Doray Minerals will seek to raise a smaller-than-expected amount of capital for its second gold project following yesterday’s announcement the state would leave royalty payments unchanged.
Speaking after a WA Mining Club lunch today, managing director Allan Kelly told Business News Doray Minerals would update the market in the June quarter on the amount of capital it would need to develop its second gold mine, Deflector, which it acquired when it took over Mutiny Gold last month.
Mr Kelly said that, by spending money that would have gone on increased royalties on expansion at its flagship Andy Well mine in the Murchison region, Doray Minerals was now confident its combination of debt and cash flow from Andy Well would decrease the amount of equity it needed.
“The thing that’s holding our share price down at the moment is people think that because we’ve got a new project that there’s going to be a big capital raising coming up,” he said.
“We think that we can maximise the use of debt and the cash flow from Andy Well because we’ve got a cash generating asset and we can minimise the amount of equity that we need to raise.
Mr Kelly said the combination of not increasing the gold royalty to the recommended 3.75 per cent (from the current 2.5 per cent), as well as the Senate passing the Exploration Development Incentive Bill meant gold companies could now pursue more exploration.
He said Doray paid $3 million a year in royalties to the state government based on its production at Andy Well and expected to pay a similar amount once its planned Deflector project when it went into production.
“You were (potentially) going from a royalty of $6 million to $12 million, so where does that $6 million come from? It comes from exploration, that’s the easiest way to find that money, not spending it on new projects or new exploration,” he said.
Mr Kelly said Doray Minerals needed a second mine to reduce its cost base and increase its flexibility so it could become a leading mid-tier gold company.
“We borrowed $55 million to build Andy Well and we paid off $43 million in nine months. We’ve got the track record to be able to do it again.”
Doray's share price closed steady today at 46.5 cents.
