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Rationalisation of Southern Cross Region of WA

Document date:  Wed 07 Feb 2001
Published:  Wed 07 Feb 2001 13:00:45
Document No:  191310
Document part:  A
Market Flag:  Y
Classification:  Asset Acquisition

SONS OF GWALIA LIMITED                        2001-02-07  ASX-SIGNAL-G

HOMEX - Perth                                                         

Sons of Gwalia Ltd ("the Company") wishes to announce that it has
acquired its two joint venture partners' interests in the Southern
Cross Joint Venture in Western Australia.

Pursuant to the purchase agreements, the Company will acquire the 50
per cent interest in Gasgoyne Gold Mines NL ("Gasgoyne") owned by
Coeur (Australia) Pty Ltd and the 5 per cent interest in the Yilgarn
Star Gold Mine held by Gemini Mining Pty Ltd.

The assets acquired comprise the following beneficial interests:

i.  A 30 per cent interest in the Yilgarn Star Gold Mine.

ii. A 25 per cent interest in the Star Mill gold processing
facilities and infrastructure situated between the Yilgarn Star and
Marvel Loch Mines.

iii. A 25 per cent interest in the Great Victoria and Nevoria Gold

iv.  A 25 per cent interest in the Southern Cross Joint Venture
which comprises approximately 60 kilometres of strike and 1,200
square kilometres of mining tenements covering the historical
Southern Cross gold belt. 

v.   A 50 per cent interest in the Gasgoyne gold hedge book which
comprises 180,000 ounces of bought puts at an average delivery price
of approximately $600 per ounce acquired, for value, for $6.5

vi.  A 50 per cent interest in a large tenement position south of

The consideration for the above purchase, other than the hedge book,

(a) In respect to the 25 per cent interest in the Yilgarn Star Gold
Mine, Star Mill processing facilities, Great Victoria and Nevoria
Mines and the Southern Cross and Laverton exploration areas, the sum
of A$21.9 million;

(b) In respect to Gemini's 5 per cent holding in the Yilgarn Star Gold
Mine, the sum of $300,000 cash and a royalty of $5 per ounce for 75
per cent of gold produced from the Yilgarn Star Gold Mine.

The above transactions will result in the consolidation and
rationalisation of the Southern Gross gold belt, mines and milling
facilities with the Company now holding 100 per cent of all assets
and sole management.

The realisation of the full benefits of the rationalisation will be
progressively achieved through the next 12 months and will achieve
cash flow benefits of between $7 million - $10 million per annum.

The Company will close the Star Mill and consolidate all gold
processing in the Southern Gross area through an upgraded Marvel Loch
mill on or before 30 September 2001.

Throughput will be increased at Marvel Loch to 2.6 million tonnes per
annum, from the current 2 million tonnes per annum, at a capital cost
of $2 million, and will be commissioned in the September 2001
quarter. The above capital expenditure does not include the purchase
cost of an additional grinding mill which will be transferred from
the Company's Harbour Lights plant and is currently held on care and

As from the beginning of the 2001/2002 financial year, the Company
estimates that gold production from the expanded Marvel Loch mill
will be approximately 250,000 fine ounces per annum with cash costs
of approximately $330 - $350 per ounce being gradually achieved as
the rationalisation is implemented.

Based on existing known reserves only, a minimum mine life of five
years is forecast prior to any increase of existing mine reserves or
provision for new exploration success.

The Company will achieve significant benefits from the above
transaction, including:

i.  Increased gold reserves and resources. 

ii. Substantially increased flexibility in ore supplies to the Marvel 
Loch mill which will be sourced primarily from the Marvel Loch, 
Yilgarn Star and Golden Pig mines. 

iii. Increased flexibility in production levels at the Yilgarn
Star Underground Mine. 

iv.  Significant reduction in cash costs of production due to 
economies of scale and the closure of the high cost Yilgarn Star Mill.

V. Increased cash flow and profitability per ounce of gold

Vi. A greater exposure to the results from ongoing brownfields and
greenfields exploration in the Southern Cross and Laverton regions.

Work will commence immediately on implementing the above
rationalisation programmes along with a review of current exploration
targets and priorities for both near and off-minesite prospects.

P Lalor