Millennium back in full flight

COVER

Page 18 GOLD MINING JOURNAL July – September 2016

Dovaston joined Millenni-um in early 2014 as site gen-eral manager of operations at Nullagine, about 300km south-east of Port Hedland, before being promoted to head office on December 18 that year.

At the time, Millennium was struggling to stay afloat. Gold production at Nullagine had picked up slightly, but the company was barely break-ing even on the cost front and the Pilbara producer had just 18 months left to repay $21.4 million of debt, having returned less than $10 million to its banking syndicate in the preceding 12 months.

Dovaston, a mining engi-neer who has worked for the likes of Barrick Gold Corp and

Newcrest Mining Ltd, knew time was of the essence and instead of easing gently into his new role, he immediately placed a call to the compa-ny’s major shareholder, IMC Group.

“My first day in the job and I had to go to IMC and ask if we could increase our subordi-nated debt level to pay down the banks,” Dovaston recalled to Gold Mining Journal.

It was a conversation even the most seasoned of chief executives would have been uncomfortable having, but Dovaston emerged success-ful from his mission and IMC agreed to increase its existing subordinated working capital facility with Millennium from $7 million to $12 million.

The additional $5 million helped Millennium resched-ule its bank repayments for the next three months, how-ever, it was only a short-term solution and the company still had to scramble a quick sale of its Beatons Creek tenements at the end of the March 2015 quarter to avoid disaster.

“We were running around on that final day trying to cash a cheque because the banks were pretty fed up and they

were actually ready to close us down and take the keys,” Dovaston said.

Fast-forward 12 months and Millennium is now debt-free after repaying $37.1 mil-lion during that period, head-lined by a $21 million capital raising late last year, and has close to $20 million in its bank account.

A turnaround on the corpo-rate side of the business also coincided with a reversal of fortunes operationally. Millen-nium churned out 91,462oz gold at an AISC of $1,175/oz from Nullagine in 2015, generating $28 million of free cash flow before financing costs.

Production of 23,166oz at $1,195/oz AISC for the March quarter has the company well on track to exceed guid-ance of 80,000-85,000oz at $1,180-1,220/oz AISC for the 2016 calendar year.

“It’s all a little bit strange be-cause we were on death row

Millennium’s management team at the Shearers deposit on the Nullagine mine. Shearers is one of the main deposits in the current Nullagine mine plan

Glenn Dovaston

Glenn Dovaston’s first day as chief executive of Millennium Minerals Ltd was far from memora-

ble, but it quietly marked the start of one of the most remarkable turnaround stories of recent times.

July – September 2016 GOLD MINING JOURNAL Page 19

COVER

there for a long time and then all of a sudden we’ve started to generate cash,” Dovaston said. “I think our expectations were ‘yes, we will survive and we will get through this’, but definitely it has been much, much faster than we thought.

“We brought some pretty high-quality, passionate peo-ple into the business and that effort of turning it around was truly remarkable. It’s testa-ment to the effort everyone is putting in to make this all hap-pen, from here at head office all the way down to our opera-tors up on site.

“I know everyone tells you

they’ve got the people, but I’ll tell you ours are pretty damn good. Being able to turn a business around from effec-tively $37 million in debt to having $20 million in the bank in just over 12 months is tes-tament to that.”

The people Dovaston is re-ferring to include Peter Man-ton (general manager op-erations), Asareh Mansoori

(mining manager), Myfanwy John (senior mine ge-ologist) and Chris Doyle (senior pro-ject exploration geologist). An-other key appoint-ment was that of

former Talisman Mining Ltd executive Peter Cash as gen-eral manager, corporate de-velopment.

Cash, often referred to as Dovaston’s right-hand man, said a change of culture among the workforce on site was one of the key drivers behind the turnaround in op-erational performance at Nul-lagine.

“We’ve had people come into the business more re-cently and when they go up to site they’re amazed at how people from across depart-ments are so willing to help them in their roles,” Cash said.

“Everyone’s aligned to the success of the company and wants it to succeed. We’ve heard stories of operators dropping what they’re doing to help with geology and ex-ploration. Everyone has their roles and reporting lines, but the success of the company crosses over all of those and we have people who are will-ing to kick in and help in shut-downs.”

