Bendigo moves to plan B

Australian-based Bendigo Mining is seeking alternative financing arrangements for its New Bendigo project under the assumption that the 360 million options it granted to Harmony Gold (hmy-n) will not be exercised.

In September 2001, Harmony paid A$50 million to Bendigo for a 31.7% equity stake and for options representing another 19.3%. However, those options expire at the end of the current year and are fixed at A30 apiece — well below recent trading ranges, rendering them all but worthless.

Despite the likely financial setback, Bendigo says it has enough cash to complete an ongoing feasibility study at the Australian project and to fund it well into the new year. The study is scheduled for completion in January, and all necessary permits are expected to be in-hand by June.

New Bendigo, situated about 150 km northwest of Melbourne, will be developed in two stages. The initial phase, which will cost A$50-60 million, will result in the production of 200,000 oz. over the first two years of production.

Capital costs for the second phase are still being worked out, though annual production is expected to rise to 400,000 oz. The necessary infrastructure for the expansion is expected to be developed in the first phase.

At last report, New Bendigo hosted 438,500 tonnes of probable reserves in the Upper S3, D3 and Christine No. 2 reefs. Reported grades range from 7.5 to 9.5 grams per tonne, the best estimate for an average being 8.5 grams, reflecting the nuggety nature of the deposits.

Gold is hosted by reefs having small cross-sectional areas but up to 5 km of strike length. The reefs run parallel to the hinges of enclosing anticlines and commonly occur in clusters, forming distinct linear bands, or ribbons, that repeat at depth. Historically, the most productive part of the field has been one in which 15 anticlines occur over an area measuring 17 km long by 4 km wide.

By year-end, Bendigo expects to have delineated enough reserves to support the first phase of production; it will then attempt to delineate five years’ worth of reserves and resources. The project’s overall “resource potential” is believed to be 12 million oz.

A geostatistical method will report grades down to the nearest half-gram per tonne. The technique incorporates results from fan drilling and focuses on 2-cubic-metre chunks of mineralized material.