Good article by John Dagge, Herald Sun. Interesting investment...

Good article by John Dagge, Herald Sun.  Interesting investment by Forrest. Surely there is more to this than a random punt on a junior gold company in the Victorian hills!

VICTORIA’S picturesque highlands stand in stark contrast to the dusty red moonscape of Western Australia’s Pilbara, but mining billionaire Andrew Forrest sees value in both.
The Fortescue Metals founder recently took a $2 million stake in Victorian gold minnow A1 Consolidated, which is working to rekindle some of the state’s mining glory days.
Mr Forrest made the investment in May through Squadron Resources, a new investment vehicle set up earlier this year by the iron ore baron-turned-philanthropist to invest in undervalued resource companies.
“They (Squadron) weren’t an easy sell, their due diligence was rigorous,” A1 managing director Dennis Clark tells BusinessDaily.
“They have not gone into this lightly and their investment is very welcome. It’s a real vote of confidence in what we are doing.”

What the miner is doing is breathing new life into the A1 Consolidated mine at the old gold town of Woods Point, 180km northeast of Melbourne.
Victoria produced 95 per cent of the nation’s gold prior to Federation.
Some eight million ounces of gold have been mined but the state has long surrendered its claim as the nation’s gold capital.
The A1 mine operated from the 1860s to 1992, yielding more than 600,000 ounces of the prized yellow metal in the process.
Mr Clark knows the mine well — he was mine manager when it was operated by Broken Hill Holdings in the 1980s.
The current plan involves A1 digging a 2km ramp for underground mining to access an ore body, which on current estimates should contain more than 280,000 ounces.
A1 expects its flagship mine to generate about 30,000 ounces annually when it is up and running at a production cost of $840 an ounce.
Last month it bedded down the purchase of a gold processing plant at Maldon owned by fellow junior Octagonal Resources.

Fortescue Metals Group chairman Andrew Forrest.
The deal also hands A1 two operating underground mines, taking its resource base to some 330,000 ounces.
Mr Clark said the purchase created in A1 an emerging junior Australia producer with the Maldon processing plant to treat ore trucked from A1’s flagship mine 300km away.
“The acquisition provides us with a quality gold processing facility that is ideally suited for our planned production from the A1 Mine,” he said.
A1 was introduced to Mr Forrest’s investment vehicle by Perth-based stockbrokers Patersons.
The details were nutted out by Mr Clark and John Clout, a long-term Forrest associate.
Mr Clout, a one-time CSIRO minerals researcher, played a pivotal role in identifying the iron ore deposits that underpin Fortescue Metals and Mr Forrest’s massive fortune.
He will also provide advice to the A1 board, which will be welcome news for A1’s existing shareholders.
A1 has given its backers a tough ride to date. It listed in mid-2012 at 30c a share, when the gold spot price was around the $US1650 mark.
The price of the yellow stuff has since slumped to around $US1160 an ounce and the general pall over the nation’s resources sector has seen A1’s share price slump around the 3c mark.
Mr Clark says the environment for resource companies has been as tough as he has seen it during his 40-plus years in the industry.
Like all gold backers, however, he says the industry’s fundamentals remain sound.
Gold is becoming more difficult to extract and growing middle classes in China and India will increase long-term demand. A falling Aussie dollar also provides local producers with a welcome tailwind given the spot price for gold is in US dollars.
“I think the sector has bottomed out,” Mr Clark said.
“It’s been very tough. Financing has been very tough. There will be more merger and acquisition activity and that will flow through to Victoria. I think you will see resurgence across the industry.”
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