Bronzewing rides again
View Resources recently confirmed a major change in corporate direction, farming out the exploration rights on its wholly-owned Kambalda nickel assets in Western Australia to Mincor Resources. View is now focusing its energies on progressing development of its Bronzewing gold assets in WA, where it believes it can generate a better return on its management resources.
|"View Resources in our view represents one of the best credentialed junior resource companies, with a first-rate management team and a history of profitability since its inception in early 2003."|
The company is led by Managing Director, Derek Lenartowicz, a mining engineer with significant experience in developing and operating large scale resource projects. Until 2002, Derek managed Western Mining's flagship nickel operation, Mt Keith, for five years. Prior to WMC, he held senior positions at North Limited and Dominion Mining.
View purchased the Bronzewing gold operation in Western Australia's Eastern Goldfields in July 2004 from Newmont Mining, for a total cash consideration of A$9.0 million. This compares favourably with an independent estimate of the scrap value of the plant alone of $7.5 million.
The total resource base at the time of acquisition was 386,436 ounces of gold, equating to an acquisition cost of just A$3 per ounce. As part of the Bankable Feasibility Study undertaken by the company, this has been increased to 524,000 ounces at a grade of 3.74 g/t Au.
The bulk of the resource comes from the Cockburn underground, which contains 413,000 ounces grading 5.5 g/t Au, with balance sourced from the Central open-pit and low-grade stockpiles. View intends to operate Bronzewing as a low-cost gold mine, which would enable greater conversion of resources to reserves. Cockburn is situated just 12km from the Bronzewing treatment plant.
View has also recently purchased the Venus deposit, which lies just a short trucking distance from Bronzewing. Venus is considered the southerly extension of the Dragon deposit, which produced 42,000 ounces of gold grading 3.6g/t from a near-surface open-pit during the 1990s.
Spectacular drilling results were released recently from the company's initial work program, including 8 metres @ 97.0 g/t Au from 12 metres depth and 8 metres @ 25.4 g/t Au from 40 metres depth. View believes that the deposit is still open at depth, with the majority of the drilling testing to only 60 metres below surface.
View plans to commence mining operations at Bronzewing in the first quarter of 2006, with ore sourced from the Cockburn underground and open-pit ore from the Central and Venus deposits. We anticipate an initial five-year mining operation that will produce between 100,000-120,000 ounces of gold annually at a total mining cost of between A$450-$470/oz. This should generate a robust operating margin of between A$150-A$170/oz and annualized free cashflow of between A$15 million-$A20 million.
View is currently debt-free with cash reserves of $2 million and a modest market capitalization of $26 million. Based on the current Bronzewing gold resource, View is valued at around A$49 an ounce. This does not take into account the scrap value of the Bronzewing plant that has been estimated at $7 million, exploration upside, nor the value of View's existing producing nickel assets.
Bronzewing boasts well-established infrastructure, including a 2.3 million tonne per annum gold processing plant including an upgraded 3.5 megawatt semi-autogenous grinding mill and crushing circuit, airstrip, power and water supplies, access roads, well maintained 280 person village, surface workshops, mine offices and assay laboratory. As a result, capital development costs are negligible, although start-up capital in the vicinity of $12 million will be required.
In terms of exploration, there is a large tenement package encompassing of nearly 1000 sq km, all within a 60 km radius of Bronzewing in WA's Yandal Belt. The Yandal Belt contains some of Australia's largest gold mining operations that have produced over 8 million ounces of gold during the past ten years.
With regard to View's residual nickel assets, under the deal with Mincor, a total of $2.5 million can be spent on the Carnilya Hill nickel project by Mincor over a three-year period, with View retaining a 30% stake. View will benefit from Mincor's considerable regional exploration expertise and gives View exposure to any exploration upside around the existing mining operations, whilst retaining 100% of the remaining nickel resource base at Carnilya Hill and Zone 29.
The Carnilya Hill nickel mine remains profitable, with production during the September quarter of 2,421 tonnes of nickel metal at a grade of 2.74% Ni. Total remaining nickel sulphide reserves from View's Carnilya Hill, Zone 29 and Dunlop deposits are 414,700 tonnes grading 2.3% for 9,547 tonnes of contained metal.
View also offers uranium exposure, with a farm-out to Korab Resources of its acreage adjacent to the Lake Maitland uranium deposit owned by Redport Mining. Under the deal, Korab can earn a 60% equity in View's acreage by spending $600,000 on exploration.
With gold prices pushing US$ 500 an ounce, the company's strategic decision to pursue development of its Bronzewing gold project could not have been better timed. Apart from its existing resource base, it is likely that the strategic location of the Bronzewing mill will attract numerous toll-treatment opportunities. We recommend View Resources as a buy to all Members around 18 cents.
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