- Updated capital cost estimate of $8.52 million to recommission processing plant;
- Resource upgrades achieved at the Riverina (36% increase) and Waihi (190% increase) gold deposits;
- Siberia resource upgrade delivered 42% lift in mining reserves in October 2019; and
- Exploration is ongoing with project finance expected for completion in Q3 2020, process plant expected for completion in Q4 2020 and production aimed for Q1 2021.
Ora Banda Mining Ltd’s (ASX:OBM) Davyhurst Gold Project is on a steady pathway to production with a 1.2 million tonnes per annum processing hub close to being ready to turn on and a definitive feasibility study (DFS) on its way.
The district-scale project consists of 112 tenements, spanning across three shires (Coolgardie, Kalgoorlie and Menzies) and 1,336 square kilometres with almost continuous coverage (200 kilometres in strike length) of greenstone sequences prospective for gold as well as nickel sulphide and base metal mineralisation.
Davyhurst is uniquely placed in the Eastern Goldfields around 120 kilometres northwest of Kalgoorlie with neighbours including Bardoc Gold Ltd (ASX:BDC) to the west, St George Mining Ltd (ASX:SGQ) and Alt Resources Ltd (ASX:ARS) to the north and Northern Star Ltd’s (ASX:NST) Kanowna Belle Gold Mine to the southeast.
Previously listed as Eastern Goldfields Ltd (EGS), Ora Banda has made it its mission to unlock value from the landholding by targeting resource development activities at five advanced projects - Riverina, Waihi, Siberia, Callion and Golden Eagle.
This work aims to deliver a robust definitive feasibility study to underpin the future development of Davyhurst in the second half of 2020.
Building 500,000-ounce mining reserve
Managing director David Quinlivan told Proactive that having completed the resource definition drilling program, the company is now converting the results into mining reserves.
“The results are on course to build a mining reserve of 500,000 ounces which theoretically will put five years of production in front of the plant.
“This then forms a consolidated production schedule and once we complete the feasibility study to bring the process plant and other infrastructure back into operational status, we will then press the start button.”
Compelling valuation relative to peers
With a 1.99 million-ounce JORC resource and an enterprise value (EV) of around $70 million, Ora Banda was trading at around $35 per ounce JORC resource (EV/oz) on March 6.
To put this in context, Quinlivan pointed out the recent $208 million Ramelius Resources Ltd (ASX:RMS) takeover offer for Spectrum Metals (ASX:SPX), which implied a value of its 355,000-ounce gold resource at more than $500 per JORC resource ounce.
With the resource base having been proven and verified he said the mining program would see the company back into production as an 80,000-ounce producer in the first instance before ramping up to 100,000.
The near new 1.2Mtpa processing plant at Davyhurst, which has cost the company more than $100 million to replace, is on a fast-track schedule and is slated for completion by Q4 2020.
“There is a lot of infrastructure that I don’t think is getting properly valued by the market and probably won’t until we get back into production."
“Once we get back into production, and it will happen, you’ll see a market re-rate of where Ora Banda goes."
Ora Banda’s five key deposits at Davyhurst
Quinlivan said Ora Banda went back to square one following the period of instability while listed as EGS.
“You don’t try to put the cart before the horse and try to start the processing plant without having done the homework in the front end.
“That means you get the resource in order first, you get the reserve in order second, you then work out what you can do on the production front and then you bring the mine into production.
“This is just logical mining going all the way through.”
Large exploration portfolio
High on the exploration agenda for the company are several well-defined but poorly tested prospect-scale gold targets - Gila, Peach Tree Deeps, Python South, Queen of Hearts, Lizard and Siberia South.
Quinlivan added: “I think one of the big things we don’t get any value for at the moment is our exploration portfolio.
“Certainly, a lot of our targets, if you were to have them in pure exploration companies would have a significant valuation attributed to just those assets.
“We spend about $5 million on exploration a year on areas outside of the key mining area – so it's like having a junior exploration company inside another company.”
Experienced executive team
Quinlivan's previous experiences include Sons of Gwalia Ltd and Mount Gibson Iron Ltd chief executive officer, Alacer Gold Corporation president and CEO as well as Churchill Mining PLC chairman.
He is currently the non-executive chairman of Silver Lake Resources Ltd (ASX:SLR).
Non-executive chairman Peter Mansell has been involved across the mining, corporate and energy sectors, both as an advisor and as independent non-executive chairman and director of listed and unlisted companies.
Mansell’s current external appointments include non-executive director of FoodBank Australia Ltd and Energy Resources of Australia Ltd.
Non-executive directors Keith Jones and Mark Wheatley have more than 30 years’ industry experience with Jones also being chairman of Cannings Purple and Wheatley as non-executive director of Peninsula Energy Ltd.
Ora Banda’s forward work program and path to production includes:
- Delivering the DFS in the second half of 2020;
- Ongoing exploration targeting resource and reserve extensions as well as priority greenfield targets;
- Completing financing activities by Q3 2020;
- Completing the process plant recommissioning and remedial work programs in Q4 2020; and
- Targeting production in Q1 2021.
Quinlivan continued: “Through to the end of March we will complete our assays and results from the definition drilling that we have done and import them into our geological models.
“Next quarter sees us looking at the modelling, the schedule optimisation finalisation for the process plant and infrastructure and finally drafting of the feasibility study, which is due in the middle of the year.”