Building a substantial gold project

Another prospect at the Randalls Project, Mt Monger Reefs, has shown the potential for anomalous gold similar to that found at Silver Lake Resources’ (ASX: SLR) nearby 618,000 ounce Daisy Milano Mine.

Best gold intersections from initial reverse circulation drilling completed late last year comprise 5 metres at 2.84g/t from 11 metres, including 1 metre at 7.55g/t, and 4 metres at 2.12g/t from 87 metres.

Silver Lake’s Daisy Milano has produced over 330,000 ounces of gold since its inception and has a current resource of 618,000 ounces – pushing historical and future production at the site towards the 1 million ounce milestone.

Daisy Milano still remains open at depth, highlighting the potential for an increased resource, which bodes well for Integra if the company's continued exploration is able to identify a similar geology.

Building a substantial gold project

Another prospect at the Randalls Project, Mt Monger Reefs, has shown the potential for anomalous gold similar to that found at Silver Lake Resources’ (ASX: SLR) nearby 618,000 ounce Daisy Milano Mine.

Best gold intersections from initial reverse circulation drilling completed late last year comprise 5 metres at 2.84g/t from 11 metres, including 1 metre at 7.55g/t, and 4 metres at 2.12g/t from 87 metres.

Silver Lake’s Daisy Milano has produced over 330,000 ounces of gold since its inception and has a current resource of 618,000 ounces – pushing historical and future production at the site towards the 1 million ounce milestone.

Daisy Milano still remains open at depth, highlighting the potential for an increased resource, which bodes well for Integra if the company's continued exploration is able to identify a similar geology.

Significance of similarities to Daisy Milano

Daisy Milano has produced over 330,000 ounces of gold since its inception and has a current resource of 618,000 ounces – pushing historical and future production at the site towards the 1 million ounce milestone.

Daisy Milano still remains open at depth, highlighting the potential for an increased resource, which bodes well for Integra if the company's continued exploration is able to identify a similar geology.

Integra had more than $28 million cash at the end of the September quarter.

Deeper holes drilled through the main zone of BIF units and to the eastern side of the Santa deposit have shown a strong presence of magnetite-rich BIF. Santa area highlights include:
 
- 14 metres at 5.58 grams per tonne (g/t) gold, including 5 metres at 8.47 g/t gold;
- 5 metres at 13.21 g/t gold; and
- 9 metres at 4.68 g/t gold.

Diamond drilling at Cock-eyed Bob has also continued to deliver promising results including 3.25 metres at 25.10 g/t gold, including 1.65 metres at 47.00 g/t gold.

Santa and Cock-eyed Bob are located 16 kilometres east and 13 kilometres east, respectively of the Randalls Gold processing facility where cash costs for gold production were just $505 per ounce (excluding royalties) in the September quarter, reaping Integra a quarterly cash profit of $19.9 million.
 
Pre-stripping at the Maxwells open pit and stockpiling of Maxwells Ore commenced in the June quarter in preparation for fully fledged production from the Maxwells open pit in 2012.

Resource drilling designed to enable final modelling of the open pit mineralisation of the Anomaly C and Fly Camp areas has been conducted over the last few months.

The drilling has returned some promising shallow results, including 7 metres at 4.21 g/t gold from 4 metres and 2 metres at 6.66 g/t gold from 1 metre.

The three diamond holes drilled at Cock-Eyed Bob provide additional confidence to the grade model where drill information was lacking and assist with the underground design.

The company expects trial underground mining will commence in December at the high-grade Cock-eyed Bob gold deposit, subject to regulatory approvals.

Integra has reached an agreement with a preferred underground mining contractor and a mining proposal has been lodged with the Department of Mining and Petroleum in preparation for a December start-up.

If the trial mining proves successful, underground mining will continue to the next level at Cock-eyed Bob and underground development at the Santa gold deposit will commence.

Following completion of open pit mining operations at the Maxwells gold deposit, underground development would commence from the base of the open pit.

Subject to successful completion of the trial mining exercise, the objective is to progressively develop underground operations at the Cock-eyed, Santa and Maxwells gold deposits to the extent that 50% of the process facilities feed is provided by underground sources at an expected grade of 5-6 g/t gold.

