Unity Mining, vormals Bendigo Mining

DIFFERENT APPROACH
Gold producer Bendigo sees better times ahead
Troubled Bendigo Mining has painted a picture of better times ahead following a stock market mauling a few months ago after disclosing a second and more serious issue of underperformance that saw major management changes.

Author: Ross Louthean
Posted: Thursday , 26 Apr 2007

PERTH -

Bendigo Mining Ltd. (ASX: BDG), which has spent years re-establishing the famous Bendigo mining field that was one of Victoria's two famous gold mining centres of the late 1880s-early 1990s, today released a quarterly report that saw a lift in its share price to A38 cents at close, well above its A26¢/share basement but a long way from the pre-crunch range of 85¢ -$A1 range. An earlier market warning had seen on January 7 the market capitalisation of Bendigo Mining dive by $A215 M ($US178.8 M).

In those sobering days the company was contemplating a complete mining and milling halt as part of the reassessment, and while the recently commissioned plant was never a problem the climb back from low recovered grades has been steady without being spectacular. However, a shutdown now appears to be off the agenda.

The company's first mining target had been the Sheepshead system immediately accessed by its Swan decline shaft, but recoveries in the first few months were well below expectations and commercial requirements.

Today new managing director Rod Hanson described the March quarter as a "turning point" with exploration redirected to the more prospective Garden Gully line.

"We have committed to a fundamentally different approach in our exploration, and in line with this approach we are now making assessments of size and quality of mineralisation based on a combination of visual estimates, assays and our accumulated knowledge," Hanson said.

Two new reefs were discovered, both along open and along strike with one, Grenfell, defined in two sections 460 metres apart.

Results were encouraging and Grenfell may be larger than anything the company has mined to date. The report said underground access was now adjacent to the southern end of a 1.5 kilometre long zone of central Garden Gully where historic mining produced about 1.6 million oz at a grade of 16 grams/tonne. Hanson said the historical gold endowment of this area "is significantly greater" than southern Garden Gully where drilling is now underway. Testing of the central Garden Gully is planned to start next month.

March quarter production was 65,709 tonnes @ 6.8 grams/tonne for 12,822 ounces for total cash costs of $A599/oz ($US471/oz). While still well below the original targets for a ramp up to about 200,000 oz per annum by fiscal 2009/10, it was a positive lift on December quarter's 77,502t @ 4.4 g/t for 9,209 oz and the underwater total cash cost of $A1,041/oz ($US801/oz).

Though the company temporarily became a sow's ear to many investors and fund managers, the company maintained the view that there was still an endowment of 11 M oz in the Bendigo field, a large part of which is now covered by housing and infrastructure for the city of Bendigo.

The company, which foreshadowed some big writedowns in the current financial year, has the benefit of still being well cashed up after big capital raisings in the past year. It had cash in the bank at March end of $A68.8 M ($US57 M), and Hanson said the objective would be to focus on reducing expenditure and maximising cash to support the exploration strategy. This will include an auction of surplus mining equipment next month.

The new search approach is to target the more highly endowed Garden Gully and New Chum lines of mineralisation at depths of between 800-1,200m. These account for about 70% of Bendigo's historic production. Drilling is now being carried out from underground openings at around 750m depth.

Gold mineralisation at Bendigo consists mainly of large particles of visible gold grains in quartz veins. Hanson said that despite the issues with estimating grade by assaying the small samples obtained in drill core, the key estimation error in the initial reserves related more to the interpreted size of mineralised zones than grade.

"In the past, an over-emphasis on grade estimation resulted in a process where statistically-factored gold grades incorrectly defined the boundaries of mineralisation.

He said the company now uses a more fundamental approach better suited to local conditions. Geologists use their accumulated knowledge to make assessments of size and quality of mineralisation based on the visual examination of core. This assessment is backed by assays, the knowledge gained from processing 140,000t of ore and a reassessment of core drilled through those mined areas.

"This is a very different approach and will continue to be refined as more information is gathered.