Pantoro, Australia’s newest gold producer, is a business on the move, signified by the new name (it was previously Pacific Niugini). The name change signals a shift from being an exploration hopeful in Papa New Guinea to an Australian gold producing company.
The rebranding from Pacific Nuigini to Pantoro came as Paul Cmrlec, managing director, and his fellow directors made a conscious decision to return the company to its core strength of underground mining. They actively shifted the company’s focus from the Papua New Guinea interests to a near-term production, high-grade opportunity and came up with the Nicholsons mine.
“We made a conscious decision a couple of years ago that the exploration market was becoming very difficult in terms of attracting investors and the equity to continue so decided to look across the world at manageable, high-grade opportunities to refocus on our core strength which has traditionally been underground mining in Western Australia.
“The shift from Pacific Niugini to Pantoro reflects our key focus which is production and ensuring profitable production. The name change better reflects what we are doing as a company now and how we are targeting investors.”
So in 2014, Pantoro agreed a deal with Bulletin Resources to take an 80 per cent interest in the Halls Creek project in the Kimberley region of Western Australia, which contains the now-productive Nicholsons mine. The project has a reported Joint Ore Resource Council (JORC) reserve of 1.768 million tonnes @ 5.2 g/t for a total of 294,000 ounces, in addition there is ample of opportunity for resource expansion in the immediate area.
However, the construction of the mine was not all plain sailing. There were ground condition problems, logistical challenges and general teething issues that had to be overcome.
“Constructing any mine will bring a number of challenges and there is nothing easy about constructing a new mine, but the issues we had with the ground in partially oxidised sines in the upper parts of the decline have now passed and the ground conditions have improved dramatically at depth,” reflected Paul.
“There were a number of teething issues to deal with but all of that is now well-established. The start-up has gone well based on where we intended to be today. I must say that we have had some excellent support from our suppliers and contracting partners in the project, and in many ways their flexibility and proactive approach to helping solve issues has helped us through the initial stages.”
The construction of the Nicholsons mine has seen the scope of the company grow across the board. Starting from a small office in Brisbane with interests in Papa New Guinea it now moved to Perth and has an operating mine site on its books with a staff size of approximately 50 employees. There is also planned expansion on the technical side with underground drilling operations and definition of open-pit mining projects to come, with an aim to be mining those pits during the current year.
With construction complete, the deal proved its worth in the final quarter of 2015 when the first production at the Nicholsons mine generated 4,180 ounces of gold and started to create the all-important cash flow.
Paul sees this as a critical advancement, especially in the current gold market environment: “The timing for moving into production is critical, to have cash flow in the business at this time and move from exploration is important. Investors are investing in companies that have cash flow and there is much less interest in pure exploration plays without a clear path to production.”
The mine has significantly over-performed relative to the reserve in its first quarter of production extracting 180 per cent of the modelled gold, indicating a large overcall on the mine.
“In the area that we have been mining we have very significant expansion – almost double – on what we expected to have and from that point of view the mine is performing way beyond expectations.
“ we have completed three full levels of development now, all with similar results, and If that continues in the levels below, it will prove to be very good news for the overall life and the production profile of the mine.”
Going forward the annual production from the plant is forecast at 30,000 ounces as a base case number, and Paul believes there will be considerable improvement on the reserve model: “We are seeing a very high grade in the mine compared to what we had in the reserve model, there is very good scope for that to increase as we progress forward as we continue to see improvement.”
To add further shine to Pantoro’s gold mine the power generation on site uses diesel and accounts for around 10 per cent of the costs. As the price of oil continues to decline worldwide there will be significant cost saving on the price of diesel – projected all in sustainable cost for the mine comes in at around A$900 per ounce.
These factors contribute to the strong financial position the company posted as it moved into 2016, also reflected in a constant increase in share prices this year. Pantoro ended Q4 2015 with over AUS$7 million of cash reserves and a debt of 6,560 ounces of gold, although that has been reduced to 6,000 and will continue to reduce after gold loan repayments commenced in January.
Highlighting the strong cash flow position, Paul said: “Once the ramp up in the mine has reached capacity we have cash flow of around $1.5 million per month or more. We are still in that ramp up phase so we expect it [Nicholsons mine] to become much more profitable with a stronger cash flow in the coming two quarters before we reach full production – we are certainly moving towards a strong position.”
Pantoro is clearly an attractive proposition – since the announcement of production, share prices have soared, increasing nearly 60 per cent since the turn of the year.
“As we have ramped up production and continue move forward in accordance with our planning, it generates a significant new interest from investors. We’ve seen the volume of shares traded on a daily basis increase substantially which shows a lot more interest in the company. I think you’ll see that interest further increasing as we remove the hurdles.” noted Paul.
The Pantoro MD is targeting three-fold strategic expansion in the coming year. Firstly bringing the underground mining operation to full capacity, secondly getting the open pit into production and finally commencing drilling in the immediate surrounding area to underpin the life of the project.
To bring the operations to the feasibility study’s main quote Pantoro are expanding the underground mine for which it has received tenders for a 12,000 metre maiden diamond drilling programme, which is planned for this quarter and will continue over the following nine months.
“Underground drilling will commence this quarter and in our view there is some immediate low-hanging fruit to get that expansion happening,” Paul said. “The underground drilling to expand the resource is aiming at two things: it increases the overall life of the operation and increases Pantoro’s production profile once developed.”
IN addition, Paul sees the open-pit mining at Rowdies and Wagtail commencing in the second half of 2016: “We are busy straightening out the database and getting everything in preparation now and expect to be undertaking a small infill drilling program that we need to get those pits up and running in the first half of this year. We plan to be mining there in the second half of the year.”
Plans to commence stoping in the ensuing quarter will increase mine production beyond the current processing plant capacity – the plant is already operating well with December’s recovery rate at 95.7 per cent – but expanding the process plant can be completed with limited additional work.
Circling back to Pantoro’s rebranding, some in the market felt this would represent a retrenchment from the existing interests in the Papa New Guinea projects.
Paul was confident that while they are not piling resources into Papa New Guinea at the present time, the projects remain in good standing for future operations.
“We hold all those tenements 100 per cent and have very low expenditure required to hold them in good standing.
“We are confident those projects will have their time in the sun and be very valuable as we revisit them periodically.”
Paul’s experience in the gold industry and Western Australia has proved invaluable as he guides Pantoro through this period of transformation and he is not finished here.
“I see Pantoro as a company that will continue production growth, we won’t remain as a small producer for ever – we have a very good starting point at a high-grade, profitable mine. But we will be active in looking at additional opportunities to grow the production profile and become a very significant gold producer in due time.”