With shareholder disillusionment towards many companies running at possibly record highs, it is comforting to have a junior that has doubled the money shareholders have put into the company in its short history.

WPG Resources has raised a total of just $129 million from its shareholders since its incorporation in 2004, yet has paid $260 million back to them by way of a dividend and return of capital following the sale of its iron ore assets in 2011 for $320 million.

Peculiar Knob, Hawks Nest and its iron ore exploration tenements were sold to OneSteel (now Arrium) in October 2011, leaving WPG shareholders

retaining their WPG shares post-sale.

Relevantly, the Peculiar Knob mine was developed within the budget that WPG defined and started production in November 2012.

Now comes the next phase. WPG has successfully transitioned from being an iron ore company to a gold company but is still very much focused on South Australia.

Although WPG is New South Wales-based, all its project assets are in SA. It took this strategic decision as it had well established relationships with the SA mining industry and an intimate knowledge of how to operate according to the government’s guidelines, especially within the Woomera prohibited area.

In fact, it was WPG’s initiatives that opened up the development of exploration and mining projects within the WPA. It is the company’s backyard.

Although gold hasn’t figured very much on WPG’s radar for a number of years, the G in WPG originally stood for gold.

WPG (the WP standing for Western Plains) floated in 2005 on a package of largely gold-focused exploration tenements in NSW and all of the company’s management team has had a prior life in the gold industry.

WPG acquired the Tarcoola and Tunkillia gold assets from Mungana Gold Mines, whose major shareholder Kagara was in administration.

Accordingly, Mungana was unable to raise money to develop any of its assets, including the gold ones.

WPG recognised that and was able to put in place an attractive deal from its own perspective to buy the assets from a company bound by the constraints of its major shareholder having funding issues.

As WPG executive chairman Bob Duffin related to RESOURCESTOCKS, his company paid the equivalent of about $1.8 million for those assets – $1.5 million in cash and $300,000 in shares, which worked out at $2.50 per ounce.

“Many transactions are being effected at the moment in excess of $20/oz and the average is about $25/oz. So we bought these assets extremely well,” he said.

“There are some trailing payments but they only get triggered once the projects are brought into production.”

While big ideas, big projects and big capital expenditure were the order of the day in the pre-global financial crisis mining boom, when capital was easier to access, raisings for project development are tougher now in a more austere era.

Tarcoola, which WPG is aiming to get into production by the end of next year, is attuned to this capitally constrained financial environment. It has a total resource of 97,500 ounces grading at 3.12 grams per tonne. The Tarcoola goldfield was discovered in 1893.

“Although we haven’t yet completed all of our studies, the project’s capital expenditure will be modest and operating costs for the heap leach mine will be quite low,” Duffin added.

“Present indications are that the project will be viable at current gold prices but if we can extend the life of the project by further discoveries or the gold price goes up, then we’ll make quite a lot of money for a very small risk and limited outlay.

“We’re pretty confident we can get Tarcoola into production under current conditions within 18 months.”

The second project, Tunkillia, discovered south of Tarcoola in 1996 and also in the Gawler Craton, is a much larger tonnage project but the grade is lower.

For Tunkillia, WPG has developed a four-pronged strategy.

“Firstly, within the 26.3 million tonnes of total resource – which includes 879,000 ounces of gold and 2.5 million ounces of silver in the known deposit – the company is looking for higher-grade pods,” Duffin said.

“Second is to increase the existing resource tonnage but at the same grade to benefit from economies of scale in a much larger mining project.

“Third is that there are a number of untested gold anomalies within the large tenement block we hold and we will be looking to complete an exploration program on those over the next period.”

Duffin said the fourth leg was “the hope factor” – to receive a bounce in the gold price.

Other parties have spent more than $20 million on exploration, resource definition drilling and permitting at Tarcoola and Tunkillia.

This work includes feasibility and scoping studies at Tarcoola, where other known prospects, including Wondergraph, provide additional upside potential.

As Tarcoola and Tunkillia are pre-development projects that have JORC-compliant resources, they fit the company’s “sweet spot”

“We’ve always said that what we’re looking for, after the sale of our iron ore assets, was to find one or more projects in the pre-development stage where there is a resource but where our skill set in expanding the resource and husbanding the project through the permitting, feasibility and financing stages can be utilised,” Duffin said.

“We have a proven track record in that area and that’s what we’ve been looking for.”

WPG also has a portfolio of other exploration tenements in SA, with what Duffin describes as “pretty good addresses”, which are very prospective for a range of base metals and other commodities.

They are Lake Woorong (gold, base metals and iron ore), Perfection Well (gold, base metals and coal), Muckanippie (nickel, gold, base metals and iron ore) and Penrhyn (base metals, iron ore and coal).

In addition, WPG owns a large and strategically located block of land near the wharf in the city of Port Pirie.

“We completed a $400,000 exploration program earlier this year and we will be going back to those tenements at the end of this year to do some follow-up work,” Duffin said of the exploration assets.

“So we have a multi-pronged approach – develop the two projects Tarcoola and Tunkillia in a sequential manner and, in parallel, expand our exploration properties in South Australia.

“The strategic objective of the company is to get Tarcoola into production for modest expenditure by the end of next year.”

Based on the existing resource and plenty of engineering, geotechnical and metallurgical work done in the past, WPG believes it can produce 20,000 ounces per annum from Tarcoola for at least four years.

However, the company is yet to complete its own internal assessment to come up with its own costings for Tarcoola.

*A version of this report, first published in the September/October 2014 edition of RESOURCESTOCKS magazine, was commissioned by WPG Resources.