Doray – Mutiny merger makes sense: Allan Kelly tells The Roadhouse
THE CONFERENCE CALLER: The Resources Roadhouse caught up the busiest man in the Australian resources sector, Doray Minerals (ASX: DRM) managing director Allan Kelly at the Mining 2014 Conference in Brisbane.
Kelly had just finished his presentation to the conference, during which he outlined the company’s rational behind the proposed merger with fellow Western Australia-focused gold play Mutiny Gold (ASX: MYG).
“The deal combines two great projects in one producing asset in Andy Well and a development asset at Deflector, which looks a lot like Andy Well, apart from the copper,” exclusively told The Roadhouse.
“The combined assets have a resources base of over one million ounces of gold at a grade of around eight grams per tonne.
“They are the two stand out [gold] projects in Western Australia.”
Kelly said the deal also de-risks the single mine element of the current Doray model.
“If you have peaks and troughs in your production profile and you only have one asset, it is difficult to manage,” he explained.
“Companies like Evolution, who have multiple mines, are able to smooth out the bumps.
“If Mutiny were to develop Deflector by themselves, they would be in the same position as us.”
Kelly didn’t appear to be too worried by the market’s usual irrational frenetic response to such news, which has seen the company’s share price take a belting since coming out of its self-imposed trading halt leading up to the announcement of the deal.
“All our institutional shareholders like the deal and have said that it makes sense,” he said.
“It is a logical combination for us – the same sort of style of deposit – in WA.
“It reduces our risk and doubles our production profile quite cheaply, and we are getting it at a pretty good price in a market that is pretty depressed.
“We have a bit of work to do, we have to finalise the funding and there is probably a bit of tweaking to do to the BFS, but we want to get Deflector into production as soon as possible.
“We’re targeting early 2016. Mutiny has been saying November 2015, which we think may be a bit optimistic, but there is no reason for us to sit around.”