Gold hopeful Papillon Resources issues upbeat outlook
by: Paul Garvey From: The Australian June 27, 2013 12:00AM
WEST African gold hopeful Papillon Resources has moved to defy the gloom surrounding its peers, with a study into its flagship Fekola project in Mali confirming that a mine will be viable even at lower gold prices.
Perth-based Papillon said a pre-feasibility study into Fekola had found the deposit could support 306,000 ounces a year in gold production across an initial nine-year mine life. All-in cash costs, which include all production costs, corporate overheads and royalties, were estimated at $US725 an ounce.
Shares in Papillon gained 11.1 per cent or 6.5c to close at 65c, although the stock remains well down from its high of $1.97 last October and the $1.34 at which it raised fresh capital through an equity raising in March.
Papillon managing director Mark Connelly noted that even at a gold price of $1100 an ounce, the mine would generate pre-tax operating cashflows of $US130 million ($140m) a year.
Mr Connelly said that despite the recovery in the Papillon share price yesterday, the slide of recent months was frustrating.
"When you look at what we've got, and the fundamentals of our assets, why are we being punished? It defies logic," he said.
There has been a long line of bad news out from Australia's West African gold players in recent weeks. Shares in Perseus Mining were slammed earlier this week after it revealed it would miss its production guidance, while Burkina Faso-focused Gryphon Minerals recently told shareholders it would delay its ordering of a mill for its proposed development.
Phil Rees, from Westoz Funds Management, noted that the forecast all-in cash cost of $US725 an ounce was considerably less than the global average among gold producers of $US1200 an ounce.
He said his firm saw Fekola as a realistic project.
PIR Price at posting:
70.0¢ Sentiment: Buy Disclosure: Held
