Ora Banda Mining Ltd (ASX:OBM) has approved the development of the Sand King Underground Mine at its 100%-owned Davyhurst Gold Project in the Eastern Goldfields of Western Australia, as it works to rapidly accelerate production and decrease costs.
The Sand King mine — the second to be developed by the company at Davyhurst in less than two years — is slated to hit a steady state production level of around 60,000 ounces per annum in the June 2025 quarter.
With this, the company expects to produce 100,000-110,000 ounces in FY25 at an all-in sustaining costs (AISC) of A$1,975 per ounce to A$2,125 per ounce.
Targeting mid-tier status
Having approved the final investment decision to proceed with the Sand King development, the company is working towards owning and operating at least two high-grade mines and aims to achieve mid-tier gold producer status by June 30, 2025.
When combined, production from the Sand King and Riverina Underground operations will represent a step-change for the business that’s now on the pathway to deliver 150,000 ounces per annum in FY26 and reduce its AISC to below A$1,890 per ounce that year.
This would represent a 40% year-on-year production growth from FY23 to FY26 that will deliver significant free cashflow in the current gold price environment.
This target growth plan has been named the ‘Drive to 150’ and marks a significant decision to move away from being a single mine producer. It will also provide greater operational flexibility and exposure to the potential upside of two significant mineralised systems.
The reduced cost (AISC) per ounce is driven by the increased grade from the underground mines, which in turn increases the production profile over a similar tonnage processed and cost base.
“Significant prospectivity”
Ora Banda Mining managing director Luke Creagh said: “This is a very exciting time for the company as the Ora Banda team has achieved a significant amount in a short period, finding two underground mines in less than two years since changing strategies – a success rate which also indicates the significant prospectivity of the belt.
“The Riverina Underground continues to ramp up well and with the support of Sand King Underground, is expected to deliver 40% year-on year growth and ~34% reduction in AISC/ounce over the same period.
“Our Drive to 150 plan to target 150,000 ounces in FY26 firmly places us on the pathway to becoming a mid-tier gold producer, and the most exciting part is that we are only just getting started on unlocking this highly prospective and under-explored tenement package.”
Sand King development to proceed
The second underground mine at the Davyhurst Gold Project, Sand King Underground, is estimated to cost ~$39 million to develop. This will be funded from cash flows from Ora Banda's existing Riverina Underground mine and existing cash.
Contractors and long-lead items have been secured with the Sand King portal due to be cut in the September 2024 quarter.
The company expects to achieve steady state production of ~60,000 ounces per annum in the June 2025 quarter.
The Sand King Underground mineral resource estimate (MRE) was recently lifted by 176% to 3.4 million tonnes at 2.8 g/t gold for 306,000 ounces, up from 110,000 ounces. It has a maiden ore reserve of 537,000 tonnes at 3.2 g/t for 55,000 ounces.
The current MRE is open in all directions and has only been drilled to a depth of around 300 metres below surface. Ora Banda plans to commence an initial 45,400-metre underground drilling program in the December 2024 quarter.
Riverina and Sand King and the Davyhurst processing hub.
Exploration continues
The company will also make a significant investment in exploration to expand resources at both Riverina and Sand King, and test a number of highly prospective new underground targets.
Ora Banda has budgeted to spend $25 million in FY25 and up to $40 million on exploration in FY26. This investment will be coupled with other investments to improve Davyhurst's infrastructure and processing capabilities.
Read more on Proactive Investors AU
