Exploration digs in as the telling game changer for...

Exploration digs in as the telling game changer for miners.

September 2009

RUPERT Murdoch doesn't own a Western Australian gold project as far as we know. But his brother-in-law, John ''The Galloping Major'' Calvert-Jones, does - or at a least a big chunk of one.

Calvert-Jones, a former stockbroker and finance guy for the Liberal Party, owns a 17.25 per cent share of Melbourne-based Range River Gold, the revitalised group that plans to become a gold producer in the December quarter from the old Mt Morgans goldfield near Laverton, WA.

Mt Morgans was picked up by Range earlier this year from the world's biggest gold producer, Canada's Barrick. Barrick joins Calvert-Jones on the register with a 16.98 per cent shareholding. The heavyweight names backing Range do not stop there.

Bustling former OZ Minerals chief Owen Hegarty is there with a 4.9 per cent stake and the brother of footy legend Ron Barassi, accountant Ken Barassi, has a stake plus a board seat.

They are all backing the idea that Mt Morgans will deliver Range the sort of long-term future as a gold producer that Range thought it had when it developed the Indee gold project in the Pilbara.

Indee is now on care and maintenance, with its remaining exploration upside the subject of a deal with Chinese interests. It is a legacy of Indee's lacklustre performance - and the share issue to Barrick for the Mt Morgans acquisition - that Range now has a massive 1.18 billion shares on issue.

The good news there is that Range is trading at all of 2¢ a share for a market capitalisation of $23.6 million, which is right down there in Garimpeiro territory for a stock that is knocking on the door of becoming a 30,000 ounce-a-year gold producer at a time when gold is strong at more than $US1000 an ounce.

The development plan for Mt Morgans is to get it into production based on the sequential mining of four known deposits which will yield the 30,000 ounces a year over an initial mine life of four years.

Initially at least, the ore will be sold to one of the many hungry treatment plants in the region owned by others. Based on a $A1200 an ounce gold price, Range reckons its post-tax operating cash flow in 2009-10 could be $7.5 million, rising to $9.6 million in 2010-11 and $24.8 million in 2011-12.

Needless to say, if it gets anywhere near those sorts of figures, it won't be a 2¢ a share stock for much longer.

While lots of free cash is nice, Garimpeiro's real interest in Range and Mt Morgans is the exploration potential. The project has been handballed from one disinterested major to the next since the 1990s, a result of it being a minor asset in the takeovers and mergers in the intervening period between the likes of Plutonic, Homestake, Placer Dome and Barrick.

Now Mt Morgans will get the modern-day exploration work-over that a historic 1.5 million ounce high-grade goldfield should get when gold is running hot. There has been no significant exploration effort by previous owners since 1997, when gold was all of $US400 an ounce. What's more, 74 per cent of the holes drilled at the project haven't gone beyond 50 metres in depth.

To fund the move to production and to get exploration going, Range last month announced a $6 million equity raising through a placement and a shareholders' share purchase plan, both at 1.6¢ a share.

http://www.smh.com.au/business/exploration-digs-in-as-the-telling-game-changer-for-miners-20090913-fman.html