[GDR in last paragraph]Victoria's gold renaissance starts to get...

[GDR in last paragraph]

Victoria's gold renaissance starts to get some shine
Barry FitzGerald
December 30, 2006

VICTORIA'S gold renaissance, more than 25 years in the making, finally began to take shape this year.

But it got off to a spluttering start, with investor confidence in the ability of the old goldfields to recapture some of their 1850s gold rush glory severely tested on several fronts.

At year end, the market value of the gold industry (excluding Newcrest, which has no producing mines in the state, and Alliance Resources, whose Maldon gold project has been overwhelmed by its South Australian uranium project), stood at about $1.2 billion.

This was down heavily for the (calendar) year, with the owners of flagship projects at Bendigo (Bendigo Mining) and Ballarat (Ballarat Goldfields) taking particularly heavy share price hits.

Bendigo Mining was the worst-performed stock in the S&P/ASX 200, shedding half its value to close the year at 78¢. Ballarat Goldfields shed 27 per cent of its value to close at 28¢.

Bendigo Mining spooked the market with its revelation that it had made sampling errors in the stockwork zones around the main gold-bearing reefs. This raised the likelihood that reserve tonnages within certain reefs could be 30 per cent less than envisaged.

Ballarat Goldfields also had production problems with its initial mining operations, prompting an overhaul of the mine plan and production schedule, including the need for $120 million if it was to become a big gold producer from levels well below those of the old-timers. Meanwhile, Perseverance's new sulphide mine at Fosterville struggled with its gold recovery rates and Leviathan's Stawell mine failed to live up to hopes that it could slash costs and make life-extending additions to its reserves.

But just as the gloom became thick on the ground, it rapidly lifted in the back half of the year, notwithstanding the share price damage.

Ballarat Goldfields' new development plans for the old goldfield got a ringing endorsement from Papua New Guinea goldmining heavyweight Lihir Gold, albeit via a takeover bid. Lihir operates one of the world's biggest goldmines on the island of Lihir in PNG.

Then there was an exciting discovery at the Tandarra prospect north of Bendigo by Leviathan — now being taken over by Perseverance — a move roundly applauded as a sensible consolidation of the local industry and one that creates a new force in Australia, with annual output of more than 200,000 ounces of gold.

Tandarra is 40 kilometres north of Bendigo and had as its target the discovery of virgin gold deposits buried under unmineralised cover rocks along an interpreted major crustal corridor, including the Bendigo goldfield with its 22 million ounces in historic production.

And Perth-based Goldstar caught the market's imagination with the emerging multimillion-ounce potential of its Walhalla gold project in Victoria's east. Its shares more than doubled to 68¢ during the year, valuing the company at $84 million.