This will be blended with open pit production ore and stockpiled ore to maintain a 3-4 g/t head grade presented to the process facility.

By supplementing the process facility with 50% of feed from underground sources, the life of the remaining open pit Ore Reserve is effectively doubled without any additional discovery, resulting in Integra targeting a 10-year mine life at Randalls.

Integra Milestones

In the past couple of months Integra has met some significant milestones including record gold production from Randalls and becoming one of the lowest cost gold producers in Australia.

In August, the first month of production since a process plant upgrade at Randalls, Integra exceeded expectations by producing 8,873 gold ounces, which annually equates to over 106,000 ounces.

The company continues to ramp-up production at the project since pouring the first gold bar over a year ago in September 2010.

Significantly for Integra, the process plant upgrade has confirmed the company as one of the lowest cost gold producers in Australia.

With cash costs for gold production just $505 per ounce (excluding royalties) in the September quarter at the Randalls Gold Project, Integra reaped a quarterly cash profit of $19.9 million.

With cash costs for gold production just $505 per ounce (excluding royalties) in the September quarter at the Randalls Gold Project, Integra has reaped a quarterly cash profit of $19.9 million.

Chris Cairns, managing director, summed up the performance by saying “Another exceptional achievement for our site-based personnel – a very well executed process facility upgrade and successful achievement of our 100,000 ounce per annum production rate at a cash cost which well and truly confirms Integra as amongst the lowest cost gold producers in Australia.”

The production breakdown for the quarter was 217,985 tonnes of ore processed at a grade of 3.42 grams per tonne gold at a bumper recovery rate of 93.7% for production of 22,463 ounces.

The cash profit from operations for the three month period is $19.9 million.

To boost productivity, during the period a process facility upgrade was completed ahead of schedule and below forecast cost.

Production disruptions, deliberate processing of lower grade ore and a 4-day shutdown to accommodate the upgrade tying-in did result in reduced gold production in the month of July, however, the upgrade was completed by the end of July and record production of 8,873 ounces was achieved in the month of August.

Post upgrade cash costs per ounce for the months of August and September were $450 per ounce and $448 per ounce respectively

A facility upgrade has now been completed to process 1 million tonnes annually, with the company targeting 100,000 gold ounces produced each year.

Integra added that metallurgical recoveries are expected to improve above the forecast 93% as a result of process refinements.

This decision has already been validated by the August record of 8,873 gold ounces, (which annually equates to over 106,000 ounces), in just the first month of production post the upgrade - which exceeded the company's expectations.

Most importantly for the project, is that the forecast cash cost of production for financial year 2012 is $550 an ounce, providing a very impressive operating margin of over $1,200 an ounce - based on the current spot.

Integra said that the record production was even more encouraging considering the unplanned four day shut down during the month to replace a primary mill pinion gear bearing.

To continue the current smooth production process, the company currently has 1.4 years of stockpiled medium grade ore, which already has the mining cost paid.

Randalls reserves

The recent 94% boost in ore reserves to 480,000 ounces provides for a minimum 6 year mine life from open pit sources, which doesn't include any underground production potential, or other assets being brought into ore reserves.

Underground trial mining is currently due to kick off before the end of 2011.

Chairman's report

John Fitzgerald, the chairman of Integra, outlined in the company's annual report - which was also released today - that the company is now a low cost producer with a growing mine life.

Fitzgerald said:

The company is now in a very strong position and well placed to take advantage of both the high gold price and the continued rationalisation we expect to see in the Australian gold industry over the coming year.

The company has now established itself as a low cost producer with a substantial operating margin.

Subsequent to year end the upgrade to the processing plant to a nominal capacity of 1 million tonnes per annum was also completed ahead of schedule and in line with budget. This upgrade will enable the company to increase production over the coming years.

The company has built up a large stockpile containing 68,500 ounces of gold and this along with the expanded plant capacity provides both considerable flexibility and reduced operating risk for the project.

The maiden Mineral Resource and Ore Reserve at Majestic were the highlights of another successful year for
Integra’s exploration and projects teams.

