Diggers and Dealers Day 3 Lunch Wrap: Plainter's delight for Capricorn and an underground future for Gruyere?

CAPRICORN METALS (ASX:CMM)

The deal that delivered Capricorn Metals the 2.1Moz Mt Gibson gold mine was a testament to the quirks of WA’s Mining Act and its use it or lose it policy.

In short, the iron ore company that owned the tenements didn’t spend enough money and privateers made applications (or plaints) for that company to forfeit them to the WA mines department.

Mines Minister Bill Johnston ruled in the plainter’s favour, giving them the priority right to peg the ground given up.

A big win for the privateer and Capricorn. Normally, the Mines Minister will give a bit of leniency to the bigger company holding the tenement, or that company will be able to cut a deal with the objector to keep hold of the ground.

The outcome: A $40 million payday for the plainter in cash and Capricorn shares and a cheap as chips $20/oz acquisition for Capricorn, which is chaired by legendary former Regis Resources boss Mark Clark.

“This is a fantastic opportunity for the company and forms part of our strategy to grow into an Australian-focused multi-mine gold company,” Capricorn CEO Kim Massey told delegates at Diggers and Dealers this morning.

“It represents fantastic value for us when you consider the upfront acquisition cost of $20/oz an ounce which is unheard of these days for a resource of this size.

“This project’s pretty much been off the grid for the last 30 years. The previous owner was very much more focused on the magnetite iron ore project that sits to the north of the gold tenure.

“To put this resource into context, it’s very similar in terms of tonnes, grade and ounces to Karlawinda.

“We think it will have similar strip ratios, so that gives you an idea of where we think this project might end up.

“It is a very robust (inferred) resource, historical drilling has been done on a 25m by 25m and 50m by 25m basis, which post data validation is dense enough for a fair portion of that resource to fall into an indicated category.”

Capricorn recently started production from its low-grade, long-life Karlawinda gold mine in the Pilbara.

GOLD ROAD RESOURCES (ASX:GOR)

The Gruyere gold mine is only a few years old but already thought is going into what it will look like at the end of its initial 13-year mine life.

Gruyere, about 200km east of Laverton in WA’s remote Yamarna belt, is one of the few major gold deposits to have been discovered in the State in the past decade.

Owned 50-50 by its founder Gold Road Resources (ASX:GOR) and South African major Gold Fields, its development provides somewhat of a template for upcoming open pit gold developments in Australia like De Grey Mining’s (ASX:DEG) 6.8Moz Hemi discovery.

Gold Road boss Duncan Gibbs says another couple years of mine life have been identified at Gruyere, but like many major Australian gold mines such as the Super Pit and Tropicana, it likely has another life as an underground development.

“We really see (extending mine life) as the primary purpose of (drilling); we’re putting out an updated reserve in the second half of the year and we really anticipate that will add another couple of years of open pit life,” he said.

“There’s potential to do further cutbacks beyond that, but probably the more likely scenario is Gruyere will transition into an underground operation and we’re primarily looking at that as mine life extension.

“There’s obviously a lot of work to do … to understand what the size of the prize might be and then the best way to develop it and make money out of it.”