The Davyhurst Project - Ora Banda Mining Limited

The Davyhurst Project - Ora Banda Mining Limited

“The Davyhurst Project is located approximately 120 km north west of Kalgoorlie within the North Eastern Goldfields of Western Australia.

This large scale project comprises 112 mineral tenements totalling approximately 1,336 square kilometres.  This coverage provides approximately 200 strike kilometres of greenstone sequences prospective for gold as well as sulphide nickel and base metal mineralisation.

The Company is focused on unlocking significant value from the company’s strategic and prospective landholding. To achieve this, the Company will target resource development activities at five advanced projects, namely Riverina, Waihi, Siberia, Callion and Golden Eagle. This work aims to deliver a robust Definitive Feasibility Study to underpin the future development of Davyhurst. The project has a 1.2 Mtpa conventional CIP processing facility with associated infrastructure, including an extensive road network, 160 man camp, administration & workshops buildings and a large bore field.

The tenement package is accessed from Kalgoorlie by a series of well-formed, unsealed shire roads and haulage roads. Airstrips are located at Davyhurst (Callion) and Mt Ida (Bottle Creek).

” — Eastern Goldfields

 

Figure 1: Project location. (source: Eastern Goldfields Limited)

Monarch Gold Mining Company Limited (No longer trading) consolidated the project around 2008. Since the consolidation, there has not been any work done in the area due to the corporate activities and the insolvency of entities involved.

In 2008,  I was working for a private company doing some iron ore work, and I learnt that Monarch was going to end up in tears as there were issues with the project.

It was not a matter of not having the gold.  It was more a fact that the extraction was not simple, and it may have something to do with the chemistry or the structure of the ore bodies.  I cannot recall if it was specific to the gold being refractory or some issues with copper, or some structural complexity within the orebody,  like Blackham Resources Limited (ASX:  BLK) in Wiluna.  Anyway, the conclusion was that the projects would struggle.

Photo by Annette Schuman on Unsplash

Don’t get me wrong. I am not saying this is a lemon project. I am a firm believer that lemons if used appropriately, can be used to make lemonade.  And we all love lemonade.  You have to remember that around that time, gold was still around the sub $1000 mark and we were almost on parity with the USD.  Mining services cost were at an all-time high.  Iron ore was all the buzz, and nothing outside that sector was exciting.  I remembered in 2008, Silverlake was putting out great news, and there was no traction.  Gold was not a flavour of the month.  The once vibrant town of Kalgoorlie was almost a ghost town. Diggers and Dealers were just acceptable. In fact, at that time, attendance numbers were not very attractive.

So funding and market interest for gold projects were not high on the agenda.

The Resource

There is no doubt about the potential of the project.  As you can see in the table below that was printed in the Eastern Goldfields website,  there is ample gold in the ground.

Table 1: Global resource for the projects. (source: Eastern Goldfields Limited)

The grade is also decent compared to what is out there in the market.  These days, anything above 2g/t is excellent.  It will be interesting what the new guys will do with the project.

What don’t I like?

As an eternal optimist, there is nothing currently that I don’t like.  I am assuming that the new management has seen what has not worked and had put contingencies in place so as to not make the same mistakes.  The bad news around Eastern Goldfield’s demise is a sad state affair for the investors, but a repeat of the same ways of operation would be the single worst factor for the new entity.

Geologically, there are apparent issues, but with technology and the market changing so fast in the last decade, I don’t think there are any deal breakers.  There will be some projects that don’t stack up but the key for me here is adequate funding.

I am assuming that the money raised had a fantastic plan — a new idea that has taken into account price movements and technical hurdles.  As I mentioned previously, there is a big difference in the market sentiment now as compared to 2008.  Like the diagram below, as in the movie, The Raiders of the Lost Ark, let’s make sure there are no surprises.

Photo by Igor Rodrigues on Unsplash

 

What is of concern would be the significant tenement commitment to the Mines Department.  I would think that cost would be running into the millions of dollars.  Raising AUD23M does not seem to be a lot of money if you take all this cost of administration into consideration.  OPEX may appear to be on the light side.   The high wages that seem to be synonymous within this industry to the top management is one that I have always found hard to comprehend.  Company management teams are customarily incentivised with lots of performance share and options, but yet they are paid high wages.

What do I like?

I like the fact that there is a significant strike length and you have mineralisation throughout the project.  When there is smoke, there is fire.  This phrase is my favourite when looking for a deposit in the mineral resource industry.

For nearly 20 years, this substantial tenement holding that has not had any exploration or mining activities. You would view that as a good thing.  It is as close to virgin exploration land as you can get today.  In terms of exploration, one always look at what may be left undiscovered or unexplored.

Look at Bellevue Gold Mines (ASX:  BGL), Northern Star Resources Limited (ASX:  NST) at Kundana, Acacia with Higginsville and the list goes on. They went and found significant deposits that were not looked at, or not given the funding to look at in the past.

Photo by Annette Schuman on Unsplash

 

I have learned over time that miners don’t venture too far out of their operations as they need to concentrate on what they have.  There is limited exploration, and in the 19980s and 1990s when many small producers were in the sector, there was just not enough capital to be distributed to ensure proper near mine exploration.

This lead to future opportunities for new players in the market.  I am not sure of the real factors that lead to the downfall of Eastern Goldfields, but many would suspect management.  While this may be true, in many cases, a lack of funding can lead to poor management decisions not due to ignorance but due to a need for e=relocation of funds.

Hence, now that the dust has settled and all the bloodletting has stopped with, one would hope that the future ahead could be positive for the new entity.

 

 

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Samso has nearly 30 years of experience in developing business ideas and concepts in the Australasian region. Samso has worked primarily in the mineral resources industry, capital markets and corporate finance. Noel Ong is the founder of SAMSO.

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