The company sees exploration as its key strength and has committed $23 million over the coming financial year to increase existing resources / reserves and test promising targets in the Randalls and Aldiss projects.

Mine life was extended to 6 years with the addition of new Ore Reserves at Majestic, Harry’s Hill and Maxwells and further extensions are expected over the coming year.

We are in a strong financial position with modest debt, cash reserves of $38 million at year end and substantial cashflow generation from the Randalls Gold Project.

Primary objectives

Fitzgerald added:

Our primary objectives are to grow the company’s reserve base and build long term profitability.

This will be achieved by further exploration success and exploitation of our large underground Mineral Resource base in the Randalls region.

Trial mining at Cock-eyed Bob, being the first of three underground deposits in the Randalls region, will commence during the coming year and this is a very important step in our long term growth plans.

Cairns spent $25,000 to acquire 54,347 shares, for an average entry price of $0.46 - and now holds just under 1.87 million shares and 4 million unlisted options.

In afternoon trade Integra last changed hands at $0.49 - and there is a lot of interest in the stock caused by the jumping spot gold price and the falling Australian dollar.

In Australian dollar terms, an ounce of gold today is worth $1700, up from $1400 just one week ago.

With this in mind, Integra is well positioned to take advantage, with the company continuing to progress the Randalls Gold Project in Western Australia - and just last month boosted the Reserves 94% to 480,000 gold ounces.

The financial year 2012 forecast cash cost of production is just A$550 per ounce, and with the Australian value of a gold ounce heading north - the economics at the project just became a whole lot better.

Johnston bought 40,000 shares for a consideration of $18,600, providing an average entry price of around $0.465.

These are the first Integra shares to be held by Johnston, although he does hold two million unlisted options.

There is little wonder there is interest in Integra, with the company continuing to progress the Randalls Gold Project in Western Australia - and just last month boosted the Reserves 94% to 480,000 gold ounces.

The financial year 2012 forecast cash cost of production is just A$550 per ounce, and with spot gold pushing through US$1700 an ounce today - the economics at the project just became a whole lot better.

The reserves estimate is now 6.0 million tonnes at 2.5 grams per tonne (g/t) gold for a contained 480,000 ounces, based on four open pit sources only, and comes less than a year after the first gold pour at the project.

This provides the enticing potential opportunity for underground production, which is not yet included in current ore reserves.

Chris Cairns, managing director, told Proactive Investors today, that the only real means of assessing the potential production performance of the Cock-eyed Bob, Santa and Maxwells gold deposits as underground operations is to develop them.

"In a nutshell, it is cheaper to develop for trial mining than it is to drill them and the trial mining gives us a much more realistic outcome – with associated revenue – than would any amount of drilling.

"As for FY2012 revenue, we are investing in the business by reducing debt by a further $20 million, spending $23 million on exploration, expanding the process facility capacity by 25% for $12 million and risk-funding underground trial mining at Cock-eyed Bob for $8.2 million."

The current life of ore reserve cash costs at Randalls estimated to be $685 per ounce, providing an $800 per ounce operating profit margin - which enhances Integra’s position as one of Australia’s most profitable gold miners.

The financial year 2012 forecast cash cost of production is just $550 per ounce.

Integra said if only open pit ore reserves were processed - without the introduction of high-grade underground production, the mine life would be extended to 6 years at an upgraded processing rate of 1 million tonnes per year.

Adding the possibility of much more gold, the ore reserves do not include the high-grade Lucky Bay, Spice, Fly Camp / Anomaly C gold deposits or northern extensions to the recently discovered Majestic gold deposit to be added to reserves at a later date

Importantly - increasing gold production and extended mine life provides Integra with a very solid platform to capitalise on immense exploration upside and other growth opportunities.

Currently there is 1.4 years of stockpiled medium-grade ore, ensuring production capacity will continue to be utilised.

Integra is targeting 100,000 ounces per year production from an upgraded processing facility at Salt Creek with the upgrade expected to be completed next month.

A further increase to 120,000 ounces per year of steady state production, before 140,000 ounces per year is expected when high-grade underground production is established to compliment the open pits.