The gold miner said the owner-operator alternative was the most cost-effective option compared to contract mining and would allow flexibility when undertaking project works.

Pan Australian said offers are being assessed to lease finance the $US31 million ($A40.6 million) consideration for the fleet and ancillary equipment. The company said the first equipment is scheduled to be delivered and commissioned onsite by December.

Meanwhile, GSJBW said the lack of news flow post the capital raising for the Phu Kham project had been the primary reason for the disappointing share price performance.

“Pan Australian is producing gold from Phu Bia and is now well funded (including contingency and in addition a capital cost over-run and working capital facility) to develop the Phu Kham project,” GSJBW said.

“We thus believe that over the next six to 18 months there is likely to be a significant re-rating of Pan Australian as the market looks to the earnings growth in FY08 – or a corporate may recognise this value.”

On Phu Kham, GSJBW said it was very competitively placed in terms of capital intensity and below the 50th percentile position in the estimated 2009 global C1 cash operating costs.

The $232 million Phu Kham project is expected to produce about 52,000 tonnes of copper, 47,000oz of gold and 400,000oz of silver annually when it comes online in 2008.

Pan Australian expects to produce about 30,000oz from its Phu Bia operation in Laos this year, and its shares gained 1c (3.7%) during morning trade to 28c, capitalising the company at $A392 million.

GSJBW, which has a Buy recommendation on Pan Australian, has put a valuation of 46c and an upside of 55c on the company.