Beaconsfield Well On Way Back To Full Gold Production
Sydney Morning Herald
Monday September 17, 2007
GUNNS faces an almighty struggle to get its proposed kraft pulp mill up and running in Tamar Valley, Tasmania.
But on the western side of the river valley another struggle is close to being won. It is the struggle by Beaconsfield Gold NL to get its namesake gold mine back to full production. Assuming the fourth approval in a series of applications to authorities is approved in coming weeks, Beaconsfield should be back at full production by the end of the calendar year. With the gold price holding at well above $US700 an ounce, it is a good time to bring back a 100,000 ounce-a-year operation with known fat margin capabilities. The high-grade operation was the scene of the rock fall in April last year that killed Larry Knight and trapped Todd Russell and Brant Webb for two weeks on the 925-metre level. BCD was the junior partner at the mine before the accident but has since moved to an effective 100 per cent economic interest and management control in a series of deals. The most important of these was taking over the previous mine manager, Allstate Explorations NL , which had been in administration when the accident occurred. The financial aspects of that deal were important, and most notably included the acquisition of the controversial Macquarie Bank debt position. But in terms of the mine's long-term future, the best aspect of BCD's clean-up of the mine's corporate structure has been that the mine is at last run by a single mining company stacked with industry professionals capable of returning it to full and safe production. Before last year's accident BCD was valued by the market at about $67 million. While it has since in effect doubled its interest in the mine's cash flows to 100 per cent, its market value has only advanced to $80 million (29c a share). A re-rating by the market will come once the final clearance needed to get back to full production is received. That is expected soon and means BCD will be able to resume mining in the high-grade western zone of the mine, which is where the Anzac Day accident occurred. Mining costs are going to be higher to take account of the safer mining methods adopted in response to the rock fall. But thanks to the mine's high-grade ore, only small tonnages are involved to get to the 100,000 ounce-a-year production rate. So while costs will be more than the $450 an ounce that was being achieved before the accident, they will not be much more. That virtually assures a fat margin for the operation as investors hunt around for some exposure to gold, but when listed investment options are few and far between. It was no surprise then that BCD was able to pull in $8.2 million last week from a share placement at a price of 23c a share and convertible note issue at 25c each to fund the push to full-scale mining operations. The investors who injected those funds know only too well that there are few listed gold companies with the (current) ability to pump out gold at near $400 an ounce cash margins. Glengarry is looking goodDavid Richards has been paid a compliment for his efforts since 2003 in firing up the former sleepy explorer Glengarry Resources. It is the highly rated Kagara that has paid the compliment by taking up a 12.3 per cent placement of Glengarry shares at a premium to the market last month. Buying on-market since has taken Kagara's stake to 15 per cent of Glengarry, with Kagara's interest being the potential of Glengarry's Maitland copper and molybdenum project in north Queensland to become a sizeable mine inside of two years. Maitland is strategically located within Kagara's mining and milling sphere of influence in north Queensland. It is also just down the road from Copper Strike's proposed Einasleigh development. But if Maitland becomes big enough in its own right it could pursue its own development path. Either way, Kagara's interest has sparked interest by others in Glengarry, valued by the market at $35 million, or 12c a share, on Friday. Thanks to the Kagara placement and some astute trading of some lesser ranked exploration properties, Glengarry's hunt for the company-making project is well funded. At last count it was holding about $6 million in cash and $3 million in listed investments. The portfolio of properties is bigger than just Maitland but it is the one that is about to get a serious workover in a 10,000-metre drilling program to be completed by the end of the year. That is expected to lead to a substantial upgrade in the size and status of the 2006 inferred resource estimate of 1.6 million tonnes at 1.3 per cent copper. High-grade intersections since of up to 41 metres at 3.25 per cent copper and up to five metres of 0.47 per cent moly suggest as much. The wild card could be with the moly. Anything around 0.5 per cent moly is worth writing home about. But having said that, the plan is to make Maitland fly on the copper alone, with moly viewed as a potential project sweetener.
© 2007 Sydney Morning Herald
