CRESCENT GOLD LIMITED
CRE - AMEC Investor Briefing: Investing in Mining Stocks - Mr Roland Hill, Managing Director
Tue, 2 Sep 2008 02:00PM
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Mr Roland Hill
Tue, 2 Sep 2008
02:00PM Australia/NSW
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CRESCENT GOLD LIMITED (CRE)
ASX code: CRE
Website: http://www.crescentgold.com.au/
Industry: Materials
Principal Activities:
Gold exploration in Western Australia
Address:
40 - 48 Subiaco Square, Level 2
SUBIACO
WA
Phone: 08 6380 7100
Fax: 08 6380 7199
Executives & Directors
Mr Roland Hill , Chairman, Managing Director
Mr Dave Keough , Director
Mr Jose Garcia Esteban , Director
Mr Franco Cavallini , Director
Mr Simon Grenfell , Non Exec. Director
Mr Geoff Stanley , Independent Director
Mr Mark Tory , CFO
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Announcements from the preceding six months are shown below.
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CRESCENT GOLD LIMITED (CRE) Events
Australia/NSW
CRESCENT GOLD LIMITED (CRE)
| Earn-in Periods extended for S.A. and N.T. Joint Ventures | Wed, 12 Nov 2008 |
| SNU: Extensions to Earn-In Periods for NT and SA J/V | Wed, 12 Nov 2008 |
| Quarterly Reports 30 September 2008 | Wed, 29 Oct 2008 |
| Annual Financial Report - 30 June 2008 | Tue, 30 Sep 2008 |
| Trading Halt | Fri, 19 Sep 2008 |
| Request for Trading Halt | Fri, 19 Sep 2008 |
| Working Capital Facility/AZC/Crescent Gold Negotiations | Fri, 19 Sep 2008 |
| AZC: Working Capital Facility/AZC/Crescent Gold Negotiations | Fri, 19 Sep 2008 |
| Appendix 3B | Tue, 16 Sep 2008 |
| Change of Director`s Interest Notice | Tue, 16 Sep 2008 |
Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.
PRESENTATION BY ROLAND HILL, MANAGING DIRECTOR OF CRESCENT GOLD LIMITED (CRE)
“AMEC Investor Briefing: Investing in Mining Stocks”
http://www.brr.com.au/event/50844
TUESDAY, SEPTEMBER 2, 2008, 2:00 PM.
CRE Thank you. Thanks for that, Sonia. Good morning, ladies and gentlemen, thank you. It’s a pleasure to be here in Sydney presenting to you, so, I thank
10 you all for coming out in such a nice day to take the time to listen to my story and that of our fellow presenters. Just should start with the legal disclaimers, everybody does. Unfortunately, my wife does complain about the size of my disclaimer. But look, what I’ll just do is for the benefit of the people that don’t know the story. I’m just going to give a quick little overview of our gold and
15 the corporate developments we’re at and just a couple of other little assets and interest that we had within the company.
Firstly, I’d like to start with what we call a value proposition. Gold is certainly Crescent’s core focus. We started our IPO in 2003 on the Barnicoat assets
20 that we’ve purchased off Sons of Gwalia for about A$4 million about we have a huge holding now in Laverton about 700 square kilometres and definitely gold is our core that we said there’s a lot of value. We said it has been under explored area. We also does have a probably reputation of being fairly mature and low grade, we don’t necessarily see that. So we got a focus there
25 for production and development and certainly strong exploration. But also, on top of the gold, we’re also looking and examining a couple of other interesting propositions that we have and opportunities that are embedded within Crescent. We always say that we see Crescent as being quite an exciting company within the Laverton tenement, 700 square kilometres as mentioned,
30 that’s quite a large area and of course, lots can happen in such a big size of the tenement.
We have various amounts of nickel up there, some other commodities, and also we have a uranium strategy that I’ll detail a little bit later on, but that’s in
35 South Australia, northern territory.
Just to give you a quick heads up, bit of a summary, again, for those who don’t know what’s the story. Quite a few shares on issue, A$590 million shares there, a couple of options give us a diluted capital base of about 638
40 million shares. Our major shareholder, Deutsche Bank, owns about 55% and that’s a very strategic investment position for us. The benefits of that are quite broad and we are looking forward to working with a good relationship with them.
