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Gleneagle aims to soar

Monday, April 03, 2006

AFTER seven years on care and maintenance, the processing plant at the Fortnum gold mine in the Peak Hill goldfield near Meekatharra is set to start turning again by mid-year. After an earlier hiccup, junior Gleneagle Gold is set to flick on the switch, with the strong cashflow generated set to bankroll further exploration of proven gold producing region. Focus Feature by Ben Sharples



Gleneagle Gold's Fortnum treatment plant

"Last year was a very trying year and tested the patience of our shareholders, we had a false start on the start-up of Fortnum and certainly we paid the price for that on the stock market," Gleneagle managing director Ian Prentice told the RIU Explorers Conference in Fremantle in February.

A recommissioning study completed in March last year, based on a $A575 per ounce gold price, had shown the profitability of the second year in the mine schedule "materially impacted by cost increases".

"At that stage we had a really nice first year of production and the second year was okay, but not anywhere as robust," Prentice told MiningNews.net.

"We were in a situation where we didn't want to start an operation and be behind the eight ball from the beginning.

"At the time we made a very hard call. We said we were not [ready] and needed to spend more money on exploration, which we did, and since then we've added another 50% to the resource base and improved the quality of the resources."

Gleneagle expects to push the button around mid-year, and has drafted in Westpac Bank to assist with financing to get the show on the road. It has been estimated around $3.3 million is required to get the operation off the ground, which is expected to produce around 156,000oz over a three-year period – based only on the open pittable deposits.

The company expects the operation to generate annual operating cash flow (pre-debt servicing) in the range of $10-12 million, based on a $650/oz gold price, during the initial operating period.

Gleneagle burst onto the scene in 2003 and has been aggressively active since, sinking around 40,000m of drilling at a cost of around $5.8 million after exercising an option agreement to buy the Fortnum project from former operator Perilya for $1.75 million in cash and scrip.

"Our goal since we listed back in 2003 has been getting that Fortnum gold mine up into production and really use the funds generated from that operation to go and explore the very extensive landholding we've got in the Peak Hill goldfield," Prentice told the RIU Explorers Conference.

"It's probably fair to say we control the goldfield [and although] there are other operators … [having a] landholding [that size] and having a treatment plant in the area, we feel we're in a very strong position.

"It's an area that's produced almost 2 million ounces and we've got now 1Moz of our own resources and there are other resources in the area, so there's probably all up a 3-4Moz goldfield, so it's not something to be taken lightly.

"The opportunity for us is that it was something that wasn't on a lot of radar screens back in 2003 and we moved and got a big holding in there, and now there is more activity in the area, which is very heartening."

Short-term, initial production will be sourced from three pits – Yarlarweelor, Toms and Horseshoe – which account for more than half of the established 1Moz resource. Medium-term production is expected to be sourced from the Starlight Group of deposits beneath the Starlight-Trevs open pit and adjacent to the existing Starlight-Twilight underground development.

Gleneagle envisages dewatering of the Starlight-Twilight underground development will start in conjunction with first production, enabling refurbishment of the decline leading to underground drilling to further define and extend the resource by early 2007.

The company believes the Starlight Group of deposits, which host around 260,000oz, could add a further three years to the mine life of the Fortnum operation.

"For us, the real driver is exploration. What we're doing is getting an operation going to generate a handsome amount of cash and we're going to put that into the ground to find another Starlight," Prentice told MiningNews.net.

"We wouldn't be doing that if we didn't think there was another Starlight out there, so we're supremely confident that we understand the geology enough and we've got all the ingredients there to allow us to find another Starlight, or maybe a couple of Starlights.

"We just need a bit of time and the cash flow to allow us to really test those targets and see what we can come up with."

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