Wednesday, May 12, 2004 Dragon Mining is adding a third diamond drilling rig to the two it already has operating at its Jokisivu gold exploration project in southern Finland, the area considered most likely to become the company's second goldmine.
The first, at Svartliden in northern Sweden, has just passed the 50% construction mark and is on track to pour gold around mid-August despite worries about possible delays being caused by engineering scheduling at what is a simple development but one in a seriously remote location.
Work at both Jokisivu and Svartliden, plus ongoing studies at a series of other potential mines in Finland, has reached a point where Dragon is emerging from its status as an Australian explorer with interesting (but largely unknown) projects, into an emerging producer with its sights set on quickly achieving annual output of 150,000-200,000 ounces of gold.
A site visit by MiningNews.net last week threw a much brighter light on what Dragon has been doing so far from home.
The 80%-owned Svartliden project, located close to Arctic Circle, was acquired as an undeveloped resource which required intense effort to win environmental and other government approvals.
Since those legal and regulatory hurdles were cleared last year, Dragon has made swift progress on the US$12.25 million development.
If Svartliden had been Dragon's only European gold project it would have been a relatively simple business to understand.
Macquarie Bank has funded development with a 100% debt package; the mine is a simple open-pit with a target depth around 80m (pit design is currently being finalised); while the process plant a plain-vanilla 300,000tpa facility with output rated at 70,000oz in year one (and 50,000ozpa over the next five years).
Cash costs are expected to be a relatively attractive US$165 an ounce – and possibly less as exploration proves up more ore – as has happened with a recent drilling program to close out the western zone of the known orebody.
A focus on developing the mine has restricted expenditure on exploration despite the pinpointing of 15 drill-ready, look-alike targets which could see the life of Svartliden substantially extended.
While the work in northern Sweden will keep Dragon busy for years, there is an even more attractive package of assets being developed on the other side of the Baltic where Dragon has acquired the precious metals interests of the big Finnish mining and metals group, Outokumpu.
The Outokumpu deal, which has been layered on top of the Svartliden mine, is the potential "company-maker".
For $17 million, Dragon got: a high-quality 600,000 tonne-a-year processing plant at Vammala, about 150 west of the capital of Finland, Helsinki; a largely worked-out nearby mine called Orivesi (complete with equipment fleet); the Jokisivu discovery, and; a third mine which was mothballed after briefly working a high-grade, near-surface ore zone called Pampalo in eastern Finland. It also got offices, its choice of staff, and 20 other exploration projects.
Dragon chief executive, James Searle, said Svartliden was the starting point for the creation of a business which he believes will become a significant European gold producer.
"These are countries with a deep understanding of mining, even if some of that understanding has become a bit rusty," Searle said. "Skill levels are high and costs are roughly similar to Australian goldmining with higher costs in some areas being compensated by lower costs in others, such as cheaper electricity."
"We expect Svartliden to be followed into production by one or more of the Finnish projects, each about the same size."
At Svartliden, located 150km south of the Arctic Circle, brisk progress has been made on site works with the orebody (currently measured at 2.6 million tonnes grading 4.8gpt but growing), requiring minimal stripping.
Concrete footings are ready for the tanks, mill, and other process facilities. By the end of the year, as cash flow grows, exploration will re-accelerate to ensure that the project has a life longer than its currently planned five years.
After Svartliden it will be a raffle as to which mine in Finland comes on stream first.
The smart money is on Jokisivu which has already revealed an initial resource of 300,000 ounces of gold (in 1.25 million tonnes averaging 7.7 grams a tonne) with the orebody outcropping at the surface.
The third drilling rig being introduced at Jokisivu work is part of the effort to prove up a reserve sufficient to secure bank finance which would enable development of an openpit followed by an underground mine feeding the Vammala mill, with a mine development decision possible before the end of the year.
With two new mines in production, Dragon would then be able to make decisions on re-opening the Orivesi mine - a possible move if a new vein system is proved up - or the Pampalo mine, the latter which has already been worked to a shallow depth and has a decline already developed to the 320m level.
Other projects across Finland, ranging from gold to base metals and platinum group metals, will then be categorised into assets to be kept 100% by Dragon, or re-packaged into a new float (especially the base metals), or offered to joint venture partners.
All of Dragon's known resources are relatively small by world standards.
But, collectively they represent a portfolio with the potential to generate profits for decades – and the possibility of yielding a major discovery, especially in the far north of Finland where some of Dragon's ground is close to a major platinum and a major gold discovery.
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