Ferret's Stock to Watch: DOMINION MINING LTD09:30, Thursday, 2...

Ferret's Stock to Watch: DOMINION MINING LTD
09:30, Thursday, 2 November 2006

GOLD PRODUCER GOES UNDERGROUND AND TRANSFORMS ITS FORTUNES

Sydney - Thursday - November 2: (RWE Aust Business News)
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OVERVIEW
********

A gold find has to be a good one if the company wants to see a
good response from the stock market.

Take Dominion Mining (ASX:DOM), for instance.

The company earlier this week reported an "outstanding"
intersection of 25 metres grading 23.4g/t gold, demonstrating the
continuity of the discovery.

But by yesterday, the market had decided it wasn't a big deal
and let the shares slip 2c to $1.49 although in fairness they did reach
$1.55 in a short-lived flurry.

The results described in glowing terms came from the deep
diamond core drilling program to evaluate depth extensions of the M1
Shoot at its wholly owned Challenger gold mine in South Australia.

The final hole of the current program confirmed the previously
reported high-grade intersection, and has traced the shoot down-plunge
some 1,500 metres to a vertical depth of 700 metres.

Directors say the results show the potential for significant
additions to Dominion's resource/reserve inventory at depth within the
M1 Shoot at Challenger, with the latest results to be incorporated in a
revised resource and reserve statement, scheduled to be finalised early
in 2007.

It's all about moving from open cut to underground and hitting
big grades.

The company expects that the results from this drilling program
will more than fulfil the company's strategy of replacing annual
low-cost gold production at Challenger, which is forecast to continue at
the rate of 100,000ozs a year.

Consolidated operating profit for the year ended June 30, after
provision for income tax, was $8,995,000 (2005: loss of $8,674,000).

The result was achieved from the first full year of underground
production at Challenger which exceeded all targets, with both
development and production from stoping surpassing budgeted schedules
and mining plans achieved both in terms of tonnes and grades delivered.

Together with increased production, overall costs were contained
resulting in much lower operating and capital costs for the year
compared with 2004/05

Operations at Challenger began in October 2002.

Prior to this, the company's main activity was exploration with
all exploration expenditure written off through the profit and loss as
incurred.

The year ended June 30, 2003, reflected the start up of the
Challenger project with nine months of production from the open pit
operation.

The financial year of 2003/04 was the first full year of
production from Challenger, with 60,757 ounces produced at a cash
operating cost of $328 per ounce, compared to the previous year with
36,675 ounces produced at $341 per ounce.

The result for the year to June 30, 2005, with production of
43,547 ounces at a cash operating cost of $511 per ounce, reflected the
transition from open cut to underground production and the requirement
to process low-grade stockpiled ore during the first six months of the
year while development of the underground decline was in progress.

Production for the current financial year totalled 108,080
ounces at a site cash operating cost of $280 per ounce reflecting the
first full year attributable to production from ore sourced from
underground.

There was a substantial increase from the previous year in ore
grade (from 3.12g/t gold to 9.52g/t gold) and recoveries (from 89.7 per
cent to 94.3 per cent).

Revenue from gold sales for the year was $67.9 million from the
sale of 107,084 ounces.

The weighted average share price over the financial year was
92c with a closing high at the end of January of $1.41 and a closing low
of 34c at the end of July 2005.

The trend of the company's share price was generally in line
with movements in the Australian dollar gold price.

The closing share price at the end of June was $1.18.

Revenue from gold sales for the year was $67.9 million from the
sale of 107,084 ounces at an average price received of $633 per ounce.
(2005: $25.2 million from the sale of 43,777 ounces of gold).

As at June 30 the consolidated entity had cash and bullion of
$21.288 million with cash of $19.02 million and gold bullion of $2.268
million.

This was after repaying in full the $6.5 million debt facility
provided by the ANZ Banking Group for the Challenger underground
development.

Production for the 2006 year totalled 108,080 ounces with
average site cash operating cost of production for the year of $280
per ounce (2005: $511 per ounce).

This was achieved from processing 375,995 tonnes of ore at an
average head grade of 9.52g/t gold.

The high cost of diesel fuel experienced during the year
resulted in increased costs for power generation - both for underground
operations and in the treatment plant - and in running costs for the
mining fleet.

The decline has been developed to the 800 level or about 400
metres vertically below the surface.

This allows access not only for production from the M1 orebody
but also to the M2 and M3 lodes, which lie adjacent to the M1.

By the end of the financial year the M1 orebody, the principal
source of production during the year, was developed down to the 820
level with exploratory development and drilling taking place on various
higher levels associated with the M2 and M3 orebodies.

SHARE PRICE MOVEMENTS
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Shares of Dominion Mining yesterday slipped 2c to $1.49. Rolling
high for the year was $1.60 and low 60.5c. Dividend is 4c to yield 2.65
per cent. Earnings per share 9.11c while P/E ratio is 16.58. The company
has 100.3 million shares on issue with a market cap of $151.5 million.

Production from Challenger for the coming financial year is
forecast to be in the order of 100,000 ounces at an average site cash
operating cost of approximately $335 per ounce, and capital and
development expenditure of around $128 per ounce.

Of the forecast production, 48,100 ozs will be delivered against
existing hedge contracts at a average delivered price of $638/oz.

Current reserves are 279,056 ounces with potential for upside
from further extension of the M1 Shoot and conversion of further
resources to reserves from the M2 and M3 shoots.

The aim is to replace, at a minimum, gold production in any
current year and have steady, efficient and low-cost gold production
while maintaining the existing excellent safety record.

It is intended to ramp up exploration programs both at
Challenger and at Dominion's major regional exploration plays in the
South West Yilgarn of Western Australia and elsewhere.

The exploration priorities for the coming year will include
further drilling at Challenger targeting increases to the mining
reserves - in particular drilling of the M2 and M3 shoots.

Other significant priorities will be to follow up the Wongan
Hills copper-gold discovery, the Lake Magenta South anomalies and the
Barton area heavy minerals and prospect.

BACKGROUND
**********

Dominion Mining is an independent Australian gold producer and
explorer.

The company's shares are quoted on the Australian Stock Exchange
while sponsored American Depositary receipts representing its shares are
traded in the United States

Dominion's key asset is the 100 per cent-owned Challenger Gold
Mine.

The company went underground in 2004 and its fortunes were
almost immediately transformed.

Dominion is focused on the safe, efficient and profitable
operation of its gold mining operations, together with intensive
exploration programs to extend the life of the Challenger operation, and
increase shareholder value through new discoveries.

ENDS

Copyright © 2006 RWE Australian Business News. All rights reserved.