gold producer, page-9

September 21, 2010

Olympus Pacific Plans To Increase Production To 300,000 Ounces Of Gold Per Year By 2014
By Thomas Jones



New Zealander David Seton is currently trotting the globe spreading the word on his company Olympus Pacific Minerals. Given how much progress has been made lately, the word could, theoretically, extend to several thousand words of in-depth analysis. But well keep it brief, and set the scene with the simple, short statement that Olympus Pacific should be producing at a rate of 300,000 ounces of gold per year, within four years. In an environment of US$1,280 gold, thats not a bad prospect at all.
While its not often these days that a fund manager gets credited for, well anything really, David is nonetheless more than happy to reveal that it was encouragement from Richard Lockwood of New City Investment Managers that set Olympus on the road to increased production, after years of resource hunting. This change in strategy has meant that Olympus has stepped up production rates from 5,000 ounces to 35,000 ounces of gold during the past four years, and from January of next year, it expects to be producing at a rate of 80,000 ounces per annum. However, the progress wont stop there, as Olympus now has a clearly defined path to production of 300,000 ounces of gold in 2014.

Current production comes from two underground mines in Vietnam, Bong Mieu and Phuoc Son, with ore from the latter being trucked some 120 kilometres to the processing plant at the former. However, from the fourth quarter of this year a new processing plant at Phuoc Son will be commissioned, which will lift total production to 80,000 ounces per annum. At that stage costs per ounces should be running at around US$550. David believes this new production level represents a significant moment for the company, transforming it from a peripheral gold producer to one that will be taken seriously by the wider market.

Gold production of 100,000 ounces per annum is an industry benchmark for any junior miner, and David expects Olympus to surpass this in 2012, once production at the companys 50.05 per cent-owned Malaysian Bau project gets underway. Olympus is looking to acquire the remaining interest from Gladoioli Enterprises, but once it does so, establishing an open pit mining operation with associated plant is expected to cost in the region of US$100 million. David believes that with the strong cash flows forecast from its Vietnamese projects, Olympus should be capable of funding the capital cost internally. Certainly, he expects to be able to avoid an equity issue.

With Bau up and running, the company will be able to look for production increases on a number of fronts. Therell be the expansion of the Phuoc Son plant, phase 2 in the development of Bau, and a more significant contribution from Bong Mieu East. The forecast effects of all that are that production will step up from 145,000 ounces in 2012, to 245,000 ounces in 2013 and finally to 300,000 ounces in 2014.

In the midst of this flurry of production activity, Olympus is also cognisant of the need to develop additional ounces, and to this end the company has budgeted US$6 million for exploration and resource studies to be spent in the 12 months till June 2011. The next deposit that the company will take a serious look at is Tien Thaun in the middle of Vietnam, and an eight hole, 1,000 metre scout drilling programme is already underway.

Vietnam has been a difficult country in which to get established, but it remains in need of foreign investment and modern development. That dynamic works in several different ways as far as Olympus is concerned. First theres the political risk discount applied to Olympus shares. But off-setting that are the significant barriers to entry that other companies will face, meaning that Olympus enjoys a significant competitive advantage.

The company is currently sitting on a healthy US$17 million of cash, US$9 million of which is earmarked for the Phuoc San plant. Olympus has been careful to ensure its targets are achievable and expects to fund much of its development internally. Given that the overall increase in production will amount to 264,000 ounces over a mere four years, if it succeeds, itll be no small achievement.