WPG Resources - Turning around Challenger

WPG Resources has embarked on a turnaround and re-investment strategy at its 100% owned Challenger Gold Mine in South Australia. The Company is targeting improved underground performance, and increasing the mill throughput from 600,000tpa, initially to 700,000tpa and ultimately 800,000tpa, with a view to decreasing the AISC to below A$1,200/oz (a level that would make it competitive with peers) and increasing production to 90,000ozpa. The mill has successfully operated at an annualised rate of 700,000tpa, and is performing well and consistently. With regards to the underground, there have been issues with development being behind schedule, and thus WPG has not been able to access areas that had been planned for, leading to having to feed the mill with lower grade material. Part of the turnaround strategy has included changing mining contractors, with Byrnecut, who have previous experience at Challenger, recently being engaged. Part of the brief is to catch up on development to allow for flexibility of operations, and to allow the mine to run the mill, and not the other way around. Underground drilling has also confirmed the potential of the Challenger Deeps to significantly add to resources (which are currently ~80% above those when WPG took over, even allowing for depletion), with drilling confirming the continuity of the main shoots below the 215 Shear, and increasing the potential ounces per vertical metre. The Company is also targeting additional shoots in the shallower areas of the mine. Mining and trucking ore from Tarcoola is continuing, with Tarcoola ore performing well in the Challenger mill. “Taking the top off” Tarcoola is also improving the understanding of the geology of this complex orebody, and has highlighted the potential to add further resources. WPG recently completed an oversubscribed $7.2m placement at $0.048/share, and have recently extended a rights issue at the same price to fund the capital investment. Despite nothing material changing in operations, we have unfortunately seen the price fall subsequent to the placement. To read our report on WPG please follow the link below.