Deflector gold production boosted by strong exploration results

THE INSIDE STORY: With its second project, Deflector, now in production, gold producer Doray Minerals (ASX: DRM) is eyeing a combination of exploration success and potential corporate opportunities to propel it into the ASX-200.

Doray Minerals’ managing director Allan Kelly has never been one to mince words so it is hardly surprising he would open a discussion by declaring, “We are building Australia’s next great gold company.”

Some may consider Kelly’s statement a little bold but it is difficult to argue with the figures enhancing the company’s ambitions.

In the second half of 2016, Doray Minerals expects to significantly increase its annual gold production from the company’s two high-grade projects in Western Australia – Andy Well and Deflector.

“With the current Australian dollar gold price we have a perfect opportunity to generate a significant amount of cash flow,” Kelly told The Resources Roadhouse.

In the relatively short time since Doray listed on the ASX, in February 2010, as an explorer with projects in WA and South Australia, it has discovered/acquired, funded and built two of the highest grade gold mines in Australia. 

Doray’s first gold project, Andy Well, located 45 kilometres north of Meekatharra, was taken  from discovery to production all within in 3.5 years, earning the handle of 2015 Australian Miner of the Year along the way.

Production achieved to date exceeds that determined by the original Bankable Feasibility Study of 74,000 ounces per annum.

2014FY
76,785 ounces at AISC of $1,044 per ounce;

2015FY
88,736 ounces at AISC $1,165 per ounce;

2016FY
Currently producing at the upper end of guidance (78,000 to 85,000 ounces).

“We have exceeded predicted production at Andy Well each year since starting, and we will do that again this year,” Kelly declared.

“Now is a great time to be a gold producer in Australia while we experience a nice increase in the Australian gold price versus the US dollar gold price.

“It’s also a great time to be exploring.”

Doray is making the most of the current affordability of exploration drilling.

At Andy Well the company continues exploration programs and a recent campaign to delineate and extend mineralisation at the three main high-grade orebodies – Wilber, Judy and Suzie lodes – returned encouraging results.

Results to date from Wilber and Judy Lodes include:

WBUG0977
2.6 metres at 41.3 grams per tonne gold (True Width approx. 0.6m);

WBUG1018
1.7m at 32.5g/t gold (True Width approx. 0.7m);

JDUG0109
1m at 95.4g/t gold (True Width approx. 0.8m); and

JDUG0110
2.3m at 64.9g/t gold (True Width approx. 1.5m).

The search for additional feed sources for Andy Well has taken Doray 15km south east of the mine to the Turnberry prospect, part of the company’s 100 percent-owned Gnaweeda project.

Recent RC drilling outlined wide zones of gold mineralisation at Turnberry, returning a number of high-grade results, including:

TBRC036
10m at 18.9g/t gold from 89 metres downhole (mdh);

TBRC043
7m at 41.6g/t gold from 153mdh, including 2m at 137.1g/t gold;

TBRC062
41m at 4.8g/t gold from 148mdh; and

TBRC070
9m at 10.4g/t gold from 162mdh.

Doray believes Gnaweeda has the potential to become an additional ore source within trucking distance of the Andy Well processing plant.

Well-defined mineralised structures have been defined over at least 1.5km of strike at Turnberry with some very good grades and mineralisation open at depth and to the south.

“The recent results demonstrate very good potential for this prospect to provide additional ore feed for Andy Well in the near term,” Kelly said.

“We now need to look at how we advance the prospect towards eventual production, with the obvious first step being a maiden Resource estimation and preliminary metallurgical test work.”

Following the prompt development of the Andy Well mine, Doray recently accomplished its first gold pour at the Deflector gold project – this time the development time frame came in at approximately 14 months after the takeover of Mutiny Gold in March 2015.

Hot on the heels of the gold pour, Doray completed the first shipment of gold‐ copper concentrate from Deflector and commenced underground development following establishment of a portal.

Firing of the portal signals the start of underground access to ore at Deflector, which will be stockpiled while open pit ore feeds production over the next eight to nine months.

“Deflector is a neat project that will produce around 60,000 ounces per year, plus copper and silver credits,” Kelly said.

“It has a six year initial mine life and also has some promising exploration upside.

“It is a narrow vein, underground mine – very similar to Andy Well – we wanted to stick to operating something we already knew very well and were fortunate to be able to find a similar style of deposit.”

Kelly said the question most people ask is, ‘What’s next for the company?’

“Basically, people have been asking that question since the day after we announced the Mutiny transaction in 2015,” Kelly said.

“Previously, we were a one mine company producing 75,000 to 85,000 ounces of gold per annum – now we have two mines producing up to 140,000 ounces.

“Our aspiration is to be an ASX-200 company so the next step for us is to aim to get over that magic 250,000 ounces per annum threshold and establish more relevance for the market.

“We started as an exploration company committed to greenfields exploration and discovery as a means of achieving production growth and we see that being the point of difference from where we can grow from.

“Last year we spent around $11 million on exploration and, pending budget approval, we’re looking at $15 million this year.”

On a corporate level Doray entered into a farm-in Agreement with Rox Resources (ASX: RXL) to explore the highly prospective and underexplored Mount Fisher gold project in the north-eastern Goldfields of WA.

The project is a complementary fit to its other Joint Venture with Alloy Resources (ASX: AYR) on the Horse Well gold project in the Warburton Mineral Field of WA.

Doray’s success can be measured in the very positive re-rating of the company’s share price, especially since it completed a capital raising in September last year at around 40 cents.

Since then Doray has more than doubled its share price – recently hitting the one dollar mark – outperforming the gold sector index.

During this time there has been a marked increase in liquidity of the stock, which is the result of greater off-shore interest in the company

“It’s been very positive, but I do believe there is still some way to go for the increase in our share price,” Kelly said.

“People will realise Deflector is up and running and they will notice the debt we currently have of around $61 million steadily decreasing.

“We’re a compelling growth story and value proposition with a great deal of exploration upside and good mixture of production from Andy Well and Deflector now on line.”

Doray Minerals Limited (ASX: DRM)
…The Short Story


HEAD OFFICE
Level 3
41-43 Ord Street
West Perth WA 6005

Ph: +61 8 9226 0600

Email: info@dorayminerals.com.au
Web: www.dorayminerals.com.au

DIRECTORS
Peter Lester, Allan Kelly, Jay Stephenson, Leigh Junk, Peter Alexander

MAJOR SHAREHOLDERS
Hunter Hall Investment Management 16.3%
SG Hiscock & Co 5.8%
Allan Kelly 3.9%