THE INSIDE STORY: History, they say, never repeats, but when it does, sometimes the story takes less time to complete.
Doray Minerals (ASX: DRM) recently celebrated the official opening of its latest producing gold mine, the 100 per cent‐owned Deflector gold project, located 160 kilometres east of Geraldton in Western Australia.
Doray Minerals’ gave its contemporaries in the gold sector something to think about in 2014 when it became one of Australia’s highest-grade and lowest-cost gold producers at its flagship property, the Andy Well gold project, located in the Murchison region of Western Australia.
Doray had done what many people – those who are supposedly in the know about these things – said was beyond the uppity new kid on the block, and transformed from explorer, to developer, to producer in just under four years.
“We always knew Andy Well was the ideal project to be a springboard for our young company,” Doray Minerals managing director Allan Kelly told The Resources Roadhouse.
“Bringing it on as quickly as we did enabled us to move into production and cash flow whilst building an operations team and a track record of development and production with banks and investors.
“Soon after successfully delivering Andy Well and after making significant headway into repaying debt funding, we started looking around for what might be a suitable second project.”
In the Quarter ending 30 September 2016, the Andy Well gold project milled 84,494 tonnes of ore delivering production of 14,943 ounces at an average head grade of 5.6 grams per tonne at cash operating (C1) costs of $841 per ounce and All‐In‐Sustaining Costs (AISC) of $1,432 per ounce.
The September Quarter also marked the first full quarter of production at the company’s latest foray, the recently commissioned Deflector gold project.
Doray commenced production of gold bullion and gold‐copper‐silver concentrate at Deflector in a shorter time frame than Andy Well, this time only taking approximately 14 months after acquiring the project from Mutiny Gold.
Granted there was a lot more infrastructure in-situ this time, however that didn’t mean it was a matter of just walking up and pressing the button.
As far as first Quarters go, Deflector’s performance was highly satisfactory, milling 105,721 tonnes of ore to produce 8,215 ounces of gold through the plant’s gravity and flotation circuits in addition to 883 tonnes of copper.
Of note is that these production figures exclude approximately 70 tonnes of native copper concentrate, produced from the gravity circuit, which are estimated to contain approximately 5,000 ounces of gold.
The presence of native copper at Deflector deposit is well known to gold industry observers, who have watched the deposit closely since its original discovery by Sons of Gwalia in the early 1990’s.
“There has been a lot of focus on this native copper and in reality it is such a small issue,” Kelly explained.
“We’re talking about 5000 ounces of gold with some copper out of 365,000 ounces of gold for the entire project.
“I actually get a bit sick of talking about it to be honest.”
Throughout its life, the project was tagged with a misguided reputation for being difficult, due to the presence of copper in the high-grade gold mineralisation.
The main problem – as is often the case in such scenarios – was that those running the operation were unable to come up with a solution as to how to treat this ore through the nearby Gullewa gold plant.
The problem, and project’s poor reputation, was exacerbated by one former owner in the early 2000s, which tried to treat oxide ore from a trial pit through the Gullewa gold plant.
The presence of high-grade copper in the oxide ore didn’t mix with a typical CIL circuit and the project’s reputation for having ‘difficult metallurgy’ was cast.
“The copper introduces a different process to a normal gold mine,” Kelly said.
“Basically we have oxide material, transitional material and sulphide – all of which are different mineralogy.
“We have pretty much completed the ramp up stage on the oxide material and are now starting to introduce the transitional material.
“By early 2017 we should be largely through the transitional ore and moving into the primary underground ore.
“That’s the main game and what the processing plant has been designed around.”
Doray recently completed an institutional placement to raise around $24.9 million, which has been earmarked to reduce the company’s debt balance and to conduct near‐mine and regional exploration with a focus on identifying additional ore sources for both Andy Well and Deflector.
The exploration work is likely to include RC and diamond drilling and the acceleration of a potential development decision by mid‐2017 for the Gnaweeda project.
Doray recently announced a maiden Inferred Mineral Resource for the Turnberry prospect at Gnaweeda, located some 15km south east of Andy Well, of 4.6 million tonnes at 1.8 grams per tonne gold for 266,000 contained ounces.
“Establishing a maiden resource of 266,000 ounces at Turnberry provided further proof of the exploration potential that is sitting in our tenement holdings to host additional ore sources within trucking distance of the Andy Well processing plant,” Kelly said.
“With the development of both of our – now producing – mines, we used debt to build them because they had very quick pay back, so using debt rather than issuing a lot of stock meant we didn’t dilute our shareholders.
“However, we realised having debt around Deflector could become quite restrictive on how we can spend our money in regards to exploration and advancement of the project.
“There was also an expectation circulating through the market that we were going to be carrying out a raising, which was having an effect on how our shares were being traded and subsequently on our share price.”
Upon completion of the placement, Doray will have approximately 356.9 million shares on issue, which is among the lowest of any current ASX-listed gold producer and, more importantly it will also boast a cash balance of $44.8 million.
“That was the key behind the recent raising, partly to ensure we had good exploration capital on hand and to make sure we had a strong cash position, from which we can negotiate a re‐sculpting of our current debt repayment profile as we go through the ramping up phase at the Deflector mine,” Kelly said.
For a project that had gone a long time unloved and thought to be too difficult, Deflector has every right to bask in the glory of its resurrection.
Once in steady-state production in primary ore the mine is projected to produce 60,000 ounces of gold per year, plus copper and silver, with an initial mine life of six years.
There is plenty of exploration upside both within the Deflector orebodies and within the wider tenement package surrounding the mine.
“Deflector is Western Australia’s newest high-grade underground gold mine and is the second high-grade gold mine and processing plant that Doray Minerals has funded, built and commissioned within the last four years,” Kelly said proudly.
“We look forward to operating our new project and extending the mine life through successful near-mine exploration and using our experience at Andy Well and Deflector to continue to build Doray Minerals into Australia’s next great gold company.”
Doray Minerals Limited (ASX: DRM)
1292 Hay Street
West Perth WA 6005
Ph: +61 8 9226 0600
Peter Lester, Allan Kelly, Jay Stephenson, Leigh Junk, Peter Alexander