KAL, like many other WA gold juniors, need a high gold price to...

KAL, like many other WA gold juniors, need a high gold price to make money. The Scoping Study indicates that about $75 million of capex needs to be raised for construction, tailings storage, mill, accomodation and other infrastructure needed to start open cut mining the Norseman gold. This will only be done if the gold reserves are large enough (which they are) and only if the gold price makes it a commercial venture. The breakeven price for the Norseman gold mine and mill is A$820/oz.

If any of the following events happen, then I believe that the gold project definitely will go ahead:

1. Increase in price of gold. Many believe the POG will increase.
2. Increase in reserves. The present mine life is 7 years at 100,000 ozs p.a.
3. Higher gold grades are found. And there are higher grades in the region.

At the moment KAL has put all of its energy into the Norseman Gold project. They have confirmed that they can start mining in 2010. If any one of the above 3 events happen, then the mine will happen. If none of these things happen, then I don't really know. We will have to wait for the feasability study.

But then there is Clinker Hill Nickel. This could be the company maker. And if not, it could certainly supplement the gold revenue. KAL are giving Clinker Hill some priority. As I posted previously, KAL has brought the drilling program forward by about 6 months. This prospect is nowhere near as advanced as the Norseman gold so we will have to wait and see. I personally believe that if the POG is A$990/oz, then Norseman will be a no-brainer and will definitely go ahead.

Unfortunately the share price/market doesn't like "wait and see." But there is lots of drilling and you never know what might be in the next announcement.