Red 5 eyes huge game-changer with switch from narrow to bulk mining at WA gold project
Tired Western Australian gold projects have a habit of surprising to the upside as much as they do to the downside.
Fortunately for Red 5 (RED), there is a bit of buzz that its King of the Hills (KOTH) project in WA’s prolific Leonora-Leinster district is in the former category.
Red picked up KOTH in October last year from Saracen and at the same time, it acquired the Darlot mine and treatment plant 80km to the north from South Africa’s Gold Fields in deals worth a combined $34.5m in cash and scrip.
The push into the Eastern Goldfields was a bold pivot by Red from the trials and tribulations of being a gold miner in the Philippines, a country which is not sure if wants a mining industry.
The parked-up Siana mine in the Philippines, with its 500,000oz resource, might one day get back into production, either under Red’s ownership or someone else’s.
But as last October’s KOTH and Darlot acquisitions demonstrated, it is WA where Red now wants to be.
Red’s transformation to WA gold producer status has taken time to come together, as was reflected in its September quarter production coming in weaker than expected at 21,600oz at $A1,829 an oz.
But the quarter was also a turning point for the mines under Red’s ownership, with the completion of underground development work at KOTH and Darlot gaining access to the new high-grade Oval West orebody.
It was why Red was able to maintain FY19 guidance at 100,000-115,000oz at $A1,350-$A1,550/oz, suggesting things all come together in the remaining three quarters to put the combined operations on a solid footing, particularly with Aussie gold knocking around $A1,680/oz.
If that – and the option value of something happening at Siana – was all there was to the Red story, its 6.1c share price for a market cap of $75m would seem about right.
But a potential game-changer for Red is in the works at KOTH. Read more +