Blackwater gold mine focus of $500 million redevelopment

Oceana Gold test drilling around the Blackwater mine site area in 2012, in the foothills of the Victoria Range. Photo / Supplied

The historic Blackwater gold mine, on the West Coast near Reefton, is the focus of what could become a $500 million redevelopment, with more than 100 jobs over a 10-year mine life.

Permit holder Oceana Gold has signed an agreement with privately-owned Tasman Mining looking at development of an underground decline down to the base of the historic workings at Blackwater.

Over recent years, $18m has been spent on test drilling and studies at Blackwater.

Tasman Mining's Sydney-based founder, managing director and 100 per cent shareholder Mark Le Messurier said a three to five-year exploration programme would focus on drilling the deposit from underground.

"Tasman Mining will assess the potential to develop a modern, underground mine at Blackwater which would bring significant local economic benefits," he said in a statement yesterday.

Blackwater is 37km south of Reefton, beneath the abandoned township of Waiuta, in the foothills of the Victoria Range.

From 1908, until the shaft collapsed and the mine was closed in 1951, it produced about 750,000oz of gold. Its lowest mining level was about 1000m underground.

In October 2014, Oceana released a preliminary economic assessment which estimated about 120,000 tonnes of ore per year from Blackwater could yield 58,000oz of gold, recovering a total estimated 570,000oz.

Oceana has said in the past that because of depths involved drilling from the surface would too difficult and exploration drilling would have to be done from new tunnels.

Under the companies' agreement, Oceana would support the project with seed financing for development of the underground decline, and if Tasman decided to go ahead with mine development, it had an exclusive right to purchase Blackwater from Oceana.

Tasman wants to establish an underground mine, with a small surface footprint, and mine tailings would be stored underground, within the mine.

A 2014 preliminary economic assessment by Oceana found Blackwater would be environmentally, technically and economically viable and contained an estimated 700,000 oz of gold; grading at 23 grams of gold per tonne of ore extracted.

The announcement yesterday said once underground access was completed, Tasman Mining would establish underground drill chambers and begin a test drilling programme to support a mining decision.

Oceana considered Blackwater had a smaller production scale, relative to its other operating and development assets, which stalled a development decision, the announcement said.

However, since the 2014 reports, Oceana had held Blackwater in its "pipeline inventory".

It was estimated Blackwater's development required more than $500m investment in capital and operating expenses, which would generate about $1 billion in export revenue.

Around 30 direct jobs would be created during the decline development and underground drilling phase and about 100 direct jobs, not including contractors, over a 10-year mine life.

Oceana's chief development officer, Mark Cadzow, said Le Messurier was a successful and highly experienced leader in underground mining.

"Blackwater will be given every chance of becoming the next significant gold project in New Zealand," Cadzow said in a statement.

Le Messurier was chief operating officer of ASX-listed Evolution Mining, which has 100 per cent interest in five projects across Australia, and has forecast 2018 group gold production of 790,000 to 805,000 ounces.

Historically, each vertical metre of the original Birthday Reef at Blackwater yielded 1000 ounces of gold. Blackwater totalled about a third of the 2 million ounces of hard-rock gold extracted from the region during that period.

Oceana Gold was granted consent in 2014 to reopen Blackwater, with access via twin 3.3km-long tunnels driven in from Snowy River, rather than vertically from above, the Greymouth Star reported.