Anyone who has travelled east by train from Australia’s gold capital, Kalgoorlie, knows how flat and inhospitable the country looks. Even hardened prospectors have struggled over the past 100 years to scratch a living from the odd rocky outcrop. That’s why conventional wisdom said no-one could ever develop a successful goldmine in the region. Fortunately for the shareholders in Integra Mining their chief executive, Chris Cairns, refused to accept conventional wisdom which is why their company’s share price has effectively tripled over the past 12 months, from A21 cents to A70 cents with the potential to do even better if decisions are made next year to expand the first gold processing centre at Randalls, and develop a second centre at the nearby Aldiss project.

Exploration success from an ongoing five-rig drilling programme is the key to what Integra opts to do in terms of future development. However, an investor with an understanding as to how Integra has evolved, and the measured steps taken so far, could reasonably expect to see the current annual gold production rate at Randalls raised from 90,000 ounces to 140,000 ounces, and for Aldiss to evolve along similar lines. It’s stretching the bow somewhat, but Minesite’s Man in Oz can see Integra evolving over the next three to five years as one of Australia’s better performing gold stocks with production stretching out close to the 250,000 ounce mark.

No-one at Integra will (or can) comment on predictions like that from a humble scribbler with no official qualification apart from 40 years experience watching how companies work and grow in the Eastern Goldfields region of Western Australia. Chris is certainly not going to rise to the bait of commenting on future production and/or discovery potential given that he is a member of the Joint Ore Reserves Committee (JORC), the mining industry’s equivalent of the Roman Curia, the central management committee inside the Vatican.

But, even without any help from Chris who was travelling when Minesite called a few days ago, a pattern can be seen emerging inside Integra, and across its vast swag of 100 per cent owned tenements, and an assortment of joint ventures, spread along either side of the Trans Australia railway. Rowan Johnston, Integra’s director of operations, and the senior on the job while Chris is away, threw a little light on current site work, but not much. Like most Integra executives Rowan is technically focussed, and not particularly interested in giving much away to an inquisitive journalist. Pity really, because he had an opportunity to speak to a London audience from the company’s field camp, and you can’t beat hearing a mine exploration and development story from the horse’s mouth.

Frustration with failed personal inquiries gave way earlier today when the company answered most of Minesite’s questions with its latest ASX filing. In a comprehensive production update, Integra noted that production at the Randalls (Salt Creek) processing plant was rising month-on-month with November gold output hitting 5373 ounces, up from 4243 in October, the first full month. Teething troubles were also listed, but with no surprises there, just normal commissioning stuff. The big surprises, and pleasant ones at that, were production costs and an apparent speeding up of plant expansion plans.

Detailed costs were not provided but the management report noted that “cash costs were likely to be lower than the A$574 per ounce estimated in the feasibility study”. Adding to the growing level of enthusiasm was news that an engineering study into the expansion of the Salt Creek plant had been commissioned using a second ball mill. “Given the company’s increasing confidence in the Majestic (gold deposit) area to provide additional mill feed, and the likely decision to commence trial underground mining at Cock-Eyes Bob and Santa (two other gold deposits) it is possible that the board could be asked to approve a processing facility upgrade sooner than previously anticipated.”

The caution in that statement is a reflection of the care being taken by Integra’s management to do everything by the book. But, any investor with the ability to read between the lines will understand why the stock should be treated as a gold play with a terrific story to tell. Essentially, Integra has developed a profitable “starter” mine at Randalls for a very modest capital outlay of A$64 million. It is producing gold at an annualised 90,000 ounces with studies underway to go to 140,000oz. The cash cost per ounce is less than the forecast A$574/oz, leaving a margin of more than A$800/oz, and the internal rate of return on funds invested is 71 per cent.

Aldiss, located a bit further along the Trans Australia railway, could be a mirror image of Randalls if, in Rowan’s words “a modest discovery adds to the (500,000) ounces we now have”. Or, Aldiss could provide feed to the Randalls mill, significantly boosting mine life. In the background, but perhaps not for long is discovery news, especially at the Majestic prospect where a suite of excellent drill hits have been reported, and with 33 of those assays included in the investor roadshow presentation.

Deciphering what’s been found at Majestic is an experts game and while 29 metres at 4.62/t looks to be the best there is probably a technical reason why the 2 metres at 12.69g/t is better – whereas all that really counts is that Integra is finding gold, on its own and in joint venture areas, and that it has one project in production, another in the wings, and a third possibly emerging. Once you cut through the heavy layer of technical mumbo-jumbo a picture of a rapidly-emerging, and very profitable, gold stock is emerging.


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