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Nov 2006 - Commissioning

The Commissioning Chickens Are Coming Home to Roost

During the coming 3 to 4 months to the end of February 2007, a number of gold companies are going to experience the commissioning phase of their plants, hopefully much better than those that have gone before them so far during 2006.

Perseverance (PSV) appear to have put their plant commissioning behind them at the end of 2005, and are now taking over Leviathan.

So the 2006 year started with Bendigo (BDG) stating in January that their plant was on track for its June Quarter 2006 commissioning. However, plant production only in fact started on 1 October 2006, with a probable reserve tonnage downgrade of 30% about a week or so later, and production forecasts of 50,000oz in 2006/07 and 75,000oz in 2007/08, based on grades of 7g/t and operating costs of A$120/t. BDG have just announced a placement raising funds from a 60m share issue + SPP.

Tanami (TAM) were also on track for June, or thought they were in April 2006, but on 23 October 2006, the plant was still not ready, and the open-cut mining was suspended until it is ready. A merger was recently announced with Monarch who have a very experienced (ex-CSM) management team, and could make a difference.

Gleneagle (GLN) also thought they would have the Fortnum plant re-commissioned by the 3rd week of June, and on 31 October reported that the plant had been subjected to a series of breakdowns, such that production in SQ06 was 30% less than expected (mainly due to lower grades). Production was expected to build up during the current quarter to December 2006.

Ballarat Goldfields (BGF) poured the first gold from their gravity circuit in December 2005, but by September 2006 seemed to still be immersed in testwork and are now being taken over by Lihir.

There are at least 3 companies that we are aware of that expect to commission their plants in the next 3 to 4 months, namely Oceana Gold (OGD) which still seems to be on track to commission Reefton in December 2006. Also expected in late December / early January is Crescent Gold’s (CRE’s) Sickle, and then Sino Gold’s (SGX’s) Jinfeng (as shown in Figure 1).

Both CRE and SGX were initially hoping to have commissioned their plants by about now, but have met construction delays (as compared to commissioning delays).

Also during the coming quarter to March 2007, Avoca should be starting to produce ore for toll treatment. AVOs current plan (as per its SQ06 quarterly report) is to build its own plant during 2007 for production in 2008.

It remains to be seen how well the newcomers will start producing from their new plants and whether they too are going to be involved in corporate activity or not.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (ERA, an independent research company) who is an Authorised Representative with Taylor Collison Ltd, and with his associates, may hold interests in some of the stocks mentioned in this article. The opinions expressed in this article should not be taken as investment advice, but are based on observations by the author. The author does not warrant the accuracy or completeness of any information and is not liable for any loss or damage suffered through any reliance on its contents.

Figure 1. Sino Gold’s Jinfeng Plant under construction in Guizhou, ChinaGDNnov06

  • Written by: Keith Goode
  • Wednesday, 01 November 2006