The Kanmantoo copper mine in the Adelaide Hills would generate strong returns if restarted

Hillgrove Resources says its Kanmantoo copper mine, which has been on care and maintenance, would generate strong returns if mining starts up again.

The Kanmantoo copper mine in the Adelaide Hills. Picture: Supplied.

Hillgrove Resources’ Kanmantoo copper mine would generate more than $200m in free cash flow and operate for at least 45 months under a new financial plan revealed on Monday.

The company has released an economic assessment for a restart of the mine in the Adelaide Hills, and says bringing it back into production would cost just $25m and have a payback period of just nine months.

The company is currently conducting a capital raising and is yet to make a final investment decision on the restart, but managing director Lachlan Wallace said in a statement to the ASX that the economic assessment was very favourable.

“The updated study reaffirms the excellent project potential,’’ he said.

“The Kanmantoo Underground Stage 1 presents a unique opportunity to produce copper in a tier one jurisdiction, generating post-tax cash flows in excess of $200m in the initial stage.

“With all infrastructure and permitting in place, the project is well positioned for a fast, low capital restart, with first copper production only seven months from commencement.’’

The history of copper mining at Kanmantoo stretches as far back as the 1840s, with copper mined there from 1846-1874, in the 1970s, and from 2011-2020 by Hillgrove.

The company has in recent years been drilling to extend the copper resource at Kanmantoo, boosting the mineral resource at the site from less than one million tonnes of ore in 2019 to almost 7Mt last year.

“Such high exploration strike rate and resource conversion provides confidence that further drilling may result in increased resources and an expansion in the mine plan,’’ Mr Wallace said.

Mr Wallace said the project as it stands is also highly-leveraged to rising copper prices.

“The underground stopes are designed to cut-off grades based on the current copper price,’’ he said.

“Many of these stopes terminate whilst still within a lower grade copper halo around the higher grade core.

“At higher prices, there is potential to grow the existing plan by simply widening stopes for relatively low incremental cost. With mill capacity at only 40 per cent, and excess tailings storage capacity, additional mineralised material can be processed without displacing any high grade.’’

Mr Wallace said because the mine was co-located with existing processing facilities, restarting production was a low-cost proposition.

“All infrastructure is in place, including a 3.6Mtpa processing plant that is being maintained in such a manner that it can be restarted quickly with very little refurbishment costs,’’ he said.

Over the initial 45 month mine plan, the mine is expected to produce 43,500 tonnes of copper and 11,500 ounces of gold. The project would employ about 170 people.

The Kanmantoo copper mine is about 55km from Adelaide.

Hillgrove shares are in a trading halt while the company conducts its capital raising. The stock last traded at 6.4c, valuing the company at $75.2m.

Originally published as The Kanmantoo copper mine in the Adelaide Hills would generate strong returns if restarted