45 We have cash running about A$40 million, thereabouts, we’re unhedged, debt free, and certainly leaving ourselves open to what we’d see has been probably increasing gold environment pricing wise. Have a market capital running about A$60 million running about 10 cents. Obviously, the market has been a little bit savage on us for a number of reasons and I’ll get into that. But also the rest of the market, we’re not alone systemic to the industry.
In terms of the metrics, our reserves status run about 200,000 ounces or 1.9
5 gram per tonne there, cut-off grade fairly high for the kind company. Inferred resources are fairly large, 24 million tonnes there at 1.4 low grams, but again a high cut-off and certainly leaves a lot of room for conversion into reserve status.
10 The operation resources, if I can give you a quick two-minute story on that. We attempted a production, back in 2006, we had a BFS that suggested that we could produce about 80,000 ounces per annum at a reasonable cash cost. Unfortunately, we failed in being able to do that, reach our expectations primarily due to, or a number of things, but mere utilization was predominantly
15 the major cause, but some things were manageable, either the front-end, the crushing system and an engineering of the plant and processing facility. But we’re certainly susceptible to some uncontrollable and uncontainable cost measures. The inflation of, really, just about everything, diesel, labour, access to skilled staff, everything was probably against us in a situation
20 where we really just thought probably the best thing to do after much deliberation is really to suspend our operations at Laverton. It was a hard decision, but we thought it was probably the best thing to do for the company and the shareholders, and so in return of the cash, and it was an interesting time for us after we ceased operations going back to probably two months
25 now, and really just taking a step back to think what we really want to achieve with the asset base, the cash, and our strategy. So we took a consolidated view of what we had and reviewing our options currently.
In terms of Laverton, we’re not certainly walking away from it. It’s an
30 interesting area with some very good potential and obvious recoverable value with good profits to be made, so what we’re thinking about doing is just taking a little bit step back and wandering if we regain our production status. For doing that we have an approach of a number of things that we wanted to do. We wanted to take reassessment and look and learn from the mistakes that
35 we’d experienced over the year of production and investigate a number of different options that we could probably maximize the value of our current asset base. With doing that, we decided that, probably the smart thing to do was also to reassess our resources and asset base, so currently under our program now of interrogating our resource base, and looking at doing more
40 development drilling and increasing our resource and reserves basis. In so doing, we’re continuing on with our current exploration program.
So, in terms of the development, if I can split them out into two separate strategies, our development objectives getting back into a production is such -
45 - we’re doing a geological due diligence on our end review on our asset base. We’re refining our geological models with the intention or in purpose of the resource upgrades and with the reclassification ideally up to 40% of that measured, of our resource base. In so doing, we want to confirm to us and to the market that we have 4- to 6-year mine life and good prospects on top of that. So, we’re consolidating with our development methodology and also looking at a multiple pit operation. Previously, we were on a single pit operation at our Sickle deposit, and we’ve learned from our mistakes in that respect. In so doing, we’re looking at the synchronicity with site
5 investigations of all the other deposits. We’re reviewing our permits and our licensing, and investigating our major lines of load, which I’ll get onto in a little while.
The progress that we’ve had since we’ve ceased suspension of mining, we’ve
10 obviously, we’ve (inaudible) (0:08:15) is a1.5 million tonne per annum plant that’s quite a large thing for the region, that’s one of three in the area, two owned by both majors, Barrick Gold and Anglogold.
When we said it’s a strategic asset, we purchased that as I mentioned back in
15 2003, an IPO with a cost of about A$4 million and that certainly has a value higher than that even strategically so. We’ve kind of get up, doing a little bit of environmental work and rehabilitation around the mine site. The milling currently is on current maintenance. We’ve put them on (inaudible) (0:08:52), because it’s strategic to us going forward, and doing minor rectification works
20 and modifications on the plant. Unfortunately, part of the suspension was the termination of about 140 staff, not an easy thing to do. However, we won’t be the last, I don’t think in this environment, things are pretty tough out there and we just have to make a tough decision, and unfortunately letting a whole lot of good people go was a tough decision. In so doing, we’ve maintained and
25 contained our costs, we’re down to virtually zero spin over that A$40 million outside of our exploration, we’re just about cash positive with the interest that we’re earning. We’ve assembled a dedicated consultants and in-house review team for our redevelopment and exploration site, and the program is underway where we currently have a number of rigs, one aircore, two RC and
30 a diamond drilling rig currently assessing the work that we need to get in back into production. And today, we’ve had some pretty encouraging signs.
