Western Australia’s next gold mine, Crescent Gold Ltd’s upgraded Laverton operation, is scheduled to be in production before Christmas and crank up quickly to 90,000 ounces a year.
Western Australia’s next gold mine, Crescent Gold Ltd’s upgraded Laverton operation, is scheduled to be in production before Christmas and crank up quickly to 90,000 ounces a year.
Production will come from current reserves of 292,000 ounces, sufficient for an initial three-year mine life, which the company expects to more than double in the next six to 12 months to provide a six-year reserve base.
Even at the early production levels, Perth-based Crescent is budgeting on before tax, depreciation and amortisation earnings (EBITDA) of $121 million in the first three years, rising to $244 million over six years.
The company is the largest landholder in the prime Laverton Tectonic zone, a world-class gold address about 200 kilometres north-east of Kalgoorlie, which contains more than 23 million ounces of gold resources in a number of deposits.
These include international miner Barrick’s producing nine million ounce Granny Smith/Just in Case/Wallaby operations nearby and AngloGold Ashanti Ltd’s 7.7 million ounce Sunrise Dam/Cleo project further south.
While Crescent is nowhere near this league, it will follow other recent junior producers such as Reed Resources Ltd’s historic Sand Queen mine, 100km north of Kalgoorlie and Tanami Gold Ltd’s new Coyote mine in the far north Tanami region.
Reed poured its first gold last week and Tanami will do so later this month to add an initial 80,000ounces/year to production from WA’s depleted gold reserves.
Crescent’s start-up costs are estimated at about $15 million, including up grading the currently non-operational mill 250km north-east of Kalgoorlie, to process 1.5 million tonnes/year, pre-stripping and mining.
Managing director, geologist and former mining analyst and fund manager, Andrew Haythorpe, told WA Business News a gold loan of between 20,000 and 30,000 ounces was a prime option to fund the start-up costs.
Veritas Securities Ltd analyst Piers Reynolds said a 30,000 ounce gold loan at $A800/ounce would provide $24 million, which together with existing cash reserves of $7 million would be enough to cover start-up, exploration and development drilling prior to the first positive cash flow.
Based on EBITDAs of $121 million in the first three years, rising to $244 million over six years, Mr Reynolds expected Crescent’s net profit to mid 2007 to be $25 million, rising to $33 million the following year and falling to $25 million in the 2009 financial year.
Initial production will come from fast-tracking production from the Sickle prospect, 6km from Crescent’s plant, which has current reserves of about 150,000 ounces, but total resources containing up to 520,000 ounces.
Mr Reynolds said the exploration potential of the Sickle corridor was becoming evident with widespread gold anomalism being recognised in continuing drilling.
“The area offers excellent opportunities for the discovery of further significant gold mineralisation,” he said.
Crescent’s average 90,000ounces/ year production compares with the Sand Queen’s initial 20,000 ounces/year, expected to rise to more than 70,000 ounces over 3.5 years at an estimated low cash cost of $230/ounce. However, recent extension drilling has indicated a resource of 120,000 ounces, taking the mine life out to at least five years with plenty of potential for more.
Coyote is a bigger proposition and is expected to ramp up to an open pit 60,000ounces/year within 10 months, then going underground lifting production to around 100,000ounces/year.
Besides its large gold holdings in the Laverton region, Crescent also has potential for nickel there, uranium prospects in the Northern Territory and copper/gold in China.
Since early May, Crescent’s shares have fallen from 49 cents to 29 cents, Tanami’s from 33 cents to 28 cents, while Reed’s share price has risen from 43 cents to 57 cents in the same period.