Operations at Nullagine began about 14 months before Dovaston joined Millennium and the initial focus was on the Golden Eagle deposit. However, production dropped below

Millennium has turned its attention to mining smaller, higher-grade pits at Nullagine, including Roscoes Reward

“It’s all a little bit strange because we were on death row there for

a long time and then all of a sudden we’ve started to generate cash.

Nullagine general operations manager Peter Manton

Page 20 GOLD MINING JOURNAL July – September 2016

15,000oz in the December 2013 quarter as the company experienced issues with dilu-tion and geological control.

Sustaining cash costs bal-looned out to almost $1,500/oz in late 2014 and, along with some poor mining prac-tices, contributed immensely towards Millennium’s inability to repay its bank debt.

Mining activities at Golden Eagle ceased in the March 2015 quarter and attention was shifted to a number of satellite deposits, including Golden Gate and Bartons. Initially, output improved 11% and operating costs fell 12%, prompting a look at several other smaller, higher-grade pits.

For Dovaston, it was a “slid-ing doors” moment for his company in an operational sense.

“I think the click was our understanding that geologi-cally the ore was there, but our models weren’t correct,” Dovaston said. “We were us-ing models created by exter-nal consultants that the for-mer teams were just putting on the ground and expecting them to be correct.

“Going into Bartons was really the start of change in not only the guard of people, but also in how we did things. We now understood geologi-

cally what was going on in this goldfield and we were not mining it correctly.”

Millennium achieved record production of 21,664oz gold for the June 2015 quarter before bettering that achieve-ment with output of 27,238oz in the September 2015 quarter. AISC also fell from $1,281/oz to $1,020/oz over the six-month period, allow-ing the company to prepare for a capital raising that would mark another major turning point in its history.

The $21 million capital rais-ing was underwritten by IMC and Millennium’s contractors and enabled the company

to retire all of its outstanding debt in February, one month ahead of schedule, while also setting the scene for the next chapter of Millennium’s re-markable turnaround story.

“With this raising, we were also able to start exploration,” Dovaston said. “Previous to that, the banks wouldn’t allow us to spend anything outside the mining plan because they were pretty worried about getting their cash.

“We had over 30 targets at that point in time that we wanted to look at, but we couldn’t drill any holes, so [the $21 million capital rais-ing] really started this next

phase of our business and that business was to increase mine life.”

Millennium ended 2015 with a solid year of production behind it, but only enough re-serves to continue mining at Nullagine until September 2017. However, no one within the internal walls of the com-pany was concerned given the untapped nature of the Pilbara goldfield.

The drill rigs arrived on site in December and by the end of March, Millennium had lift-ed the reserves at Nullagine by 27% to 159,000oz.

Drilling continues to deliver encouraging results for the

Mining manager Asareh Mansoori (left) and senior mine geologist Myfanwy John were instrumental in the

turnaround of operations at Nullagine

July – September 2016 GOLD MINING JOURNAL Page 21

company, headlined by hits of 12m @ 8.54 g/t gold (includ-ing 4m @ 24.2 g/t) at All Na-tions, 4m @ 43 g/t (including 1m @ 171 g/t) at Anne de Vid-ia and 6m @ 10 g/t (including 1m @ 55 g/t) at Golden Eagle South.

“We’re now at a point where we’re very confident – and bullish – that what we’ve set in place, in terms of increas-ing mine life and focusing on the oxide pits in our region, will give us the mine life that we need to, at least, continue going for another three years, maybe four,” Dovaston said.

“We’ve drilled eight pros-pects now and we’ve got eight

resources from it, straight up, so potentially eight reserves. We’ve got 30 of these over 40km of strike just to start with – and that’s without look-ing at anything else.”

At the time of print, Millen-nium announced it was start-ing a maiden deeper drilling programme at Nullagine, tar-geting mineralisation beneath several existing shallow open pits, including Bartons and Shearers.

