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from open briefing White Dam Gold Project in South Australia
Our expectations are that this project will be a real company starter for us, with the potential to generate significant cashflow. Even at the US$525 per ounce gold
price that we modelled the project on, it looks like generating some A$30 million free cash for us over the next three years. With current gold prices well above
US$600, the upside is also extremely attractive.
In terms of funding, we have some cash ourselves, but we’ll look to discussions with the banks about some cash borrowing - possibly linked to a gold hedging
program - to guarantee the cash-flow from the project.
We are indeed targeting initial production in the first half of 2007. We’ll be treating an optimised in-pit oxide resource of some 4.3 million tonnes at a rate of around 2 million tonnes per annum to produce approximately 50,000 ounces on an annualised basis.
On our current modelling we should generate some A$10-12 million per annum of cashflow, but under the current gold price environment I think that estimate is
somewhat conservative.
In November we increased the project resource by 25% to 9.1 million tonnes at 1.13g/t for a total of 330,400 ounces. The additional 73,000 ounce resource came from the Vertigo deposit and was a real boost for us as it exceeded our initial expectations.
Re Exco’s Cloncurry Copper Project area? Is there possibility for expansion to the known resource?
Last week we announced a new resource of 8 million tonnes at 0.83% Cu and 0.26g/t Au at E1 East. Exco’s total resource base in Cloncurry is now some 35 million tonnes containing about 345,000 tonnes of copper and 350,000 ounces of gold.
Since July 2006, we have increased our Cu and Au inventories by 44% and 80% respectively and there is tremendous potential for further increases. It’s our target to double the base over time to create a resource portfolio that is capable of sustaining a project of 10-15 years mine life, producing copper in concentrate at a rate of 15,000 – 20,000 tonnes per annum.
Your previous feasibility on Cloncurry was suspended in January 2005 due to the prevailing low copper price at that time. What is your outlook for copper and the
copper price? How sensitive is the project’s economics to changes in the copper price?
Any copper project is sensitive to metal prices. The suspension in January 2005 took place when copper was US$0.85¢ a pound. Today’s prices are still north of
US$3.00 a pound, so obviously the project looks far more attractive now than it did then, and importantly we have added significantly to the resource base since
that time.
Looking forward we’ll probably carry out our modelling around US$1.50 a pound. This is a little conservative; however I think most analysts are projecting that
prices will remain at or above that level for the next five-years.
I believe that as a junior company we are in a pretty strong position; with some cash right now and a project at White Dam that can be a significant cashflow
generator. With the production plans we have for the Cloncurry project, we will then look to talk to potential offtakers and financiers on the basis of what we
expect to be a very economic project.