Australia’s newest gold producer is just getting started
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For Ora Banda Mining (ASX: OBM) an initial 5.2 year, 81,000oz per annum gold operation is the launching pad into something much bigger. “We have a good solid resource base of over 2Moz, no debt, lots of cash and a big 1350sq.km exploration portfolio to drill,” managing director David Quinlivan says.
In late 2018 consistent problems at the historic Davyhurst gold operation near Kalgoorlie saw its then owner Eastern Goldfields Limited call in the administrators.
Eastern Goldfields’ failure was primarily caused caused by poor planning and a lack of ‘sustaining capital’ — this being the ongoing investment that miners must make to continue to operate, investments such as replacing machinery or drilling up gold reserves.
Recognising the project’s unrealised potential the company’s major shareholders agreed to a restructure by way of a Deed of Company Arrangement – a process that allowed the company to settle up its debts and start a fresh.
And so in 2019 Ora Banda Mining Limited was born – this time with fresh funding, a new management team and a focussed plan to bring project back online but only when all the mine’s fundamentals were in place.
“First cab of the rank for us when we got re-quoted was to get out and start drilling. Only then would we then look at an initial five-year mine plan,” says managing director David Quinlivan.
The company spent the next ~18 months undertaking resource drill out, detailed mine planning and regional exploration programs at its flagship project.
“We have done a lot of drilling — over 100,000m — to get a good handle on this thing,” Quinlivan says.
For Ora Banda, a mineral resource of 24.3 million tonnes grading 2.8g/t for 2.2Moz of gold is the result.
This includes a higher confidence mining reserve of 460,000oz.
Ora Banda is now Australia’s newest gold producer having poured first gold on 7 February 2021. Full production is the target from 1 April onwards.
The initial project is very robust: 5.2 year mine life, 81,000oz per year production and $68.8m in average annual profit at a ~$2,550/oz gold price.
“This a low-risk start-up,” says Quinlivan.
“Davyhurst is not the bogeyman that some people think it is.
“It is low risk, all oxide open pit with small tonnage coming from underground at 92 per cent recovery.”
Importantly, the company is fully funded and has no debt with about $30m in the bank.
Another bonus for the company is the tax loss position.
“We currently have $260m worth of tax losses accrued sitting there,” says Quinlivan.
“Any profit we make is going to be offset in the first instance by all of those accrued losses. We should see all of that cash sticking.”
Quinlivan expects Ora Banda’s share price will rerate once full production ramp-up is confirmed.
“Euroz Hartleys have a buy on us at 50c per share or thereabouts but at the moment people just want to see the production happen for probably another quarter,” he says.
“This is just the commissioning period. This next quarter is going to be the main ‘lead off’ period where we are running at full production rate.”
Ora Banda is confident that Davyhurst will be a long life, +100,000ozpa operation.
The initial five-year mine plan – which includes six deposits — was aimed at getting money in the tin to get up and running.
But each of those deposits are ‘open’, says Quinlivan, which means Ora Banda doesn’t know where the gold ends yet.
Potential open pit extensions and +500,000oz of underground resources provide near-term opportunities to put more high-grade ore in the current mine plan.
‘Riverina South’ is an advanced near mine prospect where recent drilling has pulled up spectacular intersections like 10m at 10.8g/t gold from 80m.
“We have already declared an interim maiden 43,000oz resource in the inferred category for Riverina South,” says Quinlivan.
“We are currently drilling that to get it up to indicated so we can get that into the mine plan.
“None of those sexy intersections, like 10m at 10g/t, appear in that resource at the moment so we are confident drilling will drive a bit better volume and grade out of Riverina South.
“We are also drilling the Riverina Underground and getting some very good hits there as well.
“There is plenty of life at Riverina alone after the initial pit is mined out by way of these extensions.”
Ora Banda controls 1,350sq.km of ground which includes 200km of gold-rich greenstone belt. These tenements were consolidated back in 2007 but no coherent exploration has been undertaken until now.
Ora Banda has identified over 100 drill-ready regional targets. Exploration drilling kicked off in January, says Quinlivan.
“We are looking at attacking some more of those high-profile targets in the next two to three months,” he says.
“We had earmarked nearly $6m spent on regional work in the second half and we are into that now.
“Our longer-term goal on the exploration front is to spend $15m to $20m a year on regional targets, generated out of cashflow.”
This article was developed in collaboration with Ora Banda, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.