bab determined to stand out from the crowd

Bullabulling Gold determined to stand out from the crowd

By Jamie Ashcroft
December 29 2013, 12:01pm

It will be a significant milestone on the way to a final investment decision in the fourth quarter.It will be a significant milestone on the way to a final investment decision in the fourth quarter.
In declaring a 2.5mln ounce mining reserve by mid-2014, Bullabulling Gold (LON:BGL) believes it will to set itself apart from the swathe of junior gold stocks on both the AIM and ASX markets.
It will be a significant milestone on the way to a final investment decision in the fourth quarter, which could see the substantial Bullabulling Gold project move into the development phase by this time next year.
Initially, in the first half of the year, a short drill programme will aim to infill a small part of the resource, which is still classed as inferred, and the reserve will come after those results.
"We expect to be able to declare a reserve in the order of 2.5 to 2.6mln ounces," chief executive Brett Lambert told Proactive.
"There is no other junior or mid-tier company in Australia that has a project with a reserve that size. It really stands us apart from the crowd. And it is the size of that reserve that delivers the economies of scale, which make this project very competitive."
It would be reasonable to expect a re-rating of the group's shares to follow this important milestone as well, he says.
"I think that will be an opportunity for a significant re-rating of the project. Having a resource is one thing, but, to actually declare it a mining reserve means we’ve taken the project a lot further, and we’ve done most of the work that’s needed to advance to mining."
For Bullabulling, 2013 has been a challenging and important year, as it has on paper made several improvements to the eponymous gold project.
Lambert had previously outlined a plan to enhance the economics set out in the project's pre-feasibility study (PFS).
He says this initiative was a success despite tight capital markets for junior companies and stock price volatility across the sector, as the previously inexorable gold price rise stalled.
"It has obviously been a very challenging equity market for us, but we're pleased that we've been able to continue advancing the project.
"We've had three separate drilling programmes, each one targeting specific facets of the ore body, and that has resulted in a lift to the overall ounces in the resource and also the resource grades, as well as adding ounces in places that will now be accessible to mining."
At risk of labouring the point, the firm's prospects have improved further thanks largely to the misfortune of others in the sector, as several projects have stalled.
The boom times are over in Western Australia, and as a result the availability and cost of equipment and services has improved significantly. Importantly, there is also the opportunity to hire a higher calibre workforce for much less than before while a portion of the highly skilled jobs market currently survive on a four day week.
"We’ve gone from a situation where construction and engineering costs were spiralling out of control, to a situation where costs are declining. So, we expect capital costs to have come down from where they were twelve months ago [in the PFS], though it will be something that we'll re-estimate later next year.
"Obviously that will have a positive implication on the amount we have to fund as well as the rate of return on the capital invested into the project."
It has, to some extent, done this optimisation work on a shoestring budget.
Thanks to a A$4.5mln tax rebate and £1.3mln (A$2mln) raised through a rights issue in April, and a decision to slow work on the definitive feasibility study, the company has been able to end 2013 with slightly more cash in the bank than it began the year with.
"We've achieved a lot and maintained a strong cash position, relative to many of our peers.
"Having said that, we're not as well funded as we would like to be, to really accelerate the project.
"So, we're currently balancing that desire to really push the project forward with a very careful approach to cost and cash management."
Looking ahead, Lambert says investor sentiment for gold stocks generally will be the driving factor in the pace at which the company can proceed.
"We are going to keep progressing the project, whilst being cautious, until we really start to see that sentiment turning around as we don’t want to put ourselves in a position where we have to raise funds in a manner that may be detrimental to existing shareholders.
"No matter what form of funding we may look at, we first want to achieve better market recognition of the value of the company, and that is likely to only really happen when the sentiment towards the sector in general is more favourable.
"Investors are very cautious right now. We’ve had a lot of interest in what we’re doing, but many investors still remain on the sidelines. Of course, that can turn around pretty quickly.
"Our intention is to keep things fairly simple when it comes to development finance, and we’re most likely to look for a conventional mix of debt and equity. Our intention is to maximise the exposure our existing shareholders retain to the project, that’s the key thing.
"We have 3.8mln ounces of JORC compliant gold resources in the ground, providing our shareholders with fantastic leverage to the gold price."
"Gold prices will recover at some point, and continue to grow. I think the fundamentals, the pure and simple supply and demand fundamentals, remain very good."
"While the equity market has been tough, it is now starting to improve. We are starting to get good attention from investors and we believe the scale and quality of the Bullabulling Gold Project will see us stand out from the crowd."

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