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Hillgrove Resources Limited (ASX:HGO) has secured Board approval to initiate development of Emily Star, establishing it as the third underground mining front at the Kanmantoo Copper Mine in South Australia. Geological validation through drilling confirms the model's accuracy with no significant geotechnical concerns. The project entails a capital investment of $20–22 million, fully financed from operating cash flow, with stoping operations planned to start in the second half of 2027. Additionally, the company has revised its 2026 major capital expenditure guidance upward to $15–17 million.
Key Points
- Hillgrove Resources Limited (ASX:HGO) operates the Kanmantoo Copper Mine in South Australia and has approved Emily Star as a third underground mining front.
- Drilling confirms geological continuity and grade consistency with the existing block model, identifying no significant geotechnical risks.
- Estimated capital expenditure of $20–22 million to complete development, including $6.5–7.5 million planned for the second half of 2026; stoping slated for H2 2027.
- 2026 major capital guidance increased from $8–10 million to $15–17 million to incorporate Emily Star development and Mutooroo Stage 1 Pre-Feasibility Study activities.
- Emily Star is expected to replace lower-level Kavanagh production and help maintain a 2 million tonne per annum throughput at Kanmantoo, reducing unit All-in Sustaining Costs.
- The entire investment will be funded through operating cash flow, underscoring the strength of the Kanmantoo operation.
Kanmantoo Copper Mine and Hillgrove’s Strategic Asset Expansion
Hillgrove Resources Limited’s Kanmantoo Copper Mine in South Australia is a long-life underground asset central to the company’s production strategy. The mine’s multiple mining fronts optimize production scheduling and operational flexibility. The approval of Emily Star adds a third major underground mining front, significantly expanding Hillgrove’s development pipeline.
Consistent geological characteristics across Kanmantoo’s zones, coupled with prior successful developments such as Nugent, provide operational confidence. Emily Star applies this proven mining framework to a newly evaluated resource area, supported by systematic drilling and geotechnical assessments. This phased development approach enables optimized capital allocation while ensuring operational continuity.
Drilling Confirms Geological Model and Ground Stability at Emily Star
Drilling at Emily Star’s upper levels has validated geological continuity and grade distribution aligned with the current block model. Designed to confirm resource estimates and assess ground conditions, the drilling results support mine planning and economic assumptions for development.
Geotechnical logging revealed variable ground conditions typical of Kanmantoo but identified no geotechnical risks that would impede development or stoping. Conservative ground-support and decline-advance parameters have been integrated into mine planning. These results will be included in the December Quarter Mineral Resources and Ore Reserve update, providing an updated resource position ahead of significant capital expenditure.
$20–22 Million Capital Investment Fully Funded by Operating Cash Flow
The capital required to bring Emily Star into production is estimated at $20–22 million, in addition to $2.9 million already spent on drilling and early development. Planned expenditure for the second half of 2026 is $6.5–7.5 million. The higher capital profile compared to the Nugent project reflects additional ventilation and access infrastructure needs specific to Emily Star’s geology.
Crucially, Hillgrove confirms that Emily Star’s development will be entirely financed through operating cash flow, highlighting Kanmantoo’s operational robustness and the company’s capacity to fund growth without external financing. The updated 2026 major capital guidance of $15–17 million includes both Emily Star development and Mutooroo Stage 1 Pre-Feasibility Study work, remaining fully funded by operating cash flow.
Revised 2026 Capital Guidance Reflects Expanded Project Scope
Hillgrove has increased its 2026 major capital guidance from $8–10 million to $15–17 million, driven by the start of Emily Star development and advancement of the Mutooroo Stage 1 Pre-Feasibility Study. This update offers investors clarity on capital deployment and reinforces the company’s commitment to advancing its development pipeline while maintaining financial discipline.
The capital increase reflects accelerated strategic projects at Kanmantoo and exploration of the adjacent Mutooroo asset. Emily Star’s inclusion means concurrent management of decline development, ventilation installation, and level access during 2026. The Mutooroo PFS represents a parallel growth opportunity, underscoring management’s confidence in nearby assets. Both projects are structured to be sustainable within the company’s operational cash flow.
Emily Star Production to Boost Throughput and Reduce Costs
Emily Star is expected to displace part of lower-level Kavanagh production and help maintain a 2 million tonne per annum run rate at Kanmantoo. Higher plant utilization from this production profile will lower fixed costs per unit, reducing the All-in Sustaining Cost (AISC).
Stoping is planned to begin in the second half of 2027 after decline development and level access are established. Stope sizes of approximately 35,000 tonnes align with Kanmantoo’s broader underground mining profile, supporting operational consistency and proven mining methods across multiple fronts. This staged infrastructure development minimizes technical risk.
Environmental Compliance and Rehabilitation Plans
Emily Star development will proceed under the existing Programme for Environment Protection and Rehabilitation (PEPR), with a comprehensive update scheduled for late 2026. This ensures environmental and rehabilitation obligations are met and new activities are assessed prior to commencement. The current PEPR has adequately supported planning, indicating a well-understood regulatory environment.
Approval of the updated PEPR is expected before stoping starts in H2 2027, integrating environmental assessments into the development timeline. Hillgrove’s proactive environmental compliance supports timely approvals based on its operational track record at Kanmantoo.
Third Mining Front Enhances Operational Flexibility and Extends Mine Life
Emily Star’s approval as a third underground mining front enhances scheduling flexibility, allowing simultaneous production across multiple zones. This optimizes ore extraction sequencing, equipment deployment, and reduces operational risks from disruptions at any single front.
CEO Bob Fulker stated Emily Star "provides an additional mining front, strengthens operational flexibility, and supports sustained copper production over the life of mine." Its development is a material contributor to long-term production, replacing lower-level Kavanagh output with higher-grade or more efficiently mined mineralization, improving unit economics as the mine transitions.
December Quarter Resource and Reserve Update to Include Emily Star
The December Quarter Mineral Resources and Ore Reserve (MROR) update will incorporate Emily Star, offering investors formal resource and reserve estimates reflecting recent drilling and development confidence. This standard disclosure aligns with JORC Code requirements, providing independently verified data ahead of major capital deployment.
The timing allows the market to assimilate resource information well before significant capital expenditure, enhancing transparency on the value underpinning the development investment.
Mutooroo Stage 1 Pre-Feasibility Study Advances Growth Pipeline
Alongside Emily Star, Hillgrove is advancing the Mutooroo Stage 1 Pre-Feasibility Study, contributing to the increased 2026 capital guidance. Mutooroo, adjacent to Kanmantoo, is being evaluated for economic and technical feasibility as a future growth asset. Inclusion of PFS costs in capital guidance indicates its material impact on the company’s annual capital program.
This parallel advancement reflects a multi-stage growth strategy, maintaining optionality and readiness to act on Mutooroo’s potential once study results are available. Both projects are progressing within the company’s cash generation capacity, demonstrating disciplined capital allocation.
Risk Factors and Development Dependencies for Emily Star
Despite no material geotechnical risks identified so far, underground mining development carries inherent technical, geological, and operational risks that could affect timelines and costs. Conservative ground-support and decline-advance parameters have been applied, but actual conditions may vary, potentially delaying stoping commencement beyond H2 2027 and impacting production and cost forecasts.
Funding assumptions rely on Kanmantoo’s continued operating cash flow generation through 2026 and 2027. Adverse changes in copper prices, operational performance, or costs could constrain cash flow, necessitating capital plan adjustments or external funding. Regulatory approval of the updated PEPR, while expected, remains a dependency outside the company’s direct control. Environmental or regulatory changes could extend approval timelines and delay operations.
