The company, which has been relying on its aging Darlot mill for the better part of a year, said this morning the KOTH development was progressing within budget and on schedule, and its major risks were now the labour shortages that have plagued the industry for the past two years, and the unpredictable impacts of COVID-19 disruptions.

 

Managing director Mark Williams, said creating the first gold bar was "just weeks away", with mining humming along well, the crushing circuit running, and the new 4.7 million tonne mill in the commissioning phase.

 

He described the ability to work with MACA Interquip and Macmahon Holdings and deliver a major gold development amid unprecedented labour and supply market and the recent widespread impact of COVID-19 as "a great achievement".

 

He said KOTH was "operationally ready" to take its place as a top 10 Australian gold mine.

 

To the north, the Darlot underground and Great Western open pit allowed production of a reduced 13,185 ounces at steady all-in sustaining cost of A$2552 per ounce, with unhedged sales of 14,644 oz at an average $2583/oz.

 

Despite the high costs, the mine actually managed to deliver positive cashflow of $3.5 million.

 

The mill operated on a trouble-free basis, with the main bottleneck being a shortage of staff.

 

Costs remain elevated due to the labour shortages and inflation, so Red 5 has been forced to revise up its full year AISC from $2300-2400/oz to between $2400-2500/oz, however production guidance of 62,000-72,000oz has been maintained. 

 

With all the ore to be funnelled to KOTH and the Darlot mill to be suspended by the end of June, Williams expects to see a step-change decrease in operating costs.

 

Full production is targeted by year's end.

 

He noted that Darlot was showing indications of significant potential to extend the underground resource base and define future mining areas, including significant extensions to the known mineralisation at Middle Walters South area that is under development.

 

After spending $47 million on KOTH, Red 5 ended the quarter with cash and bullion of almost $48 million, of which $28.5 million is allocated to reserve accounts and bank guarantees for KOTH.

 

It has drawn $123 million of its $175 million debt facility. 

 

Shares in the miner closed yesterday at 39c, valuing it at $919 million.

 

Red 5's stock has traded at 16-47c over the past year.