Author: BARRY FitzGERALDDate: 03/05/2004Source Publication: The...

Author: BARRY FitzGERALD
Date: 03/05/2004

Source Publication: The Age
Section: Business

Junior explorer snatches chance to join the big boys

Avoca Resources is on track to become a gold producer following its swoop for the Higginsville gold project in Western Australia.

The foreign-led consolidation of the Australian gold sector that fizzled out a year or so ago continues to create opportunities for junior exploration stocks, the latest being Rohan Williams' Avoca Resources.

The Avoca deal covers the acquisition of the Higginsville gold project in Western Australia from Gold Fields, with the giant South African keen to have an eager junior pick up the running on the project while it concentrates on its world-class St Ives gold operation up the road.

While Higginsville never meant much to Gold Fields, it has given Avoca a real leg-up, with the explorer now in a position to begin working towards making the transition to gold producer within the next 12 months. The deal also cements Avoca's relationship with Gold Fields, an original subscriber to the group's float two years back. Under the share/cash deal on Higginsville, Gold Fields' stake in Avoca will rise to 19.9 per cent.

Higginsville comes with an inferred resource of 445,000 ounces of gold, including an estimated 95,000 ounce high-grade resource in the Poseidon South Extended area that was worked up by Gold Fields without much effort.

The cost to Avoca was $4.5 million in cash and shares plus $1.75 million in deferred payments linked to the delineation of 150,000 ounces of reserves. The total cost of $6.25 million represents about $14 a resource ounce - about as good as it gets when buying ounces in the ground.

The challenge for Avoca is to get a minimum of 100,000 ounces converted into reserves to kick off a starter project, with the obvious treatment option being the St Ives plant.

Although more than 600,000 ounces has already been plucked from the area, the deeper underground potential, including finding the source of the gold in the channels, remains pretty much untested.

No one will be surprised if over time, Higginsville yields as much gold again. In the near-term Higginsville should be capable of throwing off a handy cash flow that Williams can turn to chasing up the big-time potential at the group's Mt Fisher gold project on a greenstone belt adjacent to the Bronzewing/Jundee goldmines.

Avoca closed at 14¢ a share on Friday giving it a relatively modest market value on current issued capital (a $3 million placement is under way) of $9.2 million.