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Jul 2002 - Abelle Limited

Abelle Ltd (ABX) – A Neat, Very Profitable 75,000ozpa or so Gold Mine

  • Abelle is operating the old Gidgee mine (that used to belong to Australian Resources (ARS) before that company went into receivership in early 1999), and is currently producing about 75,000ozpa at a cash cost of US$215/oz and total cost of US$260/oz (at an A$ exchange rate of US57c).
  • Our initial impression on visiting the mine in mid-November 2001 was that it was capable of generating annual after-tax profit of A$2m to A$10m per year, depending on how well the visible gold in quartz underground was “running”.
  • Gold production has the capability to increase materially since about one-third of current production is coming from extremely low 0.8gpt stockpiles which could be replaced by oxide ore (when found) or from increased underground production.
  • In our opinion there is in fact significant upside potential for both gold production and life. However, it is more a case of where to start, and which order to take the targets in, and consequently we have used scenario analysis in pages 6 & 7. For example, the current underground life is conservatively 6 years, excluding reopening either Kingfisher or Omega, and a decline is being sunk in Butcherbird.
  • Currently the exploration direction is being made towards the potentially more prospective Gidgee anticline, by focusing on already delineated oxide targets and a number of classic exploration “gaps”, before the mill runs out of “soft” ore in about 2 years’ time. An alternative could be to spend possibly $10m more capex and increase underground production so as to replace both the surface sources.
  • We have provided profit and cashflow estimates for the scenario range (pages 6 & 7), with ABX’s share price (on a 5% NPV) capable of being between 40c and 105c.
  • Written by: Keith Goode
  • Thursday, 04 July 2002

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