Olympus Pacific Has Set Itself A Series Of Ambitious Gold Production Targets To Meet Over The Next Three Years.
By Charles Wyatt / www.minesite.com
David Seton, chairman and chief executive of Olympus Pacific, has the enviable ability to introduce a bit of humour early on in a presentation about his company. As a result he has the audience onside and giving him its full attention by the time he gets to the meat of his talk. And afterwards it is his talk that is remembered and his company benefits accordingly. Most mining men have a sense of humour - they certainly need one - so why is it that so many simply regurgitate the words of the bullet points behind them on the screen? Is it laziness? Or fear of their advisers? Or fear of a joke falling flat?
Whatever, a little rehearsing can turn a ponderous talk into a memorable event. David, of course, had plenty to talk about at our last Minesite Forum, given that Olympus merged with Zedex at the end of last year that the enlarged company will have annualised production amounting to 80,000 ounces of gold by the end of this year, supported by more than three million ounces of resources. More important, David can demonstrate a path to production of 300,000 ounces per year by 2014.
The company operates in Vietnam, where it has its Bong Mieu and Phuoc Son mines, and in Eastern Malaysia where its Bau gold property lies between Kuching City and the Indonesian border. Bau was contributed by Zedex and brings with it a history of production and a 1.6 million ounce resource. Cameco had it in the mid 1990s, before Gordon Brown hit the price of gold on the head with his sale of UK reserves, but Zedex managed to retrieve the exploration data. The ores are a mixture of refractory and non-refractory, but that does not present the problem it did in the old days.
In fact this year a metallurgical programme will decide the best process route for maximising gold recovery, and minimising plant capital and process operating costs. A feasibility study will also take place on a 500 tonnes per day project at Bau, treating underground ore at six grammes per tonne to produce 30,000 ounces of gold annually. It is hoped that this production can start in 2012, and that the following year a surface pit would jack up production to 70,000 ounces. In 2014 more plant modifications would take place, to allow the processing of refractory ore from a third pit and at that stage 100,000 ounces per year would be in sight.
Simple when explained like that, but a lot of hard work will be required to get Bau to that stage. Charlie Barclay, the chief operating officer, makes a good team with David, as he brings experience of developing and managing mines over 25 years in senior positions. Most of this time he has been in Malaysia, Papua New Guinea and Fiji, where he was COO of Emperor Mines until 2000.
But while work on Bau is still gathering momentum, the rump of the business is in Vietnam, where David himself has 17 years of experience. Golf is growing in popularity among the official class so his company helps to arrange some events which enable his team to widen their contacts in the right places.
This year the focus in Vietnam is on the construction of a processing plant at the Phuoc Son mine, which is only around 60 kilometres to the east of Olympuss other Vietnam project, the Bong Mieu mine. Both lie on the Phuoc Son Suture Zone which also hosts the world class Sepon copper-gold mine over the border in Laos. Underground development started at Phuoc Son in 2007, and the first ore was transported to Bong Mieu for trial processing the following year. The plant at Bong Mieu will continue to treat the Phuoc Son ore until the new Phuoc Son plant is completed in the third quarter of this year. By the end of this year the mine should be producing at a rate of 60,000 ounces of gold, and there is plenty of scope to increase the resource with further drilling. The combined production from Phuoc Son and Bong Mieu should then hit 85,000 ounces in 2011.
Olympus Pacific originally acquired the Bong Mieu mine from Ivanhoe back in 1997, but did not start production from the Bong Mieu Central open pit until the end of 2006. The current ore throughput amounts to 500 tonnes per day and feasibility work is now taking place on the Bong Mieu East deposit which contains gold and tungsten and is open at depth. A 2,500 tonnes per day plant to treat ore from the surface deposit should take production up to 55,000 ounces in 2012. In that year production from Phuoc Son would remain static at 60,000 ounces, but the Bau mine should be making an initial contribution at a rate of 30,000 ounces per year. Thus, by the end of that year, Olympus Pacific should be producing gold at a rate of 145,000 ounces.
From then it should be onwards and upwards. Production at Bong Mieu is slated to rise to 105,000 ounces by 2014, in line with Bau and Phuoc Son where the plant will have been upgraded. It is an ambitious undertaking, funding this development as well as exploration so Olympus Pacific has recently raised C$12.75 million to supplement cash flow from gold production.
The results for the first quarter show that the company is still on track, according to Charlie Barclay, for around 40,000 ounces this year, despite a slight setback due to the Tet holiday. Positive cash flow is being generated, and construction of the gold plant at Phuoc Son has started. The ball mills should arrive next month, and orders have also been placed for the gravity and flotation circuits. Work on the construction of the tailings facilities is also progressing well.
In the background is the Tien Thuan gold project in central Vietnam, a 75:25 joint venture with a local company. Historical exploration suggests that there is potential for a significant resource here, so initial drilling is investigating the sub-surface extent of the extensively mineralized Nui Bac Ma mesothermal quartz vein set. A secondary focus will be upon investigating peripheral gold bearing veins and molybdenum mineralized intrusives.
It is a hectic schedule that Messrs Seton and Barclay have set themselves, and they now have to take time to consider how best to boost shareholder value. Will the company's shares benefit most from going flat out to achieve this production target, or might it be better to slow down and spend a bit more on exploration to boost the overall resource? There is certainly plenty of potential at all four projects, but much depends on the gold price and the availability of capital. Olympus Pacific has an enviable position as a first mover in Vietnam, and the move into Malaysia makes sense. One thing's for sure: this is a company with some very attractive options ahead of it.
OYM Price at posting:
40.5¢ Sentiment: None Disclosure: Not Held
