bgl set for significant year

Bullabulling Gold set for significant year, starting with January PFS
8:44 am by Jamie Ashcroft

GGG and Auzex did a great job of growing the resource base up to 3.5mln ounces, now Bullabulling Gold has to prove that resource can become a robust projectHaving re-invented itself over the past twelve monthsBullabulling Gold (LON:BGL) is now embarking upon a significant year in its development, starting with a completed pre-feasibility study in January.
That will trigger a busy phase of planning and development which, assuming all goes to plan, will bring the project to the bankable stage by the end of 2013.
The new company - formed by the merger of partners GGG and Auzex in March – has taken control of its own destiny and should no longer be thought of as an explorer, managing director Brett Lambert told Proactive Investors.
“Bullabulling Gold is a development company,” he said.
“As two companies in a joint venture, they [GGG and Auzex] really did a great job of growing the resource base. When the partnership was formed in mid-2010 there was just 410,000 ounces in resource and now we have 3.5mln.
“It was a fantastic achievement even though there were issues between the two partners, but we're now at the stage where we have to demonstrate that the 3.5mln ounces we've got can actually become a robust project - we have become a mine developer.”
He explains that the day-to-day running of the project was in the past the responsibility of third party consultants who, although perfectly competent, did not have the focus that comes with having ownership of the project.
Lambert himself was hired to run the newly merged company based on his background in project development, and in October he bolstered the team further, hiring Australian open pit development specialist Mark Braghieri.
“Mark's appointment is really about taking ownership of the mine development work. He will be putting together a technical team, in house, which will take control of the key areas of the project.
“It will be a marked change. Consultants don’t have ownership, and most of these guys, particularly in Western Australia, are very busy, they have a lot of different projects on their books, and they can't apply the attention to detail that we need as we take the next step.”
Bullabulling’s immediate priority is the completion of the project’s pre-feasibility study, though Lambert explains that the document, due in January, won’t fully reflect the project’s potential, despite the positive revisions to mine’s proposedeconomics earlier this month.
Nevertheless, the Bullabulling team are keen to draw a line beneath the preliminary study and move on.
Lambert says the pre-feasibility work has already achieved its two main objectives - to demonstrate that the project is potentially viable and it is worth taking forward to the definitive feasibility study (DFS).
“We want to draw a line under the pre-feasibility, get it out, and move on to the next stage – the DFS.
“There are a lot of things we’ve identified that we think we can improve on, but we’ll do that through DFS. We could address some of them now but it would only delay the process.
“We’re confident that we can show an even better project by the end of the DFS stage.”
A further expansion of gold resources could also be incorporated into the pivotal DFS, with the integration of recently outlined higher grade zones.
These higher grade zones can help lift the resource grade and also add flexibility - in terms of grade control in the mine plan.
They will be among the first areas to be mined and the enhanced cash flows will enable the quick repayment of the start-up capital, potentially in around two years, which helps make a bulk tonnage project like Bullabulling more worthwhile.
“The rapid ‘repayablility’ of the project makes it more bankable. At first we'll try to pick off the ones that can contribute most value to the DFS - we've got some areas in the southern trend that contain higher grade material.
“We don’t want to delay the study by spending too much time building resources, but will try to expand some higher grade areas whilst keeping within the current timeframe, and in the longer term we’ll continue to explore the project and grow the resource base because we want to extend the mine as long as possible.”
With the DFS being scheduled for the end of 2013, overseen by newly appointed Braghieri, Lambert’s priorities are now turning to project financing, and this is another area where the combination of GGG and Auzex is expected to reap rewards.
“Being a joint venture was a deterrent for financiers, it was a more complicated proposition, they had to deal with two separate boards and separate cultures.
“Now we’re one company owning the whole asset. We’ve got a single board, a single point of contact. It is a more attractive and bankable proposition.”
Lambert says that although it is still a bit early to strike any firm financing arrangements, he has had some contract with interested banks and he also plans to assess alternative and innovative financing options as well.
“We want to consider a range of options and the goal is to, as much as possible, protect our shareholders exposure to the project.
“As it stands, Bullabulling has fantastic leverage to the gold price and a lot of ounces, and we don’t want to give away our shareholders interest in that, beyond what we have to.
“What the ultimate financing package looks like will depend on what the equity and debt markets are like at the time, and how some of these alternative possibilities actually stack up.
“It will be a mix, and it will be something we’ll explore fully when the time comes.”
In the meantime some smaller scale funding is likely, to support the project through to end of the DFS, though as Bullabulling has just shy of $6mln in cash, and it expects completing the DFS will cost $7mln, the company has a degree of wriggle room in terms of timing.

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Comment, think the last bit re cash in bank is wrong, more like $3m imo but otherwise a good read.