And Troy Resources said yesterday it had deferred the closure of its Sandstone open cut gold mine in Western Australia for 10 more months because of the firmer gold price.
The 600,000 tonne per annum plant has been processing low grade ore stockpiles and was due to shut next month.
But Troy said in a statement yesterday to the ASX that it will produce 30,000 ounces of gold this year at the mine, with ore being mined from a cut-back to the pit at the Lord Nelson deposit.
The company stopped mining the Lord Henry deposit last month because the remaining ore was not of high enough grade.
But the company said in yesterday’s statement that at current prices (gold is over $US800 an ounce, or more than $A1200 an ounce), gold is economic ore from the Lord Nelson pit.
Spot gold was trading at $US830.00 per fine ounce in Sydney yesterday, up from the 2008 low of $US712.50 an ounce in October.
"Mining of overburden will commence as soon as final State Government, Department of Mines regulatory approval is received and ore is expected to enter the mill in April," the company said.
"In the meantime the plant will continue operations treating mineralised waste stockpiles.
"We expect this plan to provide sufficient ore to maintain operations through to the end of calendar 2009.
"The remaining ore at Lord Nelson is low grade and thus the production will be relatively high cost but at these Australian dollar gold prices, this is a value creating exercise for Troy," the miner told the ASX
"Due to accumulated Australian dollar tax losses it is not expected that any tax will be paid on any earnings generated through this extension," the company added.
At current prices, that ore could have a raw value of around $A36 million.
The company said the financial risk associated with mining low grade ore had been minimised by the purchase of Australian dollar gold put options totalling 29,200 ounces with a floor price of $A900 per ounce and maturity dates between April and December this year.
The options maintained Troy’s full exposure to any increase in the Australian dollar gold price, the company said.
Shares in Troy fell 1c to 96.5c yesterday.