I guess, the question will say, “Okay you’ve got into production, you’ve suspended, what’s going to be different this time once you do get into
35 production?” It’s something that we’re not going to attempt to do lightly. We certainly want to make sure that we get our storage straight and the numbers stock up, and the things that we can leverage off from our prior operating experience is immeasurable. We are certainly not capital constrained, anymore. We probably were under a little bit of pressure back in 2006 once
40 we’ve completed the BFS to get into production, there’s a lot of expectation by the market, by shareholders, all those sort of things that perhaps with less time pressure, less capital pressure, we could have done a few things a bit better, a bit smarter, still that’s the market. And certainly, we’ve assembled a very competent in-house technical team. We’re very well equipped in that
45 respect. We’ve got about 16 geologists working in the office now, a luxury that we didn’t’ have previously. And in fact, that door leads to the fact that we’ve got bit of control on the outcome of that we want to produce. I’ve got a point there also suggesting now that timing might be a little bit better. Things have sort of simmered over the last two years, but the market’s got pretty hot. The expectations got fairly hot and just in the last couple months, things have, sort of, cool down a little bit, so we’re under no pressure to get back into production. We’re just going to make sure that we do it right. And as a matter of fact in the market seemingly what more rational today than was for
5 the last two years.
So the development plan, we’re breaking it out into basically two phases. We have a three-month plan, we’re just going back to basics in our due diligence just looking and reassessing some of our assets. We’re checking on the
10 deposits, nine in total that we’re reviewing, nine projects which we are hopeful enough being developed. We’re just going back and doing some preliminary resource estimation and a little bit of investigative work. We hope to probably assess all that by October, November of this year, and then that will lead us onto a six-month plan where we’ll continue on with the development work and
15 then look at our final resource estimation and review our processing options.
The processing options themselves, as I mentioned, we will complete in November, but we’re looking at three basic routes that we’re assessing to get back into production. Our base case would be with a steady production of 1.5
20 tonnes per annum in the current or prior production case. We would expect to be minimum Capex to that. We have an elevated case of probably again 1.5 million tonnes per annum, but would wanted to spend a little bit more Capex to make sure that the mine life was sustained. Obviously, everything will be based economics. We wouldn’t justify the Capex bin unless we could,
25 and in fact, we also have a base case whereby we got a judicious Capex spend where we might lift the production up by 1.5 million tonnes per annum depending on the resource base and the outcomes that we get there.
I’ll just run through a couple of things that we’re looking at. I won’t dwell on
30 this too much, but just to give you an idea of the things that we’re looking at and where we see immediate value and probably immediate results. We have there what we call Euro Line of Lode, where we were just going back looking at all the old dataset that they had because these are seen as a relative immature area. There have been a number of explorers over there, a
35 number of different datasets, a number of different assessments of data. We’re just going back and making sure that we’re reviewing it and refining or tuning it. We’re also going to do a lot drilling, met test, permitting and approvals, and design, that’s similar to that with what we call our Craiggiemore to Mary Mac, which is our line of lode to the south of the Sickle
40 plant, pretty similar sort of a review plan.
Admiral Hill to Castaway is similar. What we’re looking at here is, I’m flipping through these pages fairly quickly, but it doesn’t give an indication of how much work is going behind the scenes to do all this work. As I mentioned 16
45 geologists were all working very hard at delivering an outcome.
The Western Laverton Line of Lode, similar thing, lots of drilling, met testing, pit investigations.
The Southern Project to the south, similar work program, always adds up to the fact that -- and the Barnicoat Line of Load one more time. A lot of work, but we just want to make sure that once we get into production again that we’ve got everything lined up and our number straight.
5
If I can just go on to the exploration, again 1700 square kilometres is a lot to look at. We’ve been aggressively exploring over the last year or two, run about A$4 million a year on exploration spend. As a result of that work we’ve got about 20 immediate exploration targets that we see as being key to our
10 development pipeline within the Laverton area, there is a met there. They are terms that are highlighted with the Sickle Plant just in the middle. So that two exciting discoveries with Bells and an old production there Ida H, these are high-grade targets. Laverton is probably seen as a low-grade oxide area or terrain. These ones are high grade primary ore. We see it as an under
15 explored corridor and the ability to add high-grade ore to the oxide resources is immeasurable to the point where we’ve had some drilling, previous drilling, what we call the 1234 prospect is 12m @ 34g/t and the 494 prospect 4m @ 94g/t, these sort of tonne is obvious to the impact of a resource base and a high grade feed to mill doesn’t need to be explained.
