Tuesday, 21 February 2012

Lachlan Star continues to be favourably rerated by the market as gold production grows

Unhedged gold producer Lachlan Star (ASX: LSA, TSX: LSA) continued its stellar run today on the ASX, and is trading another $0.04 higher intra-day at $1.30.

It has taken some time for the market to pick up on Lachlan Star's potential, but this was not lost on the investors in the second half of 2011 when the company traded generally below $0.90, and dipped as low as $0.595 after a one for 60 consolidation.

Lachlan Star's project focus is the CMD Mine in Chile, which currently hosts an Indicated Resource of 37.6 million tonnes at 0.6% for 725,000 gold ounces, along with 49.8 million tonnes at 0.6% for 923,000 gold ounces.

The project is made up of a group of deposits, with gold being produced from open pits - with the company also aggressively exploring to boost metal resources.

During the December quarter 11,326 ounces were produced, an increase of 10% over the previous quarter, and importantly 16,835 ounces of gold are stacked, an increase of 30% over the same period.

Another plus for Lachlan Star is a decrease of 8% for the total cost/tonne of ore at US$18.30/t.

The December quarter production when annualised is around 45,000 gold ounces, but the company is already targeting 75,000 ounces for 2012 - and if the gold price is maintained this will be very profitable.

The increase in production is forecast to come from a ramp up in ore processed, with the company having plenty of spare capacity to achieve this.

Where the story becomes even more interesting for Lachlan Star is the additional copper being discovered at similar grades to that being mined at the adjacent Teck Resources' (NYSE: TCK) Carmen de Andacollo mine - which indicates the potential to extract value from this material.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/25608/lachlan-star-continues-to-be-favourably-rerated-by-the-market-as-gold-production-grows-25608.html

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