Ballarat mine – well invested and high yielding

BALLARAT: Following StarBiz coverage of LionGold Corp Ltd last September, we were invited to join a group of Singaporean journalists on a site visit to one of the company's key assets the Ballarat gold mine in Victoria, Australia.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/6/3/business/13190323&sec=business
Published: Jun 03, 2013

Joining us at the site was Matthew Gill, who was the head honcho of the mine when it was acquired by LionGold. Gill, a 30-year veteran mining engineer who has dabbled in all aspects of exploration and mining in Australia, India and Papua New Guinea, has since been made LionGold's chief operation officer.

Gill explained that the past owners of the mine had spent some 20 years “digging to get underground” and in 2007, Lihir Gold Ltd bought the mine for A$350mil (RM1.05bil). After acquiring it, Lihir had spent the next two years investing heavily in the mine, spending some A$400mil (RM1.2bil).

But by 2010, the Ballarat mine no longer fitted Lihir's strategy of focusing on its larger mining assets and it had decided to hive it off to Castlemaine Goldfields Ltd.

Last April, Castlemaine became the subject of a reportedly “friendly takeover” by LionGold, through a share swap exercise. The bid, in which 2 LionGold shares were offered for every nine Castlemaine shares, was recommended to shareholders by Castlemaine's board. Castlemaine then said the bid capitalised on Asia's investment appetite for gold and gave its shareholders exposure to a diversified gold producer and explorer with increased financial strength.

The takeover has since been completed with LionGold now owning 100% of Castlemaine.

At the site visit at Ballarat, a couple of hours drive from Melbourne, journalists were given a first-hand view of the mine's operations, including the prospect of travelling 500m underground.

Any initial anxiety though was quickly erased after the lengthy safety briefings given by the mine's sustainability officer Kurtis Noyce. In true Australian best practice style, every visitor travelling into the depths of the mine were provided with sufficient safety equipment, from top to toe.

Noyce explained that the mine goes as deep as 650m vertically and the length of all the tunnels totals to about 20km. The tunnels also lie directly under Ballarat town.

Noyce, along with geologist Matthew Hernan, led the visiting journalists underground in a four-wheel drive to get a sample of the work that went on in the underground mine.

The tunnels were extensive and larger than one expected and indicatd years of extensive tunnelling. Every now and then, our 4WD would have to make way for heavy-duty vehicles carrying out rocks and earth dug by the high-powered tunnelling machines.

Besides tunnelling, miners need to drill and explore potential sections based on geological data before they can pinpoint ore that is worth mining.

Hernan explained that some of the machinery underground were used to extract ores from the earth that were then analysed to see if they contained any gold.

At Ballarat, the yield they achieved last year was roughly 7.4 grammes of gold from every one tonne of rock dug up.

In contrast, Muruntau, the world's largest open pit gold mine in Uzbekistan, only has an average grade of 2.4 grammes per tonne, it has been reported.

Ballarat's relatively high yield gives it an annual production of 40,000-50,000 ounces of gold.
The mine, which employs 160 people, also has a processing capacity of 600,000 tonnes per annum (the amount of earth it can dig through for gold) and a cash operating cost target of US$800 per ounce of gold.

Following the site tour, Gill gave the media his view on the business of gold mining and the price of gold.

On the question of softening gold prices, Gill explained that one had to take a longer-term view of the matter.

“If you take a 15- or even 5-year trend, you will realise that gold is probably one of the only things whose price had appreciated over that period.”

He said gold's fundamentals remain intact as it plays the role as a protection against currency volatility; the demand from India and China and the fact that hardly any new gold mines are coming on stream.