Evolution Mining said it is spending $15 million a year around its Mungari gold operation 20km west of Kalgoorlie to find a new high-grade replacement for its Frog’s Leg underground mine.

Frog’s Leg is set to run out of economic ore in three years and the neighbouring White Foil open pit is due to close in 2020.

However, Evolution’s Executive Chairman Jake Klein maintains there is a long life for Mungari despite questions over its only West Australian operation’s role in the company’s portfolio.

Speaking to analysts after reporting its quarterly results yesterday, Mr Klein said the mine could extend as long as 2027.

The comments come after Evolution extended its reserve life at Mungari from five to seven years this week by securing control over the Castle Hill deposit, 25km north-west of the Mungari processing plant, from Norton Gold Fields.

“I think it (exploration) is an important piece of the whole Mungari puzzle and the opportunity for us at Mungari is that we can go from where we are at the moment with the 120,000-ounce production base. The prize would be to get it up to 140,000-150,000oz,” Mr Klein said.

“Castle Hill doesn’t do that for us. It basically extends the mine life and gives us the baseload feed.

“It would be available potentially after (2020), but we’re kind of starting to see visibility of Mungari out to 2026-27 quite comfortably.

“The challenge is finding that high-grade replacement for Frog’s Leg.

“We haven’t yet found it but when I see grades and widths like we’re seeing at Scottish Archer, it gives me some encouragement that we’re drilling in an area that has the potential to host these things.”

The company is also drilling at depth to find extensions to the Frog’s Leg deposit.

Mungari produced 30,169oz of gold at all in sustaining costs of $1235/oz in the June quarter and 118,498oz at $1181/oz across the 2018 financial year, falling short on guidance of 120,000-130,000oz at $990-1050/oz.

But Evolution’s overall portfolio continued to be a cash cow, producing 801,187oz at $797/oz over fiscal 2018, generating $539.9 million in net mine cash flow.

Image: Frog’s Leg underground gold mine at Mungari, Kalgoorlie Miner.