Slow And Steady Wins The Race, As Peninsular Gold Moves To Double Production Capacity At The Raub Project In Malaysia
By Rob Davies
minesite.com
Starting small and gradually scaling up sure is a tried and tested way of building a company. Now that Peninsular Gold has got gold production underway at its Raub site in Malaysia it has just announced that it doubling the size of its carbon-in-leach plant to enable it to handle two million tonnes of ore a year. The existing one is designed for 1.1 million tonnes and is working through a resource of tailings from an old gravity plant.
The benefits of commencing production from a low risk well defined resource like the Raub tailings project are that full attention can be focussed on getting the plant optimised. This initial tailings resource is low grade at 8.6 million tonnes at 0.73 grammes per tonne gold. Nevertheless, that still adds up to 202,000 ounces of gold. Production to the end of May amounted to over 4,000 ounces, while in a full year the project should produce 25,000 ounces of gold. As this is the start-up year finance director Patrick Watson was reluctant to be pinned down to a precise number for 2009.
He also declined to put a number on what the production figure might be when the expanded plant is completed in the fourth quarter of 2010. By that time the company’s processing facilities will be taking oxide ore from an area of Raub known as the East Lode as well. This area contains an additional 218,000 ounces of gold, although it won’t be quite as easy to treat as the gold from the tailings, hence the need to expand the plant. Even though the East Lode is higher grade at 1.4 grammes per tonne, the estimates of production of 86,000 ounces a year that have been posted on one message board look too optimistic. Nevertheless, something like 50,000 ounces could easily be on the cards. Cost estimates are a bit vague at this stage but it ought to be fairly profitable if mined at that sort of level.
To upgrade the plant the company is taking on US$28 million of Islamic finance at a cost of 7.95 per cent. There is some risk involved in taking on debt to expand the plant, but contractor Time Mining Group of South Africa, has given assurances that there will be no disruption to current operations. And, while the debt financing of the plant will add to the cost base it does minimise shareholder dilution - something that is clearly important to 54 per cent shareholder Dato Sri Andrew Tai Yeow Kam. That controlling shareholding is clearly very nice for him and his family, although it does rather limit the upside for outside shareholders, one reason perhaps for the rather mean valuation given by the market to Peninsular of only £16 million.
What that valuation seems to discount is the potential upside from the drilling programme at Raub that will be undertaken to investigate the mineralisation lying below the oxides. So far drilling has only been carried out to a depth of 80 metres, but Patrick Watson believes there are good reasons to assume the sulphides underneath could have decent potential. The next drill campaign won’t start for a few months yet, though, and Patrick thinks it unlikely that a new resource figure will be available until this time next year.
In addition to whatever that drill programme may reveal there is still the 528,000 ounce inferred gold resource that the company holds at Tersang. Although it only lies a short distance from Raub there are no plans yet to extract it. However, once the expanded plant is complete it will be hungry for feed, so it will only be a matter of time before it too is developed. In this case it seems that the old maxim “slow and steady wins the race” is likely to hold true. |
