On the road to Mandalay
On 28 April, Alkane announced a merger of equals with Canadian-listed Mandalay Resources
Corporation. Under the terms of the transaction, Mandalay shareholders will receive
7.875 ordinary shares of Alkane for each ordinary share of Mandalay, such that former
Mandalay shareholders will own approximately 55% of the combined entity and former
Alkane shareholders will own 45%. The combined company will have a market capitalisation
of c A$1bn and will produce c 180koz gold equivalent in 2026 from three operating
mines (Tomingley and Costerfield in Australia and Björkdal in Sweden) at an AISC of
c A$2,160/oz.
Assets
Mandalay is a Canadian-based resource company with two producing assets: the Costerfield
gold-antimony mine in Australia (Victoria, 10km north-east of Heathcote) and the Björkdal
gold mine in Sweden. It states its mission as being to create shareholder value via
the profitable operation of its existing mines and the continuation of its regional
exploration programmes. By design, it operates and has interests in countries that
have a long-standing tradition in mining, low political risk and clear legal frameworks
for tenure and taxation.
Costerfield
Geology
The Costerfield gold-antimony vein district (of which the Augusta Lodes are a part)
is located on the northern end of the Darraweit Guim Province, comprising the Murrindindi
Supergroup. Stratigraphy in this area comprises a thick sequence of Lower Silurian
to Lower Devonian shelf and flysch sedimentary rocks, dominated by turbiditic siltstone,
with minor sandstone and argillite. At the base of the Supergroup is the Costerfield
Formation, which is conformably overlain by the Wappentake (sandstone/siltstone) and
Dargile (mudstone) Formations, the McIvor Sandstone and the Mount Ida Formation (sandstone/mudstone).
The gold-antimony veins in the Costerfield district are hosted within the Silurian
Costerfield Siltstone unit. Within the district, four north-north-west trending zones
of mineralisation have been identified. From the west, these are:
- the Antimony Creek Zone, approximately 6.5km south-west of Costerfield, on the outer
western flank of the Costerfield Dome;
- the Western Zone, approximately 1.5km west of Costerfield, on the western flank of
the Costerfield Dome;
- the Costerfield Zone, near the crest of the dome, centred on the Costerfield township
and hosting the major producing mines and deposits; and
- the Robinsons-Browns (R-B) Zone, 2km east of Costerfield.
Mining
At Costerfield, the company’s focus is on its high-grade Youle and deeper Shepherd
veins (both of which will continue to supply high-grade ore to the processing plant)
and the extension of mineral reserves at Youle, in particular.
The Augusta mine has been operational since 2006 and was the sole ore source for the
Brunswick processing plant until December 2013, when ore production started from the
Cuffley deposit located approximately 500m to the north of the Augusta mine workings.
Currently, Youle and Shepherd are the main source of material for Costerfield. The
Brunswick deposit is also being mined in conjunction with the Youle deposit.
The mining method employed is long-hole stoping with cemented rock fill. Ore is accessed
by a primary spiral ramp. Level spacing is at 10m centres and horizontal development
is advanced in a minimum of 1.8m wide drives in both directions of the deposit. Levels
are then mined out on retreat with long hole stopes drilled to a minimum width of
approximately 1.5m. The stopes are subsequently backfilled with cemented rock fill
in order to provide stability, reduce dilution and allow for mining above and below
developed levels.
Ore is trucked on the surface from the Augusta mine portal to the Brunswick processing
plant, where it is stockpiled and blended into the processing circuit. Costerfield
is currently planning a second mine portal at Brunswick. The circuit comprises primary
crushing, primary and secondary ball mills, rougher, scavenger, cleaner flotation,
a gravity circuit and filtering. Gravity gold concentrate is sold to a refinery in
Melbourne, while gold-antimony flotation concentrate is shipped to a smelter in China.
Björkdal
Geology
The Björkdal gold deposit is a lode-style, sheeted vein deposit that is hosted within
the upper-portions of the Skellefteå Group lithologies as they are found at Björkdal
(see Mandalay Resources website). Gold is found within vertical to sub-vertical dipping quartz veins that range in
thickness from less than a few centimetres to over several decimetres. Locally, the
veining is structurally complex, with many cross-cutting features as well as thin
quartz veinlets, which introduce mineralisation into the wall rocks proximal to the
main quartz veins.
Gold-rich quartz veins are most often associated with the presence of minor quantities
of sulphide minerals, such as pyrite, pyrrhotite, marcasite and chalcopyrite alongside
more common non-sulphide minerals, such as actinolite, tourmaline and biotite. Scheelite
and bismuth-telluride compounds (eg tellurobismuthite and tsumoite) are also commonly
found within the veins and are both excellent indicators of gold mineralisation.
Gold occurs dominantly as free gold, although it is also associated with bismuth-telluride,
electrum and pyroxenes. Silver is seen as a minor by-product (assumed to be associated
with electrum).
Mining
Björkdal is located within the Boliden mining district of Sweden, approximately 750km
north of Stockholm. Operational since 1983, Björkdal was only acquired by Mandalay
in 2014, at which point it produced from both open pit and underground operations
until the former was suspended in 2019, such that it now operates solely as an underground
mine, focusing on the higher-margin underground Aurora zone (80% of mill feed) and
stockpiled ore (20% of mill feed). Mandalay expects to increase the processing rate
to 1.45Mtpa from 2024.
Underground mining is accomplished by long-hole stoping using a combination of contractors
and an owner-operated mobile fleet. Access is via dual ramps from the open pit. The
processing plant includes multiple crushers, a ball mill, a rod mill, a gravity circuit
and a flotation circuit, producing four separate gravity and flotation gold concentrates
that are sold to smelters in both Sweden and Germany.
Reserves and resources
At targeted processing rates, Mandalay’s reserves are capable of supporting production
for approximately nine years, while its resources are capable of supporting production
for over 20 years. Including antimony (Sb), Mandalay’s most recently stated resources
across its two assets may be summarised as follows: