journey starts for catalpa

Richard Roberts, 4 August 2010
www.highgrade.net

STILL seen as the barnacle-clad bark surrounded by shinier, sleeker vessels, the gold-laden Catalpa has moved out of port with as fizzy a send-off as normally sleepy Westonia could manage on the weekend in sound shape and with some very good hands on deck.

A long way, in fact, from an ocean, the Western Australian wheatbelt town of Westonia drew a state premier, mines minister, federal MP and state Nationals party leader on a Sunday to mark its 100th anniversary and the official opening of Catalpa Resources Edna May mine, which put the town on WA gold rush charts a century ago.

WA premier Colin Barnett, mines minister Norman Moore, the Nationals Brendon Grylls and Catalpa managing director Bruce McFadzean were all quick to point out this was a mine reopening, with Edna May the focus of several previous campaigns, the most recent ending in the early 1990s. But the $A92 million, 100,000ozpa version with nine years of mine reserves Catalpa has built on Westonias doorstep clearly indicates a change of direction compared with those earlier endeavours.

Most of Westonias 250 or so residents were in the town centre on the weekend to mark the occasion, with the only sobering note amid the abounding optimism coming from shire president Louis Geier who told HighGrade hed been in the same job in the same town when low gold prices shut down the mine previously. He also had a place in another little town called Ravensthorpe in the states south-west and had been drawn by the many gold coins on offer to drive a bus for mine workers before BHP Billiton pulled the plug on its major new nickel mine. That was a debacle, Geier said.

Is the bloke at the helm of Catalpa named after a whaling boat used in a daring bid to rescue Irish prisoners in Fremantle in the 1870s a man with a better plan than the one used in that ill-fated escapade (the escape bid, not BHPs wreck)?

Investors have been marking up the value of the stock, which has risen by 800% since late 2008 in anticipation of Edna Mays production journey, giving the ASX-listed Catalpa a current market capitalisation around $A250 million. McFadzean, an experienced mine-starter and big-mine operator with Rio Tinto, Kalgoorlie Consolidated Gold Mines (Kalgoorlie Super Pit), Territory Resources and Pacmin Resources, and his strong mining and exploration technical crew, say they have a clear path to annual production of 130,000oz this year and 200,000-250,000ozpa from Edna May and 30%-owned Cracow in Queensland if the 70% of Cracow owned by operator Newcrest Mining can be acquired.

McFadzean said at Diggers & Dealers in Kalgoorlie this week that was unlikely to happen this year.

He said at the conference Catalpas corporate ambition was 500,000ozpa by 2015, a target that clearly involves sending out the boarding party and/or some near-term Marco Polo-like discoveries.

The naysayers continue to highlight Edna Mays low reserve grade while also curiously discounting the value of Catalpas 350,000oz hedge book which offers a $A1557/oz floor price for a third of the mines reserves. At a weighted average gold price of $A1400/oz that translates into a realisable average cash operating margin of $A72 million a year from Edna May as it stands.

Its not a rocket science process here, McFadzean told HighGrade at the opening.

Weve got a 1.1gpt orebody and a 2:1 strip if this was a 4gpt orebody it would be a 12:1 strip. Thats how it works.

The only reason were a 1.1gpt orebody is because theres been a lot of hungry people mining a lot of ounces there before us. What were doing [with the openpit] is taking out the periphery, but whats below that has not been touched.

Our opportunity here is this massive orebody because it is a big orebody; theres not a lot of 30Mt orebodies around which is so robust in terms of economics, at 1.1gpt, that if you add just one months feed at 7gpt from the underground we add can 50,000ozpa into it [production profile]. So our philosophy is having this large base load which supports us, and were able to then trickle in a whole lot of bits of icing on that, regionally, and from our own underground opportunities, and we make a bucket load of money.

At Diggers McFadzean tried to put the spotlight firmly on the underground potential, accessible by an existing decline established but abandoned by the previous operator before exploration beyond the relatively shallow zones that had given up 450,000oz from historic underground mining could clarify the deeper picture.

Catalpa is about to restart drilling at depth on the Edna May Gniess, having reported some encouraging results in late 2008 to an unresponsive audience at the time, with a 10,000m diamond core program planned.

We should get some great results, McFadzean said at Diggers. I dont think Ive seen a lot that we were drilling in 2008 which didnt provide visible gold in every hole.

We saw some fantastic hits 9m at 13gpt, 17m at 6gpt, 36m at 6.12gpt theres not just a few intercepts here, there are quite a few holes and were not far away from having this in resource.

We reported a lot of these in the December quarter of 2008 when no-one was very excited about anything. But were a little bit excited about our underground. Its not going to be a Higginsville that will generate over 1Mtpa; its going to be 200-300,000tpa and depending on what method we choose its going to be 7gpt, or it could be 8gpt or 9gpt. Certainly theres the opportunity to have 250,000tpa at 7gpt at this point.

We hope to have our first resource out for stage 1 of this [Edna May underground] before the end of the year and youll certainly see the results coming out as of the back end of this month.