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PanTerra Gold: First Gold Pour At Las Lagunas Imminent

PanTerra Gold (ASX: PGI) is on the cusp of a huge milestone pouring its first gold/silver doré at its Las Lagunas gold and silver project in the Dominican Republic, scheduled for mid this week.

In a challenging environment for resources companies, PanTerra has been able to develop the project into production, a real accomplishment for executive chairman Brian Johnson.

The company's Albion/carbon-in-leach (NASDAQ:CIL) process plant is functioning on a continuous basis in all elements of its operation.

Activated carbon removed from the CIL tanks for metal stripping within the next few days is grading at around 1500 grams per tonne gold.

Las Lagunas has some very positive metrics, with cash costs estimated to be just US$331 per gold ounce equivalent - this is expected to deliver a net present value (10%) of US$218 million.

The Las Lagunas project is expected to produce about 69,000 ounces of gold and 630,000 ounces of silver annually, with the pilot plant testwork demonstrating expected recovery of 435,360 ounces of gold and nearly 4 million ounces of silver over a six and a half year mine life.

A CIL plant will be utilised together with Xstrata Technology's Albion oxidation process.

This will generate free cash flow of nearly US$100 million within 18 months, in addition to repaying Macquarie Bank's $37.5 million project loan.

Another bonus for PanTerra is the company will recover its investment in the project of around $90 million to 30 June 2012 under the profit sharing agreement with the Dominican Republic Government.

The Government will then receive 25% of operating profits, but PanTerra will not pay any income tax on its profits.

At a gold price of around US$1,400 per ounce and a silver price of about US$28 per ounce, Las Lagunas could generate around $300 million in surplus cash over the next six and a half years.

PanTerra recently arranged A$8 million in working capital to support it move to first production from Las Lagunas.

Azuay

Brian Johnson, executive chairman of PanTerra Gold, said after a two to three month period of production ramp-up at Las Lagunas, the company will focus on accelerating the Feasibility Study for the expansion of the small-scale underground mining operations it controls in Ecuador, and to the exploration of copper-gold prospects in the Dominican Republic.

The Azuay Project in Ecuador should attract substantial interest from the mining sector given its highly prospective nature and a continued push for foreign investment in Ecuador.

A development decision for the Azuay Project is expected in mid-2013, based on the expansion of seven existing small-scale underground mines producing about 300,000 tonnes of ore for a targeted 100,000 ounces of contained gold per annum.

Placer Dome Ecuador reported the potential for a plus 1 million ounce gold ore body on this and adjoining concessions in 1995 based on 9000 metres of reverse circulation drilling, extensive chip sampling, and mapping of surface mineralisation.

Consultants have reviewed existing drill data and extensively sampled underground workings within the concession and adjoining mines and based on results to date PanTerra believes the expansion of operations to 300,000 tonnes per annum of ore is economically and technically feasible.

A Scoping Study of the proposed project has indicated a total development cost of US$87 million, including a substantial contingency allowance and the cost of acquisition of the San Gerardo property.

Operating costs are forecast to be low at around US$420 per ounce of gold.

Analysis

Aiming to produce 69,000 ounces of gold and 630,000 ounces of silver annually, this will generate free cash flow of nearly US$100 million within 18 months, while repaying Macquarie Bank's $37.5 million project loan.

All this for a company valued at a Market Cap. of $97 million, which seems to imply that PanTerra is distinctly under-valued. Throw in the Azuay assets and the under-valuation becomes even more acute. For investors, this is a clarion call.

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