By Dr. Michael Green

Everything looks as though it is coming together quite neatly at Bluebird Merchant Ventures (LSE:BMV), the Asian focused resources development group. Management has just clearly set out the strategic goals to be achieved over the next quarter at both its South Korean mining projects, Gubong and Kochang, goals which are expected to ultimately lead to gold production beginning as early as Q4 2019.

Just to set the scene, it is worth taking a look at the back story here. BMV is seeking to bring old gold mines back to life in South Korea, where there is not only tremendous potential but also a highly supportive government. There are really compelling economics in rehabilitating old gold mines compared with going the conventional route with exploration etc. Not only is the timeline to production much shorter, but it can be far cheaper to refurbish than develop. At the same time, old mines come with a far better understanding of the ore body shape, grade trends and characteristics.

South Korea is a country that seems to have been off the international mining map for some years now. However, this country offers big potential as gold mining really stopped here in the 1980s. This was all due to South Korea’s big shift to high tech which saw the nation turning its back on some traditional industries. Gold mines were closed en masse in the 1980s, due to a low gold price, which was under US$50 an ounce at the time. Fast forward 30 years and the sentiments have changed and now the government is actively seeking to reinvigorate the mining sector.

Let’s make it clear that there is tremendous gold potential in South Korea. This is due to Korea’s location in the Pacific Rim and affinities to the better known gold producing belts in China and Japan. In terms of geological time, Korea lies between the China and Japan subduction zone with ‘ring of fire’ geology. This relates to plate tectonics and the enormous geological forces that are unleashed when tectonic plates collide. It is these suprasubduction environments, which is the crust that lies above the subduction zone, that are seen as being one of the major sources of the world’s gold. So, there’s no doubting the potential of the region where BMV’s attention is focused.

The latest news at Gubong is that the feasibility report for the reopening of this mine has been completed and the joint venture has begun. The submission of the feasibility report was the last requirement ahead of commencing the JV with Southern Gold, and moving forward costs will be shared on a 50:50 basis. Over the next four months the application for a ‘Permit to Develop’ is planned to be completed and the necessary permission granted.

With permissions in place at Gubong, the team open up more of the mine and review the potential tailings dam project. The plan is to initially target low capex gold production of 10,000 oz per annum (5,000 oz pa net to BMV) commencing during the fourth quarter of 2019 and for production to increase to 100,000 oz per annum (50,000 oz pa net to BMV) over a five-year period.  The capex required here will be substantially less than bringing a new mine into production.

The same rapid progress seems to have been emulated at Kochang, where most of the required farm in expenditure has already been made with the feasibility report expected to be completed in Q4 2018. News is expected on metallurgical test work which could lead to Bluebird submitting the feasibility report on Kochang to Southern Gold by the end of October 2018. This report critically outlines the route to reopening the mines at Kochang and the measures necessary to commence gold production.

It should be noted that both at Gubong and Kochang, systematic sampling and underground diamond drilling which forms a crucial part of the development planning process will serve to increase BMV’s gold inventory, with these results allowing for the determination of initial JORC-compliant resources.

It does seem as though great progress is being made on the ground in South Korea. Importantly, the already highly capable team is being strengthen by two impressive recent joint venture appointments. Bluebird has appointed Joseph Lee as President of the Joint Venture Company.  Joseph has spent the last five years in the Korean mining sector managing relations with government, corporate and community stakeholders. 

At the same time, Graeme Fulton who has been with Bluebird since April 2017 has been appointed the General Manager of the Gubong project.  Graeme has been involved in the mining industry for more than thirty years including as a Mining Engineer and General Manager.  He has worked in New Zealand, Canada, Malaysia, Papua New Guinea, Vietnam, South Africa and Australia.  Graeme has expertise in geological modelling and evaluation, resource and reserve definition, mine design and scheduling, feasibility studies and due diligence.

We initiated coverage of Bluebird Merchant Ventures in July 2018 with a target price of 11.85p and a Conviction Buy stance. The strong news flow since has served to underline our confidence in the company as it moves swiftly towards gold production.

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Bluebird Merchant Ventures (BMV) is a research client of Align Research. Align Research holds an interest in the shares of BMV and is bound to the company dealing policy ensuring open and adequate disclosure. Full details can be found on our website here (“Legals”).

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