Previous drilling below the Bartons pit returned 10m @ 4.88 g/t gold (including 5m @ 8.84 g/t), 7m @ 7.73 g/t (in-cluding 4m @ 5.54 g/t) and 27m @ 1.97 g/t (including

3m @ 9.9 g/t). The best inter-cepts below Shearers include 41m @ 4.2 g/t (including 3m @ 29.5 g/t), 14m @ 6.57 g/t and 5m @ 7.5 g/t.

“Geologically there is no reason why these zones won’t continue, but we don’t know yet because we haven’t drilled them,” Dovaston said. “We’re pretty confident that they do extend at depth.”

Nullagine, about 200km west of Telfer and 400km east of Paulsens, is one of only a small handful of es-tablished gold operations in a region universally recognised for its iron ore potential.

Millennium’s predecessor,

Wedgetail Exploration (later Wedgetail Mining), pieced together the ground in 2002. Prior to that, the Nullagine goldfield was broken up into 30-40 separate tenements held by small-time prospec-tors.

Dovaston, who oversaw development of the Mt Dove project for fellow Pilbara jun-ior Atlas Iron Ltd before mov-ing to Millennium, said the region’s potential for minerals other than iron ore was start-ing to be recognised.

“Obviously the focus has been on iron ore for a very long time, but you’re starting to see lithium come through now and there’s plenty of copper and plenty of man-ganese around as well,” Do-vaston said. “The Pilbara is actually underexplored for a lot of minerals and gold is one of those.

“We’re on a different for-mation to the iron ore forma-tions...it has been an interest-ing challenge, compared to the big boys and they seem to get a lot of the credit, but I’ve got a feeling now that, over time, a lot of these other minerals will start to step up and while they’ll never take over, I’m confident we’re go-ing to be part of the Pilbara for a long time yet.”

Millennium has flagged a potential upgrade to the Nullagine processing plant, which runs at just under 2

COVER

Millennium owns the only gold processing plant within a 200km radius of Nullagine

Dovaston discusses operations with his right-hand man, Millennium general manager corporate development Peter Cash

Senior project exploration geologist Chris Doyle explains the mineralisation in the Junction pit

Page 22 GOLD MINING JOURNAL July – September 2016

mtpa, but a decision on the appropriate modifications or how it will be funded is at least six months away.

One thing clear is that Mil-lennium owns the only com-mercial gold processing fa-cility within some distance; a position the company be-lieves it can leverage off in the years to come as produc-tion ramps up at Nullagine.

“We don’t believe it’s going to be replicated in the region, as the capital expenditure to replace such a plant would be at least $100-120 million, so we think it’s unlikely that any major project out there will put up that sort of money, which really puts us in the box seat,” Cash said.

With operations steadily ramping up and the corporate side of the business running smoothly, Millennium has en-tertained the idea of entering the M&A space for the first time.

“We’re quite upbeat about

our chances of be-ing a mid-tier gold producer,” Dovaston said.

“Is there upside at Nullagine? Defi-nitely, but we’re also looking at other opportunities, ei-ther in Australia or elsewhere, to be able to build on our business and I think we’re in a very strong position to at least have a look at those op-portunities.

From a company on death’s door a little more than 12 months ago, Millennium is now fielding calls from advis-ers to much bigger gold com-panies potentially looking to divest assets.

“People are now starting to look at Millennium when beforehand we were just a penny dreadful,” Dovaston said. “We were processing, but we had a market cap of $5

million and everyone thought we were going under. And to be totally honest, there were points where maybe we didn’t think we would pull through, but we did and here we are now.

“It’s amazing what happens when you’ve got money in the bank who starts ringing you. When you’ve got no money, no one wants to know you, but when you’ve got cash in the bank all you hear is, ‘have we got a deal for you’.

“We’re on the map now. We’re a producer and we’re in the top 10 gold producers in Western Australia. We’re being recognised and we like that people are starting to ask, ‘Millennium, what are they up to?’.”

– Michael Washbourne

Golden Eagle was the initial focus of Millennium’s plans, but has since been placed on the backburner

“...there were points where maybe we didn’t think we

would pull through, but we did and here we are now.

Gold pours are now a regular occurrence at Nullagine and (inset) gold room supervisor

Stefan Mysko with the resultant product

July – September 2016 GOLD MINING JOURNAL Page 23