The dore to shareholder value

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 25 Jul 2012   Posted by admin


DESPITE a somewhat rocky Australian share price in recent weeks, the future looks bright for gold producer Alacer Gold.
Strong financial results for the company’s first quarter this year included a jump in net profit to $54.2 million, compared to a $92 million loss in the same quarter last year, and an adjusted net profit of $27 million compared to $13.6 million last year.
In the company’s recent quarterly report, Alacer president and chief executive officer Edward Dowling said the miner’s attributable mining gross profit was $56.4 million, representing a margin of $576 per ounce. The company recently increased its 2012 production guidance to between 396,000 and 410,000oz, but also revised its cash cost guidance up to between $745/ oz and $770/oz from a previous range of between $690/oz and $715/oz.
At the end of March, Alacer’s cash balance sat at $329.1 million, compared to $249.6 million at the end of December 2011, supported by strong production from the company’s key Higginsville and South Kalgoorlie mining operations.
Higginsville
Alacer owns 100 per cent of the Higginsville Gold Operation, 125km south of Kalgoorlie between the prolific St Ives and Norseman gold camps. The project incorporates underground and open pit mining plus gravity and carbon-in-leach (CIL) processing.
Alacer acquired Higginsville as part of its merger with Avoca Resources in early 2011.
Higginsville is made up of structurallycontrolled orogenic gold deposits occurring in the Archaean Norseman-Wiluna Greenstone Belt, part of the Yilgarn Craton. The bulk of the operation’s reserves are contained within its Trident deposit, which was discovered by Avoca in 2004. Many of the project’s smaller deposits were mined at surface, but few were explored at depth until mining began at the  Trident deposit in 2007.
In the second quarter of 2011, Alacer began mining from Higginsville’s Vine open pit. Later in the year it began producing  ore from the nearby Chalice underground mine, and has since reported that it expects
to ramp up production from Chalice in the coming months.
According to Alacer, as of December 2011, Higginsville’s measured and indicated resources totalled 11.1 million tonnes grading 3.5 grams per tonne gold for 1.25 million ounces. In February this year, the company reported that the project’s proven and probable reserves had been lifted by 164,000oz to 7.9mt grading 3.5g/t of gold for 875,000oz. During the 2011 calendar year, a total of 146,323oz of gold was produced at
Higginsville.
Alacer has reported that with continued aggressive exploration at depth, operations at Higginsville could extend far beyond the project’s current reserves.  The primary mining method at the
Trident underground mine is mechanise sub-level open stoping, and the stopes are backfilled with paste to ensure maximum recovery of the ore without the need for pillars.
The Higginsville processing plant currently treats ore from the Trident mine and Vine open pit. The plant is a standard crushing, grinding, gravity and CIL circuit, with current throughput of about 1.3 million tonnes  per annum. Alacer has reported that    increased volumes of Higginsville feed will be high-grade underground ore following the ramp-up of Chalice’s production later this ear, moving the mine toward its planned
processing target of 1.5mtpa grading 4.5g/t or about 200,000ozpa of gold.
South Kalgoorlie
Alacer’s South Kalgoorlie Operation (SKO)     is 15km south of Kalgoorlie and, as with Higginsville, was acquired by the company   in the course urchased SKO   from Harmony Gold in 2007.,mlacer reported that as of December.2011, the SKO contained measured and indicated resources totalling 41.4mt grading 2.1g/t of gold for 2,815,000oz, and proven and probable reserves of 12.6mt grading 1.3g/t of gold for 542,000oz.
Operations at SKO centre on the Jubilee processing plant and the operation’s numerous structurally-controlled orogenic gold deposits. As with Higginsville, the SKO deposits lie in the Archaean Norseman-Wiluna Greenstone Belt of the Yilgarn Craton, with the HBJ, Mutoroo, Celebration and Golden Hope gold deposits forming a mineralised syste along the Boulder-Lefroy Shear Zone more than 4km long. These deposits are host within a steeply-dipping, north-northweststriking package of mafic, ultramafic and   sedimentary rocks and schists intruded bfelsic to intermediate porphyries.
Currently, the primary source of oreat SKO is the HBJ deposit, which isabout 2.6km long and 220m deep. Openpit mining of the deposit is undertakenvia  a conventional excavator and truck
operation.
Ore is processed through the Jubilee plant: a standard crushing, grinding, leaching and carbon-in-pulp circuit with a throughput capacity of 1.2mtpa. In addition to ore from HBJ, the Jubilee plant also processes ore from the nearby Frog’s Leg mine, in which Alacer holds a 49 per cent interest.
During the 2011 calendar year, SKO produced a total of 31,893oz of gold.
Expansion for growth
In October 2011, Alacer announced that its board had approved a $25 million budget for stage one of an expansion of SKO. The company reported that the South Kalgoorlie Operation Expansion Project had been
undertaken to assess the economics of replacing the Jubilee processing plant with a new, 2.5mtpa plant.
“The SKO Expansion Project targets doubling gold production by developing a multi-mine treatment hub that processes 2.5 million tonnes per annum of ore grading about 2.5g/t gold, producing approximately
200,000 ounces per annum and targeting a cash cost of about $600 per ounce,” the company stated when announcing the board’s approval of the budget.
“The mix of ore would vary as exploration of Alacer’s large SKO tenements progresses over time and mining studies are completed on various resources. Alacer is evaluating various scenarios to increase and optimise
SKO gold production.
“The initial ore mix for plant commissioning in early 2013 is currently estimated to be 1.5mtpa from the HBJ Lode, 0.4mtpa from Frog’s Leg mine and 0.6mtpa from other mines.” Alacer reported that the $25 million would be used for expansion work in the six months following the board’s approval,
including: re-commencement of open-pit mining at the Mt Martin mine, recently acquired by Alacer; re-commencement of open pit mining at the existing Triumph and Pernatty deposits; and the beginning of
a significant cutback at the north end of the HBJ open pit.
The company stated that the funds would also be used for definitive feasibility studies on stage one of underground mining at the southern portion of the HBJ deposit, stage one of the Mt Marion West underground
mine, and SKO’s Shirl underground and open pit mines.
Mr Dowling said at the time that the company was systematically moving SKO towards its total targeted gold production of 200,000ozpa as part of an overall goal to become an 800,000ozpa gold producer by
2015.
“SKO is located in a prolific and extremely well-endowed, but under-explored, gold district that we believe will yield further significant gold discoveries,” Mr Dowling said. “We are working towards building a larger treatment facility that will provide a cost-effective basis for processing known resources and new discoveries in a manner that creates substantial shareholder value over time.”

 

By Amy Mattre-Harris


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