Troy Resources’ chairman John Jones has long been on the look-out for new opportunities for his small gold mining outfit.

Backed by healthy cashflows from the company’s joint venture interest (49%) with Sons of Gwalia in the Cornishman mine near Southern Cross, Western Australia, the man who was once chairman of North Kalgurli Mines has often dreamed of piecing together a regional play that offers shareholders both immediate profits and long-term exploration upside.

Troy Resources' chairman, John Jones (left) , and exploration manager, Dr Chris Ringrose, Troy's future in the Sandstone region will heavily depend on exploration success in the next few years.

Jones got his wish early last year when, through some smart deal-making with Cambrian Resources and Wirraminna Gold, he was able to pick up more than 800sq.km of ground in the unfashionable but still prospective Sandstone greenstone belt of WA.

The real sweetener to the deal was that the area had an immediately mineable orebody called Bulchina (pronounced Bull-China) as part of the package. Bulchina was the legacy of work carried out by Battle Mountain in the area in 1997. Standing out as a bullseye target on an aeromagnetic map, Battle Mountain only had to do three lines of spaced drilling before it hit the heart of Bulchina. The irony was that on the day that its geologists announced the discovery, Battle Mountain declared it was totally withdrawing from Australia.

Bulchina currently hosts a mining reserve of 851,000 tonnes of ore grading 3.68gpt for an estimated 90,640 recoverable oz, which represents a projected mine life of about two-and-a-half years. By purchasing Herald Resources’ old treatment plant located about 4km away and in view of the record low gold prices of last year, Troy figured at worst it would have a tidy earner on its hands.

However, it wasn’t until mining started that the Troy team got a sniff of the upside, namely the supergene zone that makes up the western shear of the deposit. Here Troy has encountered rocks containing coarse gold which have had the effect of bumping up the head grade from an average of about 3.7gpt to 8gpt or more.

Even nicer is the fact that this high-grade zone continues to be found along strike and has only been tested to a depth of 150m where the grade still remains strong.

With Bulchina showing strong indications it could hold more profitability than originally thought, the pressure has been on Jones from his exploration manager, Dr Chris Ringrose, and consulting geologist, John Stockley, to up the regional exploration ante.

“The current mine life is two-and-a-half years but I have a good feeling that this could quickly change,” Jones said.

“We currently have an exploration budget of about $2 million per annum but that’s not to say there isn’t the horsepower to grow that if we need to.

“It’s been case of getting Bulchina bedded down first so that we can be in a position to seriously evaluate the myriad of other targets we have. We’ve got enough targets here to keep us busy for years.

“That’s what makes it so exciting — it’s a serious company making opportunity.”

Given the near surface nature of the ore, Bulchina’s costs have been low. Output of 14,578oz from its first full quarter of production was achieved at average cash costs of just $163/oz, which was well below budget.

Although the 500,000tpa plant is a Jurassic Park model by modern standards, availability has run at 95% and recoveries have risen from 90% to 97% since Troy took it on. According to the mine’s senior management, $400,000 has been budgeted for a new ball mill and the rebuilding of gear boxes and other important mechanical items. These modifications could result in operating costs dropping further.

The Bulchina pit is currently 300m in length by 150m in width and has been exploited down to 8m. It is planned to reach an ultimate depth of 60m, however, Jones said the mining team would be re-optimising the current pit design in June.

The sum total is that Jones and Troy appear to have weathered gold’s maelstrom of the past two years. If the sentiment towards gold miners improves and the gold price can settle at a new floor of about $US300/oz, the market may well re-examine the Troy story.

The company forecast at its last annual general meeting that it would produce about 63,000oz (35,000oz from Bulchina and 28,000oz from Cornishman) in 1999-2000, equating to double the previous financial year’s total.

With those sort of cashflows, no debt and more than $4 million in the bank, the company will have the firepower to see if it can debunk the myth that Sandstone is an unfashionable address once and for all.