Australia | Jul 14 2006
By Chris Shaw
If every journey begins with a first step Bendigo Mining (BDG) has just begun its travels as a gold producer after announcing it has poured the first gold bar for 52 years from the Kangaroo Flat mine in Bendigo.
The company expects production at the mine to reach 200,000 ounces annually in the next three years before rising to 600,000 ounces at full production, which would put it firmly among the middle tier of gold producers in Australia. Production this financial year is expected to be between 70,000-90,000 ounces.
If expansion proceeds as planned the mine will become one of the world’s largest and highest grade operations, with an inferred resource of about 11m ounces at an average grade of 14.5g/t gold. Exploration upside exists, the company pointing out the mineralised zone remains open along strike and at depth, so the forecast production life of 20 years may well be extended.
Early production is anticipated to have a cash cost of between US$400-US$500/oz, but this is expected to decline over time as the operation ramps up to full capacity. Management are targeting costs of less than US$150/oz. This could lead to a significant boost to future earnings, as the company has no hedging in place and so would enjoy the margin benefits of the current strong gold price.
Among the brokers and equity researchers in the FN Arena database to cover the stock two rate it as Buy and one as Hold, with an average target price of $2.70. This is slightly below the median price forecast according to Thomson One Analytics, which stands at $2.90.
Over the past year the stock has traded in a range of $0.955-$2.60, the price sliding from its peak to current levels partly on the back of a report in May stating commissioning had been delayed thanks to an industrial dispute, which appears to have subsequently been settled. The last closing price for the stock was $1.59.