Olympus Pacific Now Has Two Operating Mines In Vietnam And A Target Of 4.75 Million Ounces In Malaysia.
By Our Man in Oz / www.minesite.com
Two small mines, or a monster in the making? That's the question which investors have to ask when they look at Olympus Pacific, a gold company listed in both Canada and Australia, but with its best assets in Malaysia and Vietnam. For the past 15 years investors have had a love/hate relationship with Olympus as it struggled to raise the capital to develop its Vietnamese mines. That history weighs heavily and means that most investors miss the point that the best value in the company now lies in what is slowly being revealed at Bau in Eastern Malaysia. These days, Olympus Pacific is more of an exploration than a production story.
A quick glance at Bau, which has a gold production history dating back into the 19th century, reveals the size of the geological "elephant" Olympus wants to shoot in this corner of Malaysia's jungle island of Borneo. Underway today is a A$6 million drilling program designed to punch down 20,000 metres of holes, backed by construction of an on-site assay laboratory to ensure a speeding flow of data. Bau is possibly one of the most important gold exploration projects in the Asia Pacific, as it offers multiple targets in multiple settings under the limestone cap which creates the region's spectacular topography.
But, before looking too closely at Bau it is important to dig a little into the history of Olympus because it can confuse investors, and did confuse Minesite's Man in Oz when he was asked to dust off the file. The starting point is the point in time when the company acquired a Vietnamese project cast aside in the mid-1990s by Canadian billionaire Robert Friedland. Back then, Robert was switching his focus to the Voisey's Bay nickel discovery in Canada after making generous promises to the government of Vietnam about large scale gold mine development. Olympus got the gold at Bong Mieu and Phuoc Son, but it also inherited Robert's promises, and has battled to keep the same projects - while struggling through a period of low gold prices, Asia's financial flu of the late 90s, and the negative publicity of the Bre-X scandal.
It is impossible to forget the past, but understand the difficult years of a decade ago and you also understand why some investors have had a love/hate relationship with Olympus. And that's perhaps a reason why it struggled to finalise its latest capital raising and was forced to top up with a convertible note. The struggle to raise fresh funds can be measured on the market, where Olympus has sagged from a peak price late last year of A65 cents for its shares to recent trades around A41 cents.
It's never wise to argue with the market, but as Minesite's Man continued his exploration of Olympus, complete with a long conversation with the company's investor relations manager, James Hamilton, it became clear that the company is carrying the baggage of its past and too much focus on the Vietnamese assets. So, while they are becoming important cash generators let's get rid of them quickly. The two mines, Bong Mieu and Phuoc Son, have been processing ore through a common plant. The high grade ore from Phuoc Son gets hauled by road the 125 kilometres to Bong Mieu. That costly phase ends next month when first gold is scheduled to be poured at a new plant adjacent to Phuoc Son, clearing the way for Olympus to grow substantially its Vietnamese gold output. This year's production target is 48,000 ounces, up 40 per cent on last year's 34,000 ounces, and double the 24,000 ounces of 2009. In time, the two Vietnamese mines could grow to 168,000 ounces a year at a cost of around US$470 to US$500 an ounce.
Cash flow from Vietnam will find its way into the exploration work at Bau where the company is sitting on a JORC resource estimated at 1.6 million ounces, and a target of up to 4.75 million ounces. Olympus management, led by chief executive and chairman David Seton, is so keen on the project that ownership is being lifted from the current 50.05 per cent to 93.55 per cent. The reason for the enthusiasm is that Bau has the potential to be more than a single mine. Geological interpretation has so far revealed carbonate replacement style mineralisation, porphyry style mineralisation, and quartz breccia mineralisation in at least 20 drill targets. "It is a project with an awful lot of smoke, and we're looking for the fire", said James from his office in Da Nang.
For investors, the key attraction of Olympus is a year of solid news flow. First event to watch for is the gold pour expected at Phuoc Son in the middle of next month. That signals the start of a second source of cash, and elevates Olympus from the status of one-trick pony. After that will come drilling and assays news from Bau. That could be the company-making event that the Olympus has promised since the mid-1990s. By the end of 2011, Olympus will be a company with two mines and two process plants ticking over, and a high-class exploration effort underway in one of the world's gold hot spots.
OYM Price at posting:
40.0¢ Sentiment: None Disclosure: Not Held
