CGA Mining Expects To Be Producing Gold From Masbate By 2009
By Charles Wyatt
minesite.com
When last we wrote about CGA Mining, in the summer of 2007, chief executive Michael Carrick was just about to make the big decision on whether or not to develop the Masbate gold mine in the Philippines. There was not much doubt which way the decision would go, and now a definite date has been set for the start of commercial production - the first quarter of 2009. One of the interesting aspects is the performance of the share price over the last six months. It has been a difficult time for junior companies, even though the price of gold has leapt ahead, but at A$2.00 the price of CGA, which is dual listed on the ASX and Toronto, is nearly double what it was last October.
Investors certainly seem to have taken the company to their hearts, since the development stage usually sees a sag in the share price as doomsters tend to predict possible teething problems. They are often right. But Michael Carrick proudly points out that the Sunday Times recently published a list of the 25 best performing stocks over the last 12 months on the entire ASX and CGA Mining came ninth, with a rise of 229 per cent. That there was only one other gold company on the list - Equigold - must say something about the impact of a strong Aussie dollar on the gold price, and something else about the local preference for the bulk export of coal and iron ore to China.
CGA is not in this latter category, but it is on the verge of making a lot of money out of gold. Shrewd investors clearly appreciate this and they take comfort from the fact that development is currently some five weeks ahead of schedule. What’s more, the whole operation is being carried out by Leighton Holdings, Australia’s No 1 mine contractor on a turnkey basis. So if there are any problems it’s Leighton that carries the can, not CGA. One of the great advantages of using Leighton, as Michael points out, is that it has five barges operating around the Philippines so plant and equipment can be transported by water, rather than overland, especially useful since Masbate has its own jetty. In fact he’s so impressed by the work done to date that he’s also signed a mining contract with Leighton to take the project through its first six years.
Against that background it’s also encouraging to find that hedging of gold production will be very limited. CGA came into Masbate with money from selling down its stake in Centerra Gold soon after Centerra listed. Last November it completed a placing to raise US$65 million, and the final bit of financing for this project is currently being agreed with BNP Paribas. But Mr Carrick therefore enters negotiations in a strong position, and is confident that hedging will amount to only 250,000 ounces of gold, half of which will be sold forward in a hedge programme, with the rest subject to put options. As he is going for production of 225,000 ounces in the first full year of production this hedging is small beer. The real news is that cash costs should run out at less than US$320 per ounce and the project, as it now stands, has a 10 year life. This life is based on reserves of around two million ounces, out of resources of five million ounces.
These resources were estimated on a basis of a gold price of US$450 per ounce so they should increase at the next update anyway, but sterilisation and geotechnical drilling around the process plant, open pit areas, and tailings area unexpectedly intercepted the Libra vein, and showed intercepts such as 27 metres at 9.88 grammes per tonne gold over 26 metres. This area is thought to be dissimilar to the main mineralization around Masbate, but it will certainly provide a boost to the upcoming resource estimate. It’s thought that this gold mineralization is related to metasediments and that high grade intercepts result from the Libra vein crossing the chemically reactive rocks. In conclusion, therefore, all things are going very well at Masbate which, considering the history of the project, is a great credit to CGA.
But the company is no one trick pony as it also has two other very promising joint ventures. The first is the Mkushi copper project in Zambia which is a 51:49 deal with African Eagle. A pre-feasibility study has been carried out on a 1.6 million tonnes per year mine with processing facilities aiming to produce a high quality concentrate easily saleable to smelters in Africa. The project is now moving to the feasibility stage and Michael is very hopeful for what he calls a “very robust project”. It helps of course that it can be mined by open pit and that water, power and other infrastructure are close by. The only jarring note is the new windfall tax introduced in Zambia which effectively pushes the tax take up to 47 per cent. Michael Carrick, however, reckons that there is still some negotiating to come over this tax as new projects simply won’t be built if it renders them uneconomic. The feasibility study will be completed by the end of this year and at around then a number of executives will also be freed up from Masbate as cash flow commences and can then move to Zambia.
Last, but not least is the Segilola gold project in Nigeria, a joint venture with Tropical Mines, a company 80 per cent owned by locals and 20 per cent owned by the Nigerian government. Segilola is about an hour’s drive north of Lagos and a long way from the troubles around the oil in the Niger Delta. CGA Mining was invited to participate by the government as it had heard of the efficient manner in which Resolute, where Michael used to be managing director, operated the Golden Pride mine in Tanzania. It helps to have the government onside in Nigeria, and CGA has other useful partners. The project itself is high grade and Michael Carrick envisages an open pit operation producing ore at a grade of between 8 and 9 grammes per tonne. A drill rig has been transported from Turkey, and though it has been delayed at customs, drilling should start within a couple of months. This looks to be the sort of straightforward project that everyone wants and Michael Carrick is so encouraged that he is seeking similar projects in Nigeria. |
