Murchison miners to ramp up gold output

THE number of gold-producing mines in the Murchison is expected to spike during the next 18 months, as miners’ interest in the region grows on the back of prices nearing $US2,000 per ounce.

Companies including Doray Minerals, SilverLake Resources, Reed Resources, Ramelius Resources, and Westgold Resources are now looking to pour gold from operations. 

Doray Minerals is rapidly progressing a rare greenfields discovery in the region at its 80 per cent owned Andy Well project, which has been recognised for its high-grade nature.

Managing director Allan Kelly bought the project after talks with the previous owner at the 2009 Diggers and Dealers forum in Kalgoorlie.

Mr Kelly explained that exploration had previously been undertaken at the site during the 1990s when the gold price was below $US400.

At that time, he said, companies were on the lookout for low-cost, open-pit projects. Little did they know that there was high-grade potential at the Andy Well prospect up to 450 metres underground.

Since listing on the Australian Securities Exchange in 2010, Doray has established a high-grade 332,000oz ounce JORC resource at Andy Well, with potential for further increases and additional deposits nearby.

The company is expecting to have the mine in production by mid next year and is aiming for annual output of between 50,000 and 60,000oz over a five-year life.

This progress has been well received by the market, with Doray’s market capitalisation rising from $8.6 million to about $100 million in the two years following the listing.

Mr Kelly believes the region had been neglected prior to the recent activity due to lower gold prices.

“It has really kicked off and you couldn’t go there and get a land package like this now – it would cost a fortune,” Mr Kelly told WA Business News.

“In 2009, the timing was perfect – the gold price was just starting to take off and the GFC was starting to go away.

“There was a bit of bad sentiment about the region for a while there, but I thought it wasn’t warranted.”

However, Mr Kelly remains concerned another company will make a bid for Doray, with the expectation of increased mergers and acquisitions activity in the gold sector this year.

Doray has already been the subject of takeover speculation following Ramelius’ purchase of a 7.5 per cent interest in the company.

For its part, Ramelius has denied interest in a takeover, instead saying the stake it purchased in Doray was an investment in a “very nice, high-grade gold deposit that could get bigger”.

“The worst thing that could happen to us right now is a bid from someone because we’re right on the cusp of going from an explorer to producer,” Mr Kelly told WA Business News.

“We would hate to get knocked off and then for someone else to come in and do the job.”

Ramelius entered the Murchison region in 2010 with the acquisition of the Mt Magnet project from South Africa’s Harmony Gold for $40 million. 

The company already produces from the high-grade, low-cost Wattle Dam project in the Goldfields.

Last month, Westgold moved to secure up to $A80 million to fund the development of the Central Murchison project.

The project, which ceased production in 2003 when gold prices were hovering below the $A500 mark, covers the gold fields of Big Bell, Cuddingwarra and Day Dawn. 

Westgold is targeting 100,000oz/year from the multi-mine operations over a 10-year period once production resumes.

Reed Resources has forecast that production will begin from its Meekatharra gold project in the December quarter of this year, with the company having bought the mine in January last year.

SilverLake’s Murchison project is currently under construction and expected to hit production in the third quarter of the 2013 financial year. The company is targeting about 100,000oz/year over an eight to 10-year mine life.

Kentor Gold expects to start producing at its Burnakura deposit in the Murchison in mid-2012 with initial production of 24,000oz expected in the first year.