Doray Minerals drinks richly at Andy Well
There’s a lot of satisfaction in travelling your own road to achieve a goal, especially when others insist you should keep to a well-worn path.
It didn’t take Doray Minerals (ASX: DRM) long to realise it would bring its Andy Well gold project, located in the northern Murchison region of Western Australia, through to production.
The revelation came soon after it discovered the high-grade Wilber Lode at the project, not long after the company listed on the ASX February 2010.
“We made the decision very early on that we wanted to mine the project, as opposed to drilling and working it up to a point where somebody may be interested in buying it,” Doray Minerals managing director Allan Kelly told The Resources Roadhouse.
“That decision dictated how we went about the business in terms of what we reported and what we said about the project.
“We were always conservative, because we wanted to ensure that whatever we said, we would be able to deliver.
“We knew, back then, that if we were to mine the project, we would be judged in the future on what we were saying back then.”
Doray quickly established a high-grade JORC-compliant Resource at Wilber, which it just as quickly converted to a Reserve.
Following the granting of a mining lease the company conducted its Bankable Feasibility Study, and secured project financing of $55 million.
Mining operations commenced at Andy Well in November 2012 and in August this year Doray poured its first gold bar weighing in at 144 ounces, or 4.6kg, and worth more than $200,000.
Being a producer means Doray is now generating cash flow to support ongoing development at Wilber Lode, which currently has a Reserve of 730,000 tonnes at 10.6 grams per tonne gold for 250,000 ounces.
The total combined resource for the Andy Well project stands at 1.2 million tonnes at 11.3g/t gold for 444,000 contained ounces.
That’s not too bad when you consider the upside the project offers, which was demonstrated earlier this year by a maiden high-grade JORC-compliant gold resource for the Judy Lode, sitting adjacent to the current Wilber Lode mining operations.
The Judy Lode Resource measures 225,000t at 9.7g/t gold for 70,000 ounces in the indicated category, 168,000t at 6.7g/t gold for 36,000 ounces in the inferred category for a total of 393,000t at 8.4g/t gold for 106,000 ounces of gold.
This Resource includes the 137,000t at 19.3g/t gold for 85,000 ounces Judy South zone, which makes up approximately 80 per cent of the total contained ounces.
The BFS for the project was conducted solely on the Wilber Lode, determining a current mine life of 3.7 years.
Doray is confident of more to come from Wilber with the current mine Reserve based on drilling completed to 480 metres.
Basically, the only reason the Reserve stops there is because the company has yet to conduct any further drilling.
“There’s no point drilling any deeper from surface because it’s too expensive,” Kelly explained.
“We know we’re going to mine it so why not wait until we get down there and drill from underground.”
Doray’s attention, for now, is on the Judy and Judy South prospects, the latter of which is emerging to be the main focus of the two.
RC Drilling at Judy South has so far reached depths of 250m, which equates to about a quarter of the drilling already completed at Wilber, and has already produced the 85,000 ounce Resource.
The high grades being achieved at these deposits is providing Doray with confidence it can repeat its Wilber Lode efforts to quickly convert the Resources to Reserve and extend the Andy Well mine life.
To that end the company is also casting a cursory eye over a number of parallel targets within the project area.
It is currently drilling one of these targets called the Suzie Zone, where it is looking for indications of a possible third lode.
Should this end up being the case, Kelly believes the company could potentially be looking at a mine life of around six to eight years.
“To start up a project and already have three and half years at Wilber, plus potentially another year at Judy, plus the potential of a third lode – that’s a really good position to be in,” he said.
“A lot of people are probably envious of the position we are now in as a junior gold mining company, but finding a high-grade deposit is one thing, being able to have the vision and determination to bring it into being is another.
“Very early on we developed our strategy, recognising this was a deposit a junior company could mine.
“That was seen by some people as being a bit premature – people were saying we weren’t advanced enough to move forward as quickly as we intended to.
“We had identified there was enough there for us to start a project straight away, so we made the decision and raised the funding – we just got on with it.”
Twelve months ago, Doray was one of many ASX-listed junior gold explorers that had completed a BFS and were in discussions for project funding.
Fast forward to today and Doray now stands apart as a gold producer bankrolling a self-funded exploration campaign with close to $26 million in the bank.
The company has drawn down the final instalment of the $55 million project finance facility and has put in a place a hedging program of 45,000 ounces over the first 14 months of production at A$1,620 per ounce to cover the debt repayment period.
Besides being a high-grade gold project, Andy Well possesses other attributes, such as high gravity recovery that requires a small mill, therefore a small footprint, which has enabled Doray to develop it in a very short time.
The company will be in full production at least two years before its former contemporaries, if indeed they are able to, also get up and running and generate cash flow, especially in these times when raising capital for juniors has become a difficult market.
“Because this was such a quick project to start up it has become a springboard for the company in that it enables us to transition from an explorer to a self-funded producer,” Kelly said.
Kelly said Doray would be able to use both what it earns and what it learns from the development of the Andy Well project to advance the company’s project portfolio.
“We want to bed Andy Well down to the stage where it’s doing what we want it to do and then do something else,” Kelly said.
“There is a lot of value to be created by finding a project rather than buying it, but in the current market you can buy advanced exploration projects for the price of a greenfield opportunity, but instead not have any of the exploration risk.
“There is opportunity for us. If we can demonstrate to the market, after our exploration and development success, that we can be a good operator, then there is potential for us to put our foot on another project.”
Doray Minerals Limited (ASX: DRM)
…The Short Story
HEAD OFFICE
Level 3, 41-43 Ord St
West Perth, WA 6005
Ph: +61 8 9226 0600
Fax: +61 8 9226 0633
Email: info@dorayminerals.com.au
Web: www.dorayminerals.com.au
DIRECTORS
Peter Alexander, Allan Kelly, Heath Hellewell, Jay Stephenson, Leigh Junk
MAJOR SHAREHOLDERS
Allan Kelly 7.2%
Renaissance Asset Management 6.8%
Lion Selection 5.5%
SHARES ON ISSUE
approx. 142 million
MARKET CAPITALISATION
approx. $88 million (at 16/09/13)