Pan Australian's Laotian Dream Becomes A Reality

Sydney, Nov 1, 2005 (ABN Newswire) - Five years ago, Pan Australian Resources Limited started on a quest to discover copper and gold resources in the under-explored South-East Asian country of Laos. In 2001, Pan Australian was one of the first companies to enter Laos, securing a 2,500 square kilometre contract area in the north of the country from a joint venture between Normandy Mining and Anglo-American. The Normandy-Anglo joint venture was one of the first groups to be awarded a contract for exploration and mining in 1994, as the Laos government sought ways to encourage foreign investment nearly 20 years after the end of the Indo-China War.

Pan Australian has taken the encouraging results of early work by Normandy Anglo and has, in rapid time, defined a 300,000 ounce gold ore reserve and built a gold mine, and is closing in on a decision to develop a significant mine based on a copper-gold resource containing over 1.5 million tonnes of copper and 1.5 million ounces of gold.

Mining is now under way at the Phu Bia gold mine, which recently delivered to the company a milestone event in the first gold pour, and making Pan Australian step from explorer to gold producer.

Gary Stafford Managing Director We’ve been here for about five years now, and building a portfolio of advanced gold and copper properties within our contract area, and to actually get to gold producer status means that we’ve been successful in our initiative to come to Asia, we’ve been successful in terms of defining ore reserves, and then successful in terms of actually building and constructing a viable mining operation, and really this will be the platform for future success and future growth.

Voiceover The Phu Bi gold mine is the first step in a two-phase development programme, with the ore reserves to come from three deposits: the Phu Kam gold cap, the Long Chieng Track and Ban Houayxai. The gold mine is designed to have an annual ore mining and processing rate of 1.5 million tonnes for the first two years. However, record mining and processing rates of over 5,000 tonnes in a single day have already been recorded, and if these rates can be sustained, then production will exceed the initial targets. At design production rates, Pan Australian expects to deliver over 60,000 ounces of gold by December 2006.

Gary Stafford Managing Director In relation to the gold, we are also looking at expanding our production rates to approach somewhere between two and a half and three million tonnes per annum. But if our grades hold up, then I think we can consistently produce over 50,000 ounces of gold per annum and I think we can peak out at somewhere between 70 and 80,0000 ounces of gold. But we really have to do the work first and see that it’s possible in terms of planning, but also that we can in practice put that into motion.

Our cost structure is very competitive compared to other gold mines. I’d expect that cash costs during the first year are going to be sub-$200 US per ounce, and when you add on capital costs, that’s about $50 per ounce – that’s on an ore reserve basis. So obviously the capital cost component comes down if we start converting resources into reserves and extend the mine life.

Voiceover The company’s biggest defined gold deposit, the Phu Kham gold cap, sits on top of the Phu Kham copper-gold deposit and it’s this latter deposit which Pan Australian sees as its major prize. The Phu Kham copper-gold deposit is said to be a company-maker. The proposed mine will be significantly larger than current operations, with an expected average production of more than 50,000 tonnes of copper and 50,000 ounces of gold a year. Pan Australian is now conducting a feasibility study, recently extended to optimise metallurgical work, resource modeling, and finalise the location of the processing plant. Pan Australian hopes to commit to development of the Phu Kham copper-gold project in early 2006.

Gary Stafford Managing Director We’ve found that some of that work could be refined and should be refined before we make a commitment to develop the mine, but I’d have to say that even with the results that I have to hand, the project looks robust at $1.15 US per pound copper price and at a $400 US per ounce gold price. Those are the numbers that we’re using, compared to a current copper price of $1.70 plus, and a gold price of over $460. So we’re being conservative. It looks good, it looks solid, but before we commit to detailed design work and to building the project we believe that we should do this optimisation work first.

Voiceover With South East Asia economies booming, demand for copper is strong. Pan Australian’s Laos operation has sparked considerable interest from copper smelters and metal traders. It’s a location advantage which will give Pan Australian a strong position when negotiating off-take agreements.

Gary Stafford Managing Director I have to say that we’re delighted with the response. We’re ideally located very close to the booming South East Asian market and we’re finding there’s a significant amount of demand based on our location advantage being so close to those smelters. We’ve not entered into any off-take agreements yet, but because of the significant interest we’ve received, I’m sure that we’re going to get good terms that reflect that location advantage.

The outlook for the company has never been better. We’ve just started producing gold, which means we are now a mining company, we’re no longer categorised as an exploration company. In the next few months we’re going to be completing the work on the Phu Kham copper-gold project, which I’m confident will lead to a positive decision to develop that mine, and I can only see growth ahead of us in terms of taking this company from junior production status to mid cap production status over the next few years.