Gold/Silver Investor Hub: You’ve just raised A$50 million in a heavily oversubscribed bookbuild and you’re planning to raise a further $5 million through a share purchase plan to develop Dalgaranga. What does this support mean?
Mike Dunbar: The overwhelming demand for this placement from supportive shareholders and a large number of new well-respected domestic and international institutional investors provides a strong endorsement for the quality of our high-margin Dalgaranga gold project. The company is now in the strongest position it has ever been and we look forward to rapidly advancing the development of Dalgaranga for the benefit of our shareholders.
Gold/Silver Investor Hub: Gascoyne has purchased the remaining 20% stake to take full ownership of its flagship Dalgaranga gold project. How significant is this milestone to the company?
Mike Dunbar: This is a major step forward for the project and the company as a whole. Having complete control of the asset without having to negotiate with a minority JV partner and all of the complications that adds is a massive achievement. It also simplifies the financing of the project, which is a key consideration moving forward. On top of that, to have 100% and no ongoing private royalty, saves the operation around A$18 (US$14) million over the initial mine life at the current gold price. To secure all of this for A$4.5 million in cash, 11 million shares (escrowed for 12 months) and a $1.5 million deferred payment after 30,000oz are produced is a great result and sets the company up going forward.
Gold/Silver Investor Hub: Dalgaranga’s feasibility study indicates a robust, six-year project based on two open-cut mines and a new processing plant, with all-in sustaining costs of A$931 (US$709) an ounce and payback of pre-production capital costs within 18 months. How is the permitting process progressing?
Mike Dunbar: The permitting for development is progressing very well. The native vegetation clearing permit has already been received and all of the other permits are well advanced with the mining proposal and mine closure plan progressing through the mines department and the works approval nearing completion within the department of environment and regulation. On top of those three approvals, the water extraction licence is progressing through the department of water. So in short, permitting is going very well and all of the permits are expected to be received in the next month and will not hold up the development.
Gold/Silver Investor Hub: Dalgaranga’s resource doesn’t include the nearby Gilbeys South or the Sly Fox prospects, where drilling highlights include 8m at 11.5g/t gold from 28m (at Gilbeys South). How do you intend to incorporate these results?
Mike Dunbar: The Gilbeys South Resource is currently being estimated and we are expecting to release an update to the Gilbeys resource in the next month. This will include the Gilbeys South area. At Sly Fox, it is still early days; however it is very encouraging that we have intersected mineralisation of up to 36m @ 2.3 g/t in three consecutive aircore holes. RC drilling of the prospect is currently underway and if this drilling confirms the discovery drill results, an initial resource will be estimated in the first half of 2017. The impact of additional soft ore in the mine plan is significant. If we continue to discover additional oxide ore, the process plant can treat more than the nameplate capacity of 2.5Mtpa – closer to 3.0Mtpa. This could see the project produce closer to 120,000ozpa for the first 2 – 3 years. This will significantly improve the economics of the project.
Gold/Silver Investor Hub: The company is taking steps towards development, such as securing a second-hand accommodation village and assessing tenders for SAG mill required for the new processing plant. What other steps is the company taking and what timeline are you working to for commercial production?
Mike Dunbar: We are continuing to move rapidly towards development of the project. Permitting is key, however one thing that we are actively investigating is moving to a lump sum (EPC) implementation strategy. While this is likely to increase the capital cost by around $3.5 million, it removes the risk of capital cost escalation and schedule creep, which is one of the largest risks during the development. The current timeframe we are working to is to be commissioning the process plant in Q1 2018 (or around 14-15 months from now). This is a tight timeframe but one that we are actively working to achieve.
Gold/Silver Investor Hub: In an environment of improving commodities and equities markets, how are finance discussions progressing and what “non-traditional” proposals are being considered?
Mike Dunbar: We are currently in discussions with 9 Australian and international banks for “traditional” debt. The indicative terms being offered by the traditional lenders are very attractive and it is likely that the project will be funded using the normal debt and equity model. This is normally the most cost effective way of developing projects; however we are also in discussions with non-traditional groups including private funds to secure the funding that we need for the development. We are working to have the debt funding in place in the next few months.
Gold/Silver Investor Hub: Is the rising gold price having an effect on the company’s progress?
Mike Dunbar: The rising gold price is not hurting!! However one thing that I would stress is that we do not need higher prices to make the project viable. Having expected costs in the lowest quartile (AISC of A$931 in the Feasibility Study) ensures that the project will remain viable throughout the commodity price cycle.
Gold/Silver Investor Hub: Looking further north: what work is being done to progress the company’s second, 100%-owned 1 million ounce gold project, Glenburgh?
Mike Dunbar: We are continuing to evaluate the Glenburgh system. It is a very large mineral system and we are yet to fully understand the project and the full potential. So far we have 1.0 million ounces in resource after testing only around 30% of the three mineralised trends, so clearly the potential is yet to be fully understood. The current plan is to continue with surface sampling to define new trends. In the next few months the first high priority targets will have been tested. This is expected to result in new drill targets that will be tested in the current field season. On top of that we are also updating the 2013 PFS that was completed on the project. Given the costs have dropped significantly since that study, we are expecting a step change in the project as a result, so there is more news to come from Glenburgh in the next few months.
