Gold hunter may now be the hunted

MARKET indications are that a predator may be stalking Mt Magnet gold miner Hill 50 Gold NL.

Stockbroker Bell Securities Limited analyst Caroline Lewis has rated Hill 50 a “strong medium buy” due mainly to its prospective production forecasts but also following comments made at the recent gold conference in Perth.

The analyst said with a market capitalisation of more than $100 million, Hill 50 was a long-life, low cost, profitable operation with a rising production profile.

“We rated it as our strongest buy in the medium market cap area,” Ms Lewis said.

Hill 50’s share price rose by 5 per cent to $1 per share along with Newcrest Mining Limited and Sons of Gwalia Ltd recently, following comments by Anglogold at the gold forum that it was targeting gold companies that had mines capable of producing 200,000 ounces per annum for 10 years.

Anglogold is particularly interested in underground operations — in which it has considerable expertise in South Africa — with which it could form joint ventures using its own skills and cash.

Ms Lewis said Hill 50 was acquired from WMC Limited in July 1997 for $17.5 million and its management had completely turned the company around, with steadily increasing grade and production to an annual 145,000ozpa at a cash costs of $320/oz, with growth potential to 250-300,000ozpa within three years.

“Hill 50 has a significant upside because its lode systems are located in vertical fracture breaks in a BIF sequence and have not been closed at depth,” Ms Lewis said.

Historically the Hill 50 mine has been an open cut operation but the company’s production of about 1.6 million tonnes per annum is now being derived from four areas.

These are namely the Hill 50 and Star underground mines and various open cuts and low grade stockpiles.

While the low grade stockpiles are a last resort, they provided the bulk of the feedstock last year, and will be replaced by open cut ore from a number of satellite pits.