Thinking back to 2011: Unity hit hard for Bendigo mine move
Company still has potential in Tasmania and Africa despite poor results at Kangaroo Flat
PSST! Want to buy a goldmine? One that has had more than $350 million spent on it in recent years but which you can probably secure at a knockdown price of $5-$15 million? Well pick up the phone and give the Bendigo head office of Unity Mining a call. Its Kangaroo Flat mine on the outskirts of Bendigo could well be yours, with Unity (formerly Bendigo Mining) having decided that it is in the best interests of shareholders to build its future around the Henty gold mine in Tasmania and west African gold exploration. As the company's name change suggests, the Kangaroo Flat mine was once the group's flagship operation. While Unity enjoyed some success running the show as a sort of small-scale trial mine in recent years after the plans by previous management to make it a big mine proved overly ambitious, the time has come to let someone else have a go at recapturing some of Bendigo's former glory as a gold town. Little wonder, too. In an example of best practice for continuous disclosure that our mining market continues to lack, Unity recently revealed ahead of time that its March-quarter production effort was a shocker, with production for the period of 8400 ounces at a cash cost of $1700 an ounce. You can buy gold from the vaults of the Bank of England for $325 an ounce less than that. The mining of remnant and lower-grade ore at Kangaroo Flat was a key factor in the group's $1700-an-ounce cash costs for the quarter.
Exploration has failed to find a replacement ore source for the Gill reef, leaving Unity to rat around for remnant ore in smaller reefs that are both more difficult to mine, and unreliable when it comes to gold grades. So if you are thinking about making an offer for Kangaroo Flat you will want to add another $10-$20 million to fund an exploration effort to find new ore positions. Make no mistake, someone will be exploring the old Bendigo goldfield in 100 years. The old girl has lots of gold left to give up. It's just a question of finding economic concentrations of the stuff in new reef positions. Now it should come as no surprise that Unity has been beaten up something shocking for pulling the pin on Kangaroo Flat. Despite gold prices toying with all-time record levels, its share price has been in freefall. It's fallen all the way from a 52-week high of 29¢ to the miserable 8.2¢ a share seen on Friday. Garimpeiro for one thinks that the sell-off has been overdone, failing as it does to recognise the ongoing production/exploration potential at the Henty mine in Tasmania and the blue-sky exploration potential that will unfold this year with the group's push into west African gold exploration via its 20 per cent stake in AIM-listed explorer GoldStone Resources. You could also add the exploration blue sky that comes from Unity's exposure to the regional Bendigo exploration joint venture led by Ed Eshuy's Drummond Gold. But for simplicity sake all that we need to know is that at its market capitalisation of $42.33 million, Unity is trading within a whisker of its cash backing of $40 million. Its shareholding in GoldStone is worth another $5.3 million, so Unity is trading at less than cash and tradeable securities. That means that the market is giving no value to Unity for Henty (or Goldstone exploration upside in Ghana and Senegal), which remains as a 30,000-50,000-ounce-a-year producer from a mineral resource base that since its acquisition from Canada's Barrick Gold has grown to more than 200,000 ounces of gold.
Henty had a tough March quarter as well. But it was a period of transition, with Unity working away at accessing new zones of mineralisation (Tyndall and Newton), optimising a new mining method and introducing new equipment to increase productivity and deliver lower costs.
Near mine exploration at Henty also gets a real move along in the months ahead, with drilling at the Aurora target 1.2 kilometres north of Henty set to be drilled for the first time. First drill holes into a new alternation zone (Henty South) that splays off the fault that hosts the Henty mineralisation will also be worth watching.
