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Integra Mining locks-in gold price at Randalls Gold Project

Last updated: 13:00 26 Mar 2010 AEDT, First published: 12:00 26 Mar 2010 AEDT

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Integra Mining (ASX: IGR) has announced the purchase of put options at a strike price of A$1,236/A$1,237 covering 28,736 ounces of gold from the first two quarters of production at its 100%-owned Randalls Gold Project development, located 60km south-east of Kalgoorlie, Western Australia.

The total purchase cost of the put options was A$3 million. Of the total put options purchased 13,598 ounces mature on 31 December 2010 and 15,138 ounces mature on 31 March 2011.

With put options in place for approximately 70% of the first two quarters of production, the company has secured for itself a significantly higher minimum gold price than anticipated in the project’s financial model without the risk of committing to delivery of physical metal.

Additional committed hedging of a proportion of production will be required prior to finance draw-down, however, the magnitude of this additional hedging is expected to be a minor proportion of Phase 1 gold production and there is no urgency to complete this hedging in the near term.

The Randalls Gold Project development is only the second integrated mining and processing new gold mine development based on a new gold discovery in Australia in the past 10 years.

On Phase 1 base case production and at current gold prices, the Randalls Gold Project will generate approximately $50 million of operating profit per year and will rival or exceed the profitability of any other domestic Australian gold miner with the exception of Newcrest Mining Limited.

Phase 1 of the Randalls Gold Project is expected to produce an average of 75,000 ounces per year for the first four years on Phase 1 mining of two open pits at an average grade of 3.1 g/t gold.

The capital cost for project development has been estimated to be $64 million.