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August 22, 2012

Focus Minerals Remains In Growth Mode, As Gold Production In Western Australia Continues To Rise
By Robert Tyerman

Campbell Baird, chief executive officer of Focus Minerals, is in ebullient mood after recently reporting a 140 per cent increase in production to 176,632 ounces of gold in the year to June. And exploration is going pretty well too.


Underground at Tindals

“Every time we stick a hole in the ground we find something”, he says, as he contemplates the Perth-based company’s A$8 million to A$12 million budget for exploration in Western Australia’s Eastern Goldfields, where Focus has been expanding, acquiring and consolidating for more than a decade.



Focus now claims a group resource of some 4.3 million ounces at a modest average of 2.5 grammes of gold per tonne, having almost doubled its resources with last year’s takeover of fellow miner Crescent Gold for A$60 million in paper and A$15 million.



In all, says Baird, Focus has struck 20 to 30 tenement-acquiring deals since co-founder and current business development chief Chuck McCormick first set out to build a significant new mining business in an area where gold was first discovered 120 years ago.



The company’s appetite shows no sign of diminishing, despite relatively high mining costs Down Under.



As part of the Crescent deal, Focus gained 81.5 per cent of the promising Laverton project. Laverton has helped boost production, such that the company’s overall output, from Lavertaon and its other principal operation at Coolgardie, totalled 23,177 ounces in July. And Focus is still pushing for more.



Recently, Focus announced another hefty resource increase, this time at the Burtville deposit within the Laverton project, where the total resource now stands at 235,000 ounces at 1.3 grammes a tonne.



Baird points out this resource hike comes after three months of drilling at Laverton, where the company reckons the current overall resource is now two million to 2.3 million ounces at an average 2.4 grammes a tonne.



And Baird and chairman Donald Taig seem determined to maintain the pace of expansion at Focus, which began its present financial year with cash and bullion to the tune of US$19.5 million and has so far drawn US$8 million of a US$10 million facility provided by South Africa’s Investec banking group.



Profits in the six months to last December fell by nearly two thirds to A$2.5 million on revenues more than doubled to A$104 million, which Baird explains by pointing to the investments the company has been making in acquiring and developing projects.



Focus has 100 kilometres of strike at Laverton, only 50 kilometres of which has ever been tested says Baird. And he also argues that Coolgardie, with a present resource estimate of 694,000 ounces at 1.9 grammes a tonne, is “under-explored” and could hold two million ounces.



He suggests the Dreadnought pit at Coolgardie could become a large open pit and highlights a strong contribution from the Mount, an underground operation with a present resource estimate of 370,000 ounces at 5.5 grammes a tonne.



Another longstanding Focus project, Tindals, holds an estimated open-pit resource of 1.4 million ounces at 2.1 grammes a tonne and 444,000 ounces underground at 4.4 grammes a tonne.



Meanwhile, somewhat incongruously, the company is also involved in a nickel project at Nepean near Coolgardie, an historic producer with an inferred resource of 13,250 tonnes at 2.2% nickel.



Having said all that though, what Baird says particularly excites him looking ahead is the Treasure Island project, a relatively recent acquisition in a dry salt lake near Kambalda in the same part of Western Australia.



In late 2010, rock chip sampling at Treasure Island was showing impressive gold grades of 55 grammes a tonne. Now, according to Baird, the project has “two strong trends and is showing sensational gold intersections”, though he cautions “it is going to be a long road for a green field project”.



One feature of gold mining in Australia, as opposed to otherwise apparently more risky places in South America, Asia and Africa, is relatively high costs. Baird puts average cash costs at “US$1,100 to US$1,200 an ounce”, against a present market price of around US$1,600 an ounce, though he says “we have a programme to push costs down”.



Costs and stock market impatience help explain the fall in Focus’s share price since February from nearly A6 cents to below A4 cents today, valuing the company at A$153.4 million. But if sentiment towards gold equities recovers the shares could yet make up that lost ground.


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