20
As I mentioned, we are in a world class province. We believe that the upside is obvious to us. Other people, in the likes of Barrick and Anglogold, two companies that have been in the area for a long time and you don’t get an occurrence like that three major deposits in isolation, there’s bound to be
25 more which is going to spend the time to make sure that we find one on our tenements.
Potential other region is highlighted probably quite well in this graph and table. Predominantly, majority of the drilling is only between 0 and 50 depth,
30 62% in fact, then to the bottom of table there only 2% of the drilling, that’s our drilling in our previous owners have drilled less than 150 meters is only 2% so the depth potential is again as highlighted.
What we see is this is a systemic of the Sickle Pit – just there. The Ida H as
35 mentioned before that was a previous mine roughly 180,000 ounces at 22 grams a tonne that definitely gives us a signal that the potential fund repetitions of that and also of the Sickle Pit which was our primary pit. It’s a structurally controlled area so the region to virtually define this again is high.
40 If I can just take a little bit of the time now and just move away from the gold and just go into the uranium strategy. We’re quite lucky to get into the uranium, I suppose going back to a couple of years now, manage to secure a number of assets in South Australia and Northern territory, two good regions to be looking for Uranium, very productive in their approach, the government.
45 We did have a strategy to speed that up. Our uranium assets, we thought, that was certainly value in us doing that and shareholders’ response to it was positive. However, the market has turned on us a little bit, so we’ve changed our approach to that and we’ll keep it in-house. Certainly, we’re happy to fund that, given our cash balance, we’re happy to fund that for the short term and continue with our own strategies, so the (inaudible) (0:19:43) off the table for a little while. At some point we will deliver to the market, but we said that we can build further value into it for the time being. We’re very positive about a number of those assets and happy to keep them in-house for a little while.
5
We’re in a business of selecting an appropriate fund for it in a short term and certainly possibly in the mid term prior to the IPO, but we want to look at some, sort of, special funding with that but it’s one thing that we -- our view on the uranium is positive enough to make sure that we want to deliver value for
10 it.
Technically, I should have gone to that one. If I just can give you a quick map of the uranium assets, the tenements. South Australia and Northern Territory as I mentioned, we own them in three forms. We own some tenements in
15 own right, we’re earning into some and some other partners are earning into ours. We value this, what we call our Sturt Project probably the highest and is probably going to take much of their focus, but just give you a rough heads up on the Northern Territory tenements, essentially there are longer lead, longer term item exploration wise, we think there are excellent quality, but just
20 on the timeline difficult, but the cover for those is a little bit high particularly the South Australian ones, mainly IOCG and uranium targets. Everybody knows about the problems there, fantastic terrain to be in, but in a very good technical one, but the cover to the north of the state, South Australia, we see as being much better, we can get bigger bang for our buck out of the Sturt
25 tenements.
Other projects that we have within the company, we see these as being sort of value building strategies. We’ve got gold, which is an obvious synergy at Laverton. We’re looking at different options at different partners and different
30 participants within that region. It’s definitely a consolidation phase in the industry and also for the sector and we see that Laverton area is not different. Also, we have some excellent nickel potential there, sulphide and laterite. We’re looking at seeking a joint venture partner there to probably maximize the value there. We don’t’ see ourselves as being lead or nickel explorers
35 particularly sulphide, that’s a different skill set that we don’t have. So we’re looking at joint venturing that out and maximizing the value to someone that can probably examine a little bit closer and a bit better. In so doing that’s going to obviously reduce our cash out flows and leverage up in our success rate. We do have a number of other commodities within our tenements base,
40 still little early days, so I won’t go into that at this point but we say that there is a very exciting potential for development of other commodities within that. And in a corporate sense given our cash and I guess our strategic view in the market, we’re happy to look at a number of different things on a corporate sense that any proposal that seems to make sense.
45
So in summary, in terms of Laverton, we’re wishing to complete out our development program by November 2008, select the appropriate production scenario, get back to into producer status in rewriting. We’re going to continue with the development work and exploration to that point, and we look forward to getting back into that status very shortly.
In terms of the corporate, we want to preserve the cash. Cash is king, it’s an
5 asset that is pretty rare in this market, as other presenters will probably testify to, so we’re going to make sure that we preserve that to the best we can and maximize the value and leverage for that and in terms of looking for other opportunities.
10 Our vision, we’re wanting to increase the reserves and resources at Laverton, resume the producer status as I mentioned, build the core and non-core business