By Courtney Pearson
5 November, 2015
IT may only be five years old, but gold explorer Doray Minerals has a to-do list to rival the best in the industry.
The company’s project plans are coming to fruition, with first production at its newest development, Deflector, expected in mid-2016 and its flagship project, Andy Well, exceeding annual production guidance.
Doray Minerals managing director Allan Kelly said the past year had been better than expected for the company.
“We’ve been busy on the production side, the exploration side and on the corporate side,” he said.
In fiscal 2015 the company reported good results across the board, including a 15 per cent rise in gold production to 88,736oz, a 21 per cent rise in revenue and a 426 per cent increase in net profit after tax to $19 million.
Doray Minerals holds about 1700 square kilometres of tenements in the Murchison region of WA as well as a number of prospects in South Australia.
The Andy Well project pushed the company into the spotlight with its first gold pour in August 2013.
The company is now directing its resources towards its second major project, Deflector.
“Combined with Andy Well, Deflector will deliver a significant increase in production and an enhanced asset portfolio and project pipeline,” the company stated.
The year ahead is set to be marked by milestones for Doray Minerals with the mine’s start-up planned for June 2016.
Together, the two mines will create a resource base of 1 million ounces grading 7.7 grams per tonne of gold.
Mr Kelly said he believed the two long-life major projects would bring the company long term success.
“I think both of these projects will far surpass the original mine life that was indicated by feasibility study work,” he said.
Doray Minerals acquired Deflector from the takeover of Mutiny Gold in February this year.
The mine, 450km north of Perth and 160km east of Geraldton, will have an initial life of six years.
The “development ready” project will produce 63,000oz of gold, 2600t of copper and 60,000oz of silver per annum.
Doray Minerals secured funding for the construction and development of the project at the end of August, raising $13.8 million through an oversubscribed placement, $12.9 million through an underwritten non-renounceable entitlement issue and $90 million through corporate finance facilities from Westpac.
Mr Kelly said that getting Deflector up and running would put the company in better stead for profits and share prices.
“The fact that we’ve done the takeover, we’ve now done the funding for Deflector and construction is underway, once Deflector is up and running the company should double production and increase our profits,” he said.
“…it’s just a process of following the schedule and making sure everything happens on time and I’ve got every confidence that will happen.”
The project has progressed rapidly since the takeover, with construction of the processing plant underway and steelwork arriving on site.
Dongas for the accommodation village have begun to arrive, and the open pits that were previously mined at the site are being dewatered and are going through grade control.
“The next main milestone at Deflector will be open pit mining which will start in February next year and then underground mining [which] will start in May, so we’re still on track for first production in June next year,” Mr Kelly said.
About 60 per cent of the gold produced will poured into gold bars and sold to the Perth Mint, while the rest will be used in a gold-copper-silver concentrate for sale to an offtake partner and smelters in Korea or Japan.
The final documentation for offtake agreements would be completed within the “next couple of weeks”, according to Mr Kelly.
The offtake agreement is the last piece of the Deflector puzzle.
Following Doray Minerals’ first discovery at Andy Well in 2010, the company targeted a 250,000oz gold find.
However, Mr Kelly said he was confident the project’s resources could reach up to 1moz.
“If you look at what we’ve produced to date and you look at the current resource, it sits up at about 750,000oz and we’re still doing a lot of drilling,” he said.
“It will definitely surpass the 1 million ounce camp in the near future.”
The project had an original life of 3.7 years; however Mr Kelly said this could be increased to between six and eight years.
“We’ve been going for more than two years now and we’ve still got about three years based on reserves and we’ve got a whole heap of other targets based on resources and exploration targets,” he said.
The company is now mining the Judy, Suzie and Wilber lodes, with Wilber reporting a 22 per cent increase in its measured resource to 141 kilotonnes at 18.1g/t during the 2015 financial year.
The company’s continued exploration has shown potential for expanded operations – the Wilber lode is open below 450m, Judy is open along strike and at depth, and high-grade zones were discovered at Suzie and Kirsty.
Most recently Doray Minerals reported multiple high grade results from drilling at the Judy North resource which indicated “additional underground potential”.
Judy South has an ore reserve of 203,000t grading 8.8g/t for 58,000 contained ounces.
During drilling at the Wilber deposit, the company decided to push one of the holes further to determine whether it could hit the Judy lode at depth. The hole hit the Judy lode about 600m below Judy North.
“We’ve got some nice results at 16 grams up to about 40 grams there and importantly it looks more like Judy South than Judy North,” Mr Kelly said.
“We think it opens up that whole area underneath that Judy North resource in basalt. That’s not in resource, it‘s not in reserves, so that’s potential additional mine life upside.”
Doray Gold was looking at additional ways to extend the life of the mine, including through near-mine exploration at the Gnaweeda joint venture.
Drilling at Turnberry, within the Gnaweeda project about 15km southeast of Andy Well, intersected high-grade gold mineralisation that could be potentially treated at Andy Well. Gnaweeda is a joint venture between Doray Minerals (88 per cent) and Chalice Gold Mines (12 per cent).
“I’m convinced that [Andy Well] will develop into a gold camp with multiple deposits that continues to produce over a number of years,” Mr Kelly said.
The next year
Now that the funding for Deflector was complete, Mr Kelly said he was hopeful that the company’s share price would “take off”.
“We’ve seen that share price move from $0.40 up to $0.47/$0.48 so we’re starting to see that re-rating now that people are happy now that the funding is done.
“There’s nothing else holding the share price back. We’re focused on getting the project up and running and getting that re-rating.”
Amidst the strong focus on bringing Deflector to production, Doray Minerals is also heavily invested in exploration, with an $11 million exploration budget for the next year.
“There’s a fair bit going on at the moment, and we’re starting to get results coming in,” Mr Kelly said.
“Once we’ve got enough results to make sense we’ll be able to put that in an announcement and get it out to the market.
“It’s a pretty busy time at the moment.”
Doray Minerals is earning up to 60 per cent interest in the Horse Well gold project in the north-eastern Goldfields of WA Initial drilling returned encouraging results including 65m grading 2.6g/t of gold and follow-up drilling was recently completed.
The company also reported positive results that indicated “numerous large gold targets for follow-up” at the Western Gawler tenements with the Central Gawler project in South Australia. The Central Gawler is held by Iluka Resources with Doray Minerals earning up to 80 per cent of any gold discovery by spending $7 million across a six-year period.
Mr Kelly said he hoped the new discoveries and exploration would create more value for the company, potentially within existing projects.
“Hopefully some of the exploration that we’re doing starts to translate into opportunities that are extra feed for Andy Well or potentially a new project, because that’s what we’re out there looking for,” he said.
“The next 12 months will be exciting for us.”