Oldtime miners would approve GRD's hunt for gold in Reefton

By Peter V O'Brien

Friday 8th February 2002

Table I
MINING STOCKS' SHARE PRICES (C)

Company	2.2.01	4.5.01	3.8.01	2.11.01	1.2.02

Cue	5	5	10.5	6.5	6.8
Heritage	4.5	4.9	4	3.1	4
GRD ¹	122	117	142	137	160
NZ Oil & Gas	30	36	42	35	36
Otter	36	17	12.8	21	26
Summit	10	10	16.5	14.5	12
¹Converted from Australia cents London gold
($US/oz)	266.70	266.15	268.85	280.35	284.05
2002 high:	$US286.85		2002 low:	$US278.25
(Note: Pounds amended to NZ dollars - unadjusted for current values)

Table II
REEFTON QUARTZ GOLDMINES
INVESTMENT RETURNS 1870-80

Mine/ company	Paid-in capital $	Dividends paid over 10 years $	% return on paid-in capital (total - 10 years)

Wealth of Nations	6500	70,000	1076.9
Golden Fleece Extended	8400	81,600	971.4
Energetic Extended	3000	43,800	1460.0
Just-in-Time	1866	20,032	1078.9
Keep-it-Dark	2000	33,166	1658.3
Hopeful Extended	2886	80,850	2801.4
Big River	22,950	140,000*	610.0*
Welcome	Nil ¹	140,000	Infinity
Over life of mine; into 20th century ¹ Subscribers agreed to subscribe, no calls ever made but dividends paid Source: Westland's Golden Century 1860-1960*

Investors in the two overseas-owned operational goldmining companies were the only people in the mining sector to enjoy good news and a solid rise in share prices over the quarter ended December 31.

Otter Gold Mines' share price rose for the second successive quarter on the back of a takeover offer from Normandy NFM, which itself was being taken over by US behemoth, Newmont Mining.

Normandy NFM had 75% of Otter on January 29 after a heavy advertising campaign persuading shareholders to accept its offer, which was extended to February 15.

Otter's share price had nothing to do with a sudden improvement in the company, which has an interest in the Martha Hill mine on the Coromandel. It was based on the terms of the Normandy offer. Normandy offered 1.9 of its shares for every 100 Otter shares.

The Australian company's bid was made on October 11, when its price was $A9.30, pricing Otter at 17.6Ac. Normandy's price was $A11.30 on Friday, raising the value of its offer to 47Ac, the New Zealand equivalent of which was 26.2c, similar to the figure shown in the share price table.

It was reported that Newmont intends to sell small Normandy interests, which would seem to include Otter's operations, because the world's biggest goldminer has no interest in insignificant mines.

It is difficult to disagree with Normandy's argument that Otter shareholders would be better off accepting the scrip offer, rather than remaining minority shareholders in a troubled organisation.

Australian company GRD's production and exploration report for the quarter ended December 31 confirmed an earlier announcement that approval had been obtained to develop its Reefton gold project after "successful conclusion of the outstanding matters relating to the existing 15-year access agreement with the Department of Conservation."

The company revamped its proposal after Conservation Minister Sandra Lee declined an earlier application to vary the access agreement.

Ministerial vetoes over mining projects on the advice of officials were unheard of in the days when Reefton was a base for quartz gold fever.

The Reefton quartz reefs were first pegged in November 1870. Alluvial gold in rivers, streams and beachsands was worked from the mid-1860s in the Inangahua Valley, of which Reefton was the main town.

GRD used modern, sophisticated science to prove up its ore and gold resource but the oldtimers did well with relatively primitive methods.

Gold worth £5 million in the money of the day was extracted from the Reefton quartz fields between 1872 and 1915. Alluvial mining added another £3 million. The average price for the 1.29 million ounces of quartz-based gold was £3 an oz.

Any economists out there can work out the current value after inflation and so on, including a change from sterling to New Zealand pounds and then to dollars. A line can be taken through the current New Zealand dollar gold price, which moves around the $600-650 levels, although forward sales currently tend to command higher prices. Reefton's gold on that basis was worth $838.5 million in today's money.

It was sufficient to support a Stock Exchange which had two "calls" a day in the late 18070s, two banks and 63 floated mining companies by 1872.

It was not all romance. Murders, hold-ups, weather hardship and prices for supplies that people would object to in 2002 on a straight money conversion were part of the riches' equation.

Some investors did well. Table II shows investment returns for eight mining companies over the decade 1870-80. The returns for the Welcome mine were extraordinary, given the lack of capital calls on subscribers. An "infinity" rate of return would be acceptable at any time.

The extractable wealth faded over the years but there were those who believed there was undiscovered gold, particularly in what could be called (in non-geological terms) as "slipped" reefs at depth. My late great uncle who died 50 years ago in his nineties after living in a West Coast "ghost town" for most of his life, including time as a miner, believed it.

Perhaps GRD will prove him and others right.

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