Vatukoula Gold Mines

Vatukoula Gold Mines says it could be producing at an annual rate of 100,000 oz before July 2010, subject to equipment delivery.

Steered by entrepreneurial chief executive officer David Paxton, the AIM-quoted company, which started producing gold at Vatukoula in Fiji last year and lost £3.9m in the six months to February, says the mine increased its output 17% to 8,711 oz of gold in the three months to May.

According to Vatukoula, the mine achieved a net profit of £983,000 over the same period, having lost £742,000 in the previous quarter, helped by a 25% fall in cash costs to $680 an ounce and a 4% increase in the average gold price realised to $920 an ounce – against a current gold price of $933.25 an ounce.

Paxton and his fellow directors now suggest the company could lift gold production to an annual rate of 110,000 oz during the first half of next year, provided present mine refurbishment goes to plan and mobile equipment is delivered to schedule. Vatukoula says it hopes to cut costs by switching equipment from diesel to sugar-based power.

Vatukoula’s shares have veered between 4p and 0.53p over the past 12 months. Ten days ago, the company raised £1.2m by issuing shares at 0.6p to Canadian Zinc, a company headed by Anglesey Mining chairman John Keaerney.

On paper, Canadian Zinc has already more than doubled its money, with Vatukoula shares now trading at 1.1p. There is a significant risk in an entrepreneurial venture like this, especially in today’s markets, but, if the equipment arrives in time, gold stays firm and Paxton’s production targets are met, it might in time reward a bold punt.