Bendigo raises cash for Victorian revival (July 07, 2004)

A successful global book building tour has Bendigo Mining a major step closer to realizing its dream of reviving the historic goldfield after which it is named, in Australia’s central Victoria state.

Investors in Australasia, Europe and North America have ponied up for A$100 million worth of shares at A72 apiece. Additionally, the company’s two major shareholders, South African gold producer Harmony Gold Mining (HMY-N) and General Oriental Investments will sub-underwrite a share purchase plan for existing shareholders, up to a maximum of A$15 million.

Says Bendigo’s CEO Doug Buerger: “We are very pleased that we have succeeded to secure the funds necessary to commence construction. We are looking forward to commencing gold production by the fourth quarter of 2005 and then ramping-up production over a six year period to over 570,000 ounces per year.”

Plans at the company’s New Bendigo project centre on mining some 33.6 million tonnes of ore at a rate of 1.6 million tonnes annually over a quarter century. The underground operation’s target mine head-grade is 12 grams gold per tonne, with total gold recovery projected at more than 12.7 million oz.

Still, the company has only defined reserve totalling 656,000 tonnes running 9 grams gold per tonne, good enough for the first three years of operation. The company says it would be too expensive to prove up reserves too far ahead of mining thanks to nuggety nature and depth of the ore. Instead, the company plans to have just two to three years of reserves proved up at any given time.

Gold at New Bendigo is hosted by reefs having small cross-sectional areas but up to 5 km of strike length. The reefs run parallel to the hinges of enclosing anticlines and commonly occur in clusters, forming distinct linear bands, or ribbons, that repeat at depth. Historically, the most productive part of the field has been one in which 15 anticlines occur over an area measuring 17 km long by 4 km wide.

During the first three years of production, the mine is expected to squeeze 83,000 oz. of gold out of 300,000 tonnes of ore each year. Thereafter, the throughput rate will be doubled to boost production to 185,000 oz. per year. In 2011, a second million-tonne-per-year processing plant will be added to achieve the design rate of 1.6 million tonne per year, at which point production is pegged at more than 570,000 oz. per year.

At full steam from 2011 on, production is expected to average 600,000 oz. per year for another 19 years. Average cash operating costs are estimated at less than US$120 per oz., and the average exploration and sustaining capital costs are pegged at US$42 per oz.

The base case model outlined in the project’s feasibility study indicates a net present value of more than A$400 million, based on a discount rate of 10%. The internal rate of return is pegged at more than 20%, based on an unhedged operation and a long-term gold price of A$525 per oz. The project is expected to generate average after-tax cash flow of A$130 million per year.

The project includes two waves of capital investment, the first A$135-million tranche will go toward construction of a 300,000-tonne-per-year processing plant at the nearby Carshalton mine site. Some of the initial capital will also go towards ramping up to production stages two and three. Another A$80 will be required to double the plant capacity in the fourth year, and reach the design throughput rate in the seventh year.

The start of mining at New Bendigo will follow quickly on the heels of a yearlong period of plant construction, as much of the underground development is already in place. Initially, mining will target the Sheepshead and the Deborah reefs already accessed via the Swan decline at the southern end of the project.

Ultimately, mining operations will extend over some 10 km of strike length a depths ranging from 500-1,500 metres. Plans call for 75% of the mining to be by cut-and-fill stoping, with the remainder by bench stoping.

Ore will be crushed underground and then trucked to the surface for processing. Test work and trial processing indicate a gold recovery rate of 95% via crushing, grinding, primary gravity concentration, flotation and secondary gravity concentration of the flotation tail. Gold will be recovered from the gravity concentrate in a leach reactor, consisting of dewatering, reactor, detoxification and electrowinning.

Residue from the leach reactor will have any remaining cyanide neutralized before being use in backfill; cyanide-free tailings from the primary processing circuit will be sent to a tailings storage facility or used as backfill.