RBK, page-2

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    re: RBK,no interest??? Here's something interesting!>Is Red Back shaping as a target?

    By: Peter Gonnella


    Posted: 2002/05/19 Sun 20:34 | © Miningweb 1997-2002


    PERTH – They may be small, they're not ferocious in appearance and they don't spin elaborate webs like their larger cousins. But red backs possess a lethal bite.
    The diminutive Australian spider's namesake, Red Back Mining [ASX:RBK], will be hoping it has either the venom to fend off potential predators, the wilyness to snare a big catch, or the smarts to avoid prying eyes.

    The Australian-based West African gold explorer has just revealed some impressive pre-feasibility figures for the proposed open cut development of the Chirano project. Data that could entice other West African players, namely Ashanti Goldfields or Resolute, to take more than a passive interest.

    According to pit optimisation work undertaken by consultants Resource Service Group (RSG), a 140,000 ounces a year operation could be sustained at Chirano at a gold price of US$300/oz and annual throughput of 2 million tonnes grading 2.3g/t over a mine life of 7.5 years. And scoping studies point to operating costs of around US$200/oz.

    RSG estimated a pre-capital undiscounted cash flow of US$97.6 million over the projected mine life based on the base case average US$300/oz, and a pre-capital net present value of US$73.6 million at a discount rate of 8%.

    Red Back announced that the A$3.6 million Chirano bankable feasibility study would be carried out by Lycopodium, which also designed and constructed the Obotan plant for Resolute in 1996 and the nearby Bibiani plant for Ashanti. Quite an intricate web.

    Resolute currently has a 4.9% stakeholding in Red Back following a recent A$5.1 million capital raising by the junior to help fund the feasibility study.

    And last month Resolute granted Red Back the first right of refusal to acquire the former's Obotan treatment plant and agreed to assist with the study.

    The study was aimed at evaluating the viability of relocating the plant to Chirano and modifying the plant configuration to be able to treat Chirano ore. "The deal to utilise the Obotan treatment plant will have a significant impact on the economics of the project," said Macquarie Financial Services analyst, Ian Prentice.

    In addition, Red Back released Resolute from a previous covenant which restricted Resolute from acquiring Red Back shares. "The emergence of Resolute on the share register, combined with its release from the previous restriction agreement, provides potential for further consolidation," Prentice said.

    He also didn't discount the Ashanti factor. "Ashanti, which operates the Bibiani gold mine to the north of Chirano, remains the wildcard for potential corporate activity," the Perth-based analyst said.

    With a market cap of only about A$23 million – to an extent the product of the Australian market's tendency to underrate Aussie juniors with quality offshore projects – Red Back could come under close scrutiny from its larger cousins, especially once the feasibility study has been squared away, around October this year.

    But Red Back has shown a dogged determination to advance Chirano over the past few years and would likely prefer a joint venture deal if anything. Whether the company's size allows it the luxury to choose is another question. Stay tuned.

    Its shares edged up A$0.015 to end last week on a near year-high of A$0.305.

    Latest stated indicated and inferred resources for Chirano totalled 26.77Mt at 2.2g/t for a contained 1.8Moz.


 
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