TAM 1.19% 8.3¢ tanami gold nl

time to re-rate tanami gold

  1. 195 Posts.
    Feature Story
    Date: September 08, 2005

    Time To Re-Rate Tanami Gold As It Accelerates Towards Production At Coyote.

    It takes time to turn round investor perceptions of a company, but Denis Waddell was making a good fist of it for Australian listed Tanami Gold when he was in London just before the Trent Bridge Testmatch. In recent months the company and its policies have changed drastically, so it as well to go back a couple of years to understand how it got into the position from which it is now emerging. 2003 was the year when it did two deals, the first of which was the acquisition of an 18.3 per cent stake in Pilbara Mines which owns the Jaguar copper-zinc-silver deposit in the Teutonic Bore region in the north eastern goldfields north of Laverton. Second, it acquired AngloGold’s Western Tanami project which contained the Coyote gold deposit for a swag of shares.

    Coyote was too small for the major but it looked ideal for Tanami as it boosted the company’s gold resources and was only 35 kms down the road from its existing base Larranganni. Tanami Gold could see itself moving towards early production and a bankable feasibility study was initiated which was based on production of 75,000 to 90,000 ounces of gold/year through a 350,000 to 450,000 tpa plant at a cash cost of only US$225/oz. Late 2004- early 2005 was targeted , but it never came to pass. The bankable feasibility just wasn’t sufficiently robust and the directors had to put their thinking caps on again.. It was then that investors became a shade disillusioned with the company and the position was made a bit more difficult as Denis Waddell’s directorship of Jabiru Metals, the new name for Pilbara Mines, was seen as a distraction

    Denis Waddell was always convinced that there was significant potential to add to the Coyote resource given the presence of high grade intersections, particularly at depth, and these are now central to the new plan to mine high grade ore via a smaller operation. Successful in-fill drilling in the June quarter confirmed the continuity of the high grade Gonzales Lode at Coyote. This will be mined first and other adjacent high grade lodes will be accessed at a later date. The preferred development plan now starts with a three stage open pit which will be mined over a year and followed by decline development off the base of the pit. Narrow vein mining techniques will be used to minimise dilution of the vein material and initial development of the underground workings will be in ore from the beginning.

    Changes will have to be made in the configuration of the processing plant as envisaged in the bankable feasibility study to accommodate the high grade ore. A modular style plant will give flexibility to process higher tonnages in situ or relocate the facility to other deposits on the company’s extensive landholdings in the Tanami-Arunta Province. Any surplus plant will be sold and Tanami is in the very fortunate position that it has enough cash in the kitty to develop the mine and build the plant without recourse to any banks. As a result the company will be under no pressure to hedge its gold production and it can forgo the pleasure, or otherwise, of another bankable feasibility study. It already knows it has no environmental problems, has a handle on costs and has recently upgraded its camp, so the push towards annual production of 60,000 ozs of gold from around 125,000 tonnes of ore/year is now on as the undiluted grade in Gonzales is around 23 g/t.

    OK, the production is not as high as originally envisaged, but with a margin of between A$200 to A$250/ounce cash flow will be positive from day one. Around A$6.7 million was raised by the sale of the stake in Jabiru to Consolidated Minerals and the rest from the sale of the uranium rights on its exploration portfolio to Deep Yellow for a mixture of cash and shares. Very soon Tanami Gold will have to be re-rated as a producer. It has been a difficult two years for Denis Waddell, who is now full time again with the company as executive director, but in the end the two deals done in 2003 have paid off.

    Looking ahead the company could generate plenty of excitement with its exploration programme around Coyote, Bald Hill (formerly known as Larranngani and comprising the Sandpiper and Kookaburra gold deposits) and outlying prospects. As an example, the new Lyrebird prospect at Bald Hill returned a composite intercept of 12 metres at 5 g/t gold from 8 metres depth and an outcropping quartz vein returned assays as high as 102 g/t gold. Meanwhile there are plenty more targets over at the Lake Mackay joint venture with Newmont in the Northern Territory as well as at Reynolds Range. Time for a re-think on Tanami Gold.

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