Sydney-based explorer bought the Far Fanning and past-producing Blackjack gold projects in November for A$18.9 million (C$17 million) plus a 2% production royalty. In mid-February, NMR raised A$15.9 million to refurbish Blackjack’s processing plant. 

Now, CEO Blake Cannavo, who oversaw the construction of Fortescue’s (ASX: FMG) Solomon iron ore project six months ahead of schedule and A$1 billion under budget, is channelling the can-do attitude of Fortescue founder Andrew Forrest to deliver first gold by Sept. 30.  

“We don’t want anyone here who basically can’t see the vision of what we’re trying to get to,” Cannavo said during a February visit to Blackjack. “I worked very closely with Andrew, and what we did, everyone told us we couldn’t do it.”  

The project has attracted Wes Maas, founder and CEO of A$1.6-billion market cap civil and mining contractor Maas Group (ASX: MGH). He invested A$6.8 million in February to take 19.9% of NMR while Cannavo boosted his stake to 25%.  

The Blackjack deposit, shallow and just 600 metres from the processing plant, might produce 20,000 oz. of gold annually and could potentially quadruple output within a few years of expansion, according to the CEO. The proposed mine’s design is to be ready within weeks while the plant’s update is on track despite once-a-century flooding in the state last month.  

“What we’ve found is, traditionally, you’ve got to change the gears, belts, drives, things like that, because they’ve been sitting there for so long,” Cannavo said. “But the big-ticket items and the long-lead items in this plant are all coming up okay.” 

NMR shares traded for A6¢ before press time, giving the company a market capitalization of A$30.3 million. Its shares traded in a 52-week range of 1¢ to 9¢. 

Drilling 

NMR is planning to get one to two years of plant feed from the shallow pit. Blackjack produced ore as recently as 2019 but doesn’t have a JORC-compliant resource so NMR is drilling about 12 diamond holes to improve its status. 

“At the moment, we’re drilling down to 50 metres, so it’s very, very shallow, and we’re looking at some really good ounces there,” Cannavo said. “It’s running at about 1.8 grams [per tonne], but that’s fine, because we’re so close to the plant.” 

NMR also plans to drill two holes to 100 metres depth as there are records of historical underground mining at the project grading up to 30 grams gold per tonne. 

The project NMR acquired comprises the 340,000-tonne-per-annum Blackjack processing plant, which is on care and maintenance, and 17 mining leases, one mineral development licence, six exploration permits and one exploration permit application. 

The Far Fanning deposit has an inferred resource of 2.3 million tonnes at 1.84 grams gold for 138,000 ounces. The Great Britain deposit is estimated to contain 109,000 oz. at 2.2 grams and the Granite Castle deposit has a resource of 77,000 oz. at 3.14 grams. 

‘Amazing payback’ 

Veteran gold analyst Warwick Grigor, of Sydney-based Far East Capital, was on the site visit and saw the potential for 20,000-30,000 oz. per year. 

“Being near surface, lower cost oxidized ore, there is nothing tricky about what NMR intends to put through the mill,” he said.  

“I’m prepared to estimate cash operating costs in the order of A$1,800-A$2,000 per ounce. Two years ago, this would have been viewed as expensive, but not today. The Australian gold price of A$4,400 per oz. provides a very attractive cash profit margin of A$48 million in year one, giving an amazing capex payback of less than six months if the company ends up spending A$20 million to get it up and running. What is not to love about these economics?” 

Cannavo said having the plant was the key to reaching revenue quickly. 

“If you can’t get to revenue in this business, you’re not surviving,” he said. 

The company has already appointed Ausenco to study an expansion of the Blackjack plant. Cannavo says the plan is to upgrade annual output to 80,000 oz. at the end of year two which roughly amounts to processing 800,000 tonnes a year.  

“The one thing that we’re blessed with is Blackjack has got plenty of room,” Cannavo said. “We’re looking at 2026 as the start of that upgrade.”