Gold miner navigating towards positive cash flow

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 28 Mar 2012   Posted by admin


AFTER a tough couple of years, Navigator Resources is anticipating positive cash flow from June onwards as it hits higher-grade ore at its flagship Bronzewing gold mine in WA’s Eastern Goldfields. The ore at the Cockburn pit, which Navigator has focussed on for the past year, lies beneath about 60m of mostly waste cover so until recently, mining entailed stripping the waste to expose the ore body, which improves in grade with increasing depth. Navigator progressed down to higher-grade ore during the March 2012 quarter, and is expecting to be reaping profits for the next few years. The company has evolved several times since it started out. Looking back to its debut on the ASX in September 2003, Navigator was originally focussed on rare earths – particularly its Cummins Range rare earths project in the Kimberley region of northern Australia. Now, Navigator has farmed out 25 per cent of its Cummins Range project to Kimberley Rare Earths, which also manages the project and all exploration activities, and can earn an extra 30 per cent in Cummins by spending $10 million during four years.
About a year after its ASX debut, Navigator acquired the Leonora gold project from Sons of Gwalia for $120,000 in cash and one million Navigator shares, according to Navigator managing director David Hatch.
When Navigator acquired the Leonora project, it had a resource of about 250,000oz of gold. “After spending over $15 million in drilling up until late 2008, Navigator was able to boost the resource to about 750,000oz gold,” Mr Hatch said. “Navigator had been maintaining a watching brief on various milling facilities in Western Australia, with the object being one of those might be acquired and moved to Leonora as the milling facility for the project.” Navigator’s research had identified a useable mill at View Resources’ Bronzewing mine, which was in administration at the time.
“It was a 2.5 million tonnes per annum mill and the company had a level of familiarity with Bronzewing,” Mr Hatch said.
At the time, the decision makers at Navigator believed that Bronzewing could be brought into production in its own right with a starting five-year open pit mine life. “In fact, [Bronzewing] would probably be a faster transition than [Leonora] into production with lower risks and costs,” he added. Navigator subsequently made a bid for the project and acquired Bronzewing from the administrators of View Resources in mid-2009 for $16 million, which comprised $9.5 million for the project itself and $6.5 million for the environmental bonds. The acquisition also included the 2.5mtpa-capacity mill and associated infrastructure.
“We raised a total of $45 million, of which $16 million was debt and the balance was equity, which enabled us to fund the project back into production. “My background is mining operations, and I joined the company to drive the transition from explorer to producer,” Mr Hatch said. Prior to Navigator acquiring Bronzewing, about 3moz of gold had been produced from the various deposits within the project area.
Within seven months of acquiring the project, Bronzewing was producing again.
“We’ve been in operation for the first time, for Navigator, since April of 2010. When we committed to that Bronzewing mine plan we clearly understood that the first two years would be the most challenging. “They have been. It’s been a tough couple of years, but we are getting pretty well positioned now to reap the benefits of all the hard work we’ve done,” Mr Hatch said. Despite producing some gold, the unit cash costs per ounce of gold for the operations have been high due to large amounts of waste ore. During the December 2011 quarter, Navigator produced about 13,858oz of gold and sold it for an average price of $1666 per oz, bringing the company $20.7 million in revenue.
However, cash operating costs for the quarter were $1593/oz. Another impact on the higherthan- expected cash cost during the December quarter was the lack of equipment availability. To combat this shortage, Navigator contracted four new haul trucks, which were mobilised to Bronzewing in late January.
“We’ve now stripped 8 or 9 million cubic metres of mostly waste off the top of the ore body, which represents an investment of something around $50 million,” Mr Hatch said. “Given that we’ve already spent that money on the waste stripping and the pit design was based [on a lower gold price than the current spot], the ounces that are sitting within that pit design should be very robust ounces. “Over the balance of the life of that pit design, which is around two and a half years, we expect our average unit cost of production to be less than $1000 per ounce,” he added. Navigator expects to produce about 100,000oz of gold per annum. At the time of writing, the project’s
open pit resource sits at 18.42mt grading 1.6g/t gold for 940,000oz. “We have no debt and we have no hedging in place at the moment,” Mr Hatch said. Navigator spent $934,000 on exploration during the December 2011 quarter, with $663,000 outlaid at Bronzewing and $271,000 allocated to the Leonora gold project. Capital outlay during the December quarter was $273,000. Future exploration plans Mr Hatch said that due to the “fairly experienced, there hadn’t been “a lot of money to throw at exploration”. “We consider the 1000-plus square kilometres of ground that we have at Bronzewing to be highly prospective. We know that a new ore body will not be sticking out of the ground. It will not be outcropping. It will be under cover because that is typical of the area.”

By Lorna Seatter


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