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Pantoro Ltd: THE INVESTMENT CASE

Pantoro is a low-cost gold producer with plenty of growth opportunities

The company's AISC for the December quarter 2017 was $990 per ounce.
Pantoro processing plant
INVESTMENT OVERVIEW: PNR The Big Picture
The gold price has already been as high as A$1,750 per ounce in 2018

Pantoro Ltd (ASX:PNR) is producing gold from its 100% owned Nicolsons Gold Mine within the Halls Creek Project in Western Australia.

Notably, the December quarter of 2017 marked Pantoro’s tenth consecutive quarter of increased production from Nicolsons.

Furthermore, the company expects to continue production increases later in 2018 facilitated by improved ore sorting and underground development.

Commenced production in September 2015

Pantoro commenced gold production from Nicolsons in September 2015 following six months of construction which involved commencement of a new underground mine.

The existing processing facility was repaired and refurbished and surface infrastructure including the tailings storage facility was built.

After producing 13,841 ounces in the December 2017 quarter, Pantoro is currently producing gold at levels exceeding its feasibility study targets.

The company has expanded to a production rate of 55,000 ounces per annum and is well on its way to growing its annual production to 80-100,000 ounces per annum.

READ: Pantoro AISC below A$1000 ($US780) in another record breaking quarter of production

A competitive advantage of Pantoro relative to other comparable ASX gold producers is its cost of production.

Significantly, the company's all-in sustaining costs (AISC) per ounce fell below the A$1,000 mark to A$990 ($US 780) for the December 2017 quarter.

With the gold price already reaching up to A$1,750 per ounce in 2018, Pantoro has secured its position in the market as a high-margin, debt-free gold producer.

Taking the Wagtail pits underground

While the majority of ore has been mined from the Nicolsons underground mine, open pit mining has also been undertaken at the project.

Mining at the Wagtail open pits was completed in December 2017 as scheduled after which time work to establish underground access points commenced.

Pantoro is finalising approvals documentation and intends to start development and mining immediately after the wet season in April 2018.

Mineral resource modelling is underway at Wagtail, with a new mineral resource and ore reserve expected to be published before underground mining begins.

READ: Pantoro reveals high-grade gold depth extensions in drilling at Nicolsons

In March 2018, Pantoro identified deep high-grade gold extensions at the Nicolsons underground mine.

Extensional drilling revealed the deepest intersection received to date in the Anderson Lode at 410 metres below the surface and 130 metres below the current ore reserve.

Best results included 16.9 metres at 7.20 g/t gold, including 8.35 metres at 12.04 g/t; 1 metre at 11.80 g/t; and 3.8 metres at 58.36 g/t, including 2.4 metres at 91.7 g/t.

Mineralisation out-performing ore reserve

Development at Nicolsons continues to identify zones of very high-grade mineralisation which significantly out-perform the ore reserve in a manner similar to results in the northern side of the mine.

Pantoro will continue to explore deeper at Nicolsons with approved drill programs in place to systematically target the ore body to depths greater than 600 metres below surface.

Processing plant expansion underway

After undertaking ore sorting test work Pantoro has purchased a state-of-the-art ore sorter from STEINERT Australia.

The machine is expected to be operational by April 2018.

The ore sorter, as well as other processing upgrades, support Pantoro’s expectations to achieve a production run rate of 80-100,000 ounces per annum by the end of CY2018.

READ: Pantoro debt-free after making early final repayment to CBA

Pantoro became debt-free in April 2018 after making its final repayment under the gold pre-payment facility with the Commonwealth Bank of Australia (ASX:CBA).

Competitively priced hedge contracts in place

During April 2018, the company entered into new hedging contracts with CBA up to October 2019.

The company hedged 2,000 ounces per month to underwrite operating costs while ensuring strong leverage to the gold price.

Notably, Pantoro has already hedged a total of 38,000 ounces to be delivered at a competitive average price of A$1,724 per ounce, which compares favourably with the hedge price of peers.

READ: Pantoro makes strategic move to expand portfolio in gold producing region

The greater project region has only been sporadically assessed over a number of years, and is considered to be grossly under-explored.

First pass exploration results from early-2018 at a number of targets has highlighted the potential of the Nicolsons project area which has remained essentially untapped until now.

READ: Pantoro high-grade gold hits highlight regional potential of Nicolsons project

These new results combined with other recent successes lay the foundations for Pantoro’s continued growth in the Halls Creek region.

The widespread results confirm that extensive gold mineralisation exists throughout the 15-kilometre strike length of the Nicolsons tenement area.

2018 exploration program targeting new resources

Work completed to date has allowed Pantoro to plan its 2018 exploration program.

The initial focus will be on further expansion of the Nicolsons and Wagtail ore reserves.

Resource definition at Grants Creek, Paddock Well and Western Reef exploration prospects will begin following the wet season, with one drill rig to be committed to this work.

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Pantoro Ltd Timeline

Article
January 11 2018

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