GOLD JNRS - ***** Article

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    PERTH – Botswana, Papua New Guinea and Laos. Not exactly your premium gold exploration addresses. But for three Aussie tiddlers these are the unfashionable locations they're pinning their hopes on, and so far they've made admirable headway in a tough market for juniors.
    All three are well on the way to demonstrating the robustness of their relatively small-scale projects and next year promises to be a watershed for the trio's growth aspirations.

    Perth-based Gallery Gold [ASX:GGN] has been chipping away the longest. It has been carrying out exploration in Botswana for almost six years. That work has identified several gold targets, with the most advanced being the wholly-owned Mupane area. The company this week announced an anticipated preliminary recoverable reserve estimate of around 700,000 ounces of gold as its definitive feasibility study continues. The study was assessing the viability of developing a 100,000oz per annum operation, with commencement of development pencilled in for around mid-2003 and production start-up around mid-2004. "We are confident of achieving our previously stated target for a minimum seven-year mine life," said Gallery's managing director, Keith McKay.

    Gallery's share register makes for interesting reading, with Melbourne-based pooled development fund Lion Selection Group [ASX:LSG] holding 43.32 per cent of the stock and Perth-based junior African miner Resolute Mining [ASX:RSG] 11.45 per cent. Following a rights issue that raised A$8.1 million in June, Gallery's current cash position (of just under A$4 million as at 30 September) would fund it through to the completion of the Mupane feasibility study (scheduled for March 2003). Then, "some US$26 million (in capital costs) would be required to take the company into production," said Sydney-based Aegis Equities Research. Whether Gallery goes it alone or not remains to be seen, especially in light of Resolute's murmurings of creating a mid-size African gold producer out of a four-way merger with Gallery, Spinifex Gold [ASX:SPX] and Red Back Mining [ASX:RBK].

    McKay told Mineweb that although the feasibility evaluation was factoring in brand new plant and heavy equipment, Gallery was investigating the possibility of purchasing quality secondhand equipment, which would bring the capital costs down. An early forecast of Mupane's average operating costs was approximately US$160-170/oz. Reserves and costs were expected to be firmed up by December once more than 15,000 metres of infill drilling completed this year was analysed. McKay said Mupane would be debt financed and that there were about seven banks showing an interest in participating.

    Brisbane-based Highlands Pacific [ASX:HIG] has a higher grade project but a similar capex requirement and – based on the latest stated measured, indicated and inferred resource of one million tonnes grading 32.4 g/t gold for a contained one million ounces-plus – a similar targeted mine life to those of Gallery. Highlands is marginally ahead of Gallery in terms of development timetable, but nothing can be taken for granted in PNG, as the fallout from recent national election-related unrest has illustrated. Highlands has already done a feasibility study, which suggested the proposed Irumafimpa underground gold mine at the 100 per cent-owned Kainantu gold project would be economic at an output rate of about 100,000-140,000ozpa and head grade of around 32g/t gold, while the company recently obtained a mining lease from the government, a feat in itself.

    Capital costs of the Kainantu development were slated at around US$25 million, while average cash costs were projected to be in the order of US$105-115/oz. "At a gold price of US$320/oz the annual cash flow after debt service is forecast to be around US$18 million," Highlands said today (Thursday).

    The company has this week put to bed a share placement of 24 million shares at A$0.25 apiece to raise A$6 million. The proceeds would be used mainly for pre-development and development expenditure. In addition, ABN AMRO has been engaged to arrange a US$25 million project finance facility to fund the balance of the project development costs. Managing director Ian Holzberger said the company was planning to give the green light to development in the March 2003 quarter and, if so, first gold was due to be poured a year later. Both dates have been put back slightly to allow for the slower passage of these things in PNG.

    Meantime, another Brisbane-based junior, Pan Australian Resources [ASX: PNA], has increased the gold resource estimate at the Ban Houayxai deposit – which is part of its 80 per cent-owned Phu Bia gold project in Laos – to 510,000oz. Managing director Gary Stafford said the company was optimistic, based on its updated geological model generated from recent drilling it carried out and previous drilling by the Normandy Mining/Anglo American JV, that Ban Houayxai could become a 1Moz orebody. Ban Houayxai is one of three deposits within the Phu Bia project area, which contains a combined inferred mineral resource of 1Moz. Stafford told Mineweb PanAust was preparing to undertake further drilling programs, and scoping work, with the aim of being in a position to complete a feasibility study by the end of 2003.

    Gallery, Highlands and PanAust had 169 million, 241 million and 194 million shares on issue respectively, and their share prices finished the day at A$0.25, A$0.325 and A$0.028, which equated to market caps of A$42 million, A$78 million and A$5.5 million respectively.

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