Less than three years ago Bendigo Mining (ASX:BDG) was being feted as the new darling of Victorian gold mining only to be hit by an embarrassing under-performance that saw wholesale management changes and jobs cuts and a share price that went for a Stuka dive.
But, late last month Bendigo Mining foreshadowed an improving performance at its Bendigo operations based on mining of previously untapped zones in the vast underground workings below the city of Bendigo.
Then this week the company announced it had struck a deal with Barrick Australia Ltd, subsidiary of North American gold giant Barrick Gold Corporation, that it would take over the Henty gold mine on Tasmania's West Coast.
Henty was discovered and developed by Renison Goldfields and then went into its spin-off Goldfields Ltd that merged in 001 with Delta Gold as a defence mechanism against predators to produce Aurion Gold. However, the mid-tier medium-to-high grade operation was incorporated in a takeover by Placer Dome two years later which in 2006 was digested by Barrick.
Bendigo is paying $A5 million ($US3.9 M) cash and $A3 M ($US2.39 M) worth of Bendigo shares, plus a royalty that will be capped at $A22 M ($US17.55 M).
Liabilities taken over will be employee responsibilities and environmental closure costs totalling $A15 M ($US11.97 M) - not expected to be triggered for at least 15 years.
Henty is a small fish for Barrick but it fits the growth criteria for Bendigo Mining whose Kangaroo Flat mine in Bendigo is a similar scale operation.
Bendigo Mining's managing Director Rod Hanson said Henty would provide immediate gold production and significant exploration potential, combined with a low risk financing structure.
"The mine is planned to be immediately cash flow positive with no major capital expenditure requirements," he said.
The change of ownership would be welcome on Tasmania's West Coast, the island's mining hub, because Barrick had scheduled the operation for closure this December, whereas Bendigo Mining plans to invest significantly on exploration and development.
Hanson said over the next six months Bendigo would mine and process about 130,000 tonnes at a grade of 6 grams/tonne to produce between 20-25,000 ounces gold. Cash operating costs should be less than $A800/oz ($US638/oz).
Production in 2010 would be dependent on post acquisition actions relating to both the mine plan and conversion of near-mine resources into reserves. Indicated and inferred resources not included in reserves and estimated by Barrick back in
December 2008 relate to the unmined Tyndall Zone at Henty.
Hanson said that two years ago Barrick identified 22 priority targets, most of which remain unchecked. One example of a regional target is Henty North, where an 800 metre long co-incident geochemical and geophysical anomaly, only 3 km north of the mine, remains untested. Near mine targets exist, especially up and down dip of the main mineralised trend which remain "poorly tested."
The mine has been in production for 13 years and has produced over of one million ounces of gold. Production averaged around 85,000 oz gold a year, peaking at 143,000 oz gold in 2004. Henty's average life-of-mine grade has been 12.3 g/t gold.
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