Million ounce vision for Australian gold miner
Australian gold miner, St Barbara, has a goal of upping its gold output from a current 170,000 ounces to one million ounces a year.
Posted: Monday , 16 Apr 2007
A North American roadshow presentation by mid-tier Australian gold producer Saint Barbara Ltd (ASX: SBM) shows it has a goal of achieving equity production of one million ounces per annum and gold reserves of 10 million oz.
The company is nowhere near that mark at present, targeting in fiscal 2006/07 production of 172,000 ounces. However, it has an enormous war chest, part of which it used to acquire a major block in troubled Victorian gold miner Bendigo Gold Ltd.
St Barbara, originally floated as Endeavour Oil in 1969, converted to St Barbara about the time it went gold mining in the Meekatharra region of Western Australia in 1980s gold boom. High profile geologist Eduard Eshuys who had helped open up the Yandal Greenstone Belt with the Bronzewing and Jundee discoveries, became a major shareholder in July 2004 and added to the company's assets by acquiring gold assets of the beleaguered Sons of Gwalia Ltd.
In the North American roadshow Eshuys said the company's immediate objectives include starting production from the Gwalia Deeps at Gwalia in the September 2008 quarter and lifting production from both the Leonora and Southern Cross mines by late 2008 (purchased from Sons of Gwalia) to 450,000 oz per annum at a cash cost of $A490/oz ($US395/oz).
Eshuys said the company was undertaking an aggressive programme to convert resources into reserves and to explore for new finds and extensions on the Southern Cross and Leonora leases in WA.
He said the company also has big gold grass roots targets and also nickel targets.
Important milestones were the raising in May 2006 of $A59.4 million ($US48 M) from the issuing of 99 M shares, the determination by December of reserves of 1.7 M oz and 8 M oz of resources. Linked to the big capital inflow was Denver-based Resource Capital Fund II LP now major shareholder, according to Intierra's Minmet data base, with 22.38%, as well as today holding major stakes in two other unrelated companies - Lithic Resources Ltd and Constellation Copper Corporation.
On the North American tour Eshuys said that by March the company had cash and investments of $A50.6 M ($US40.9 M) and was carrying debt of $A1.8 M ($US1.5 M).
The company has clearly been one of Australia's big spenders on gold exploration, for Eshuys revealed that in the nine months to date of fiscal 2006/07 it had spent $19.4 M ($US15.7 M) on exploration and, on mine development $A24.4 M ($US19.7 M) on the Gwalia decline and $A24.2 M ($US19.6 M) on the Southern Cross regional mines.
In the Southern Cross belt Eshuys made it clear that extending the Marvel Loch mine was the cornerstone, as ongoing exploration has shown the shoots mined by both open cut and underground methods extend clearly below the current reserve level at 500 metres depth, to clearly 750m depth while limited probing has extended some systems to 1,000m.
The strategy in 2008 is to produce 225,000 oz pa from the Southern Cross region, led by underground mining extensions at Marvel Loch and also deeper development at the nearby Nevoria mine, and opening up of the Nevoria and Great Victoria open cuts.
The decline mine into the historic Sons of Gwalia mine near Leonora reached 700m in the March quarter, which is the top of the Deeps orebody, on a mine with an historic production of 7.5m tonnes at 11.4 grams/tonne for 2.6 M oz. Gwalia Deeps has reserves of 4.8 Mt at 9.1 g/t and total resources of 10 Mt at 9.7 g/t for 3.1 M oz.
Production is to ramp up from September 2008 to 100,000 oz pa and, by early 2010 reach 200,000 oz pa.
St Barbara was able to buy into Bendigo Mining when the company announced serious mining reconciliation problems and the prospect of halting operations to change the exploration focus. St Barbara was able to buy 50 M shares at A34.8 cents to gain a 10% stake. Today's closing price was A39.5¢.
Recently Eshuys said St Barbara had been studying and researching Bendigo - the second largest Australian goldfield after Kalgoorlie and the seventh in the world - for 18 months and that he had been personally been considering the Bendigo region. The issue for Bendigo Gold today was to establish JORC compliant reserves. This, he said, can only be achieved if a thoroughly disciplined approach is adopted and executed.
He said Bendigo Gold's work on underground development and infrastructure to reopen this field has established the platform for exploration and drilling from underground.
The geology, reefs and lines of reefs have been recorded in detail from past production up to the 1920s and exploration in the 1930s and again in the 1980s by Western Mining Corporation.
"The predictability of the reefs has been established. An estimated 11 million oz as an inferred resource has been made," he said.