Gold star for miner

DESPITE Dominion Mining's share price going for a strong run in recent months, analysts are still tipping South Australia's biggest gold producer to perform strongly in the near future.
Dominion, which operates the Challenger gold mine in central-west SA, had been nudging towards the $2 per share mark due to a combination of good exploration results, low costs of production and strong increases in gold production.

A recent announcement of a new gold zone at the mine pushed the share price to a new record high of $2.39 last week. The stock closed at $2.25 on Friday.

Fat Prophets resources analyst Gavin Wendt said in a research report released recently that the company was a good buy near the $1.92 mark.

But even despite its recent strong run, Mr Wendt said late last week there was still value in the stock.

"While many gold producers suffer from downgrades, rising costs and falling production, Dominion Mining continues to perform seamlessly," Mr Wendt said in his research report.

"Its December quarter production report shows strong, low cost gold production, rising gold reserves and minimal hedging and no debt. Its share price reflects this exceptional performance."

The Dominion share price has more than doubled from 97c in October, but Mr Wendt said Dominion was part of an "elite and relatively small group" of gold miners which have been able to maintain their margins in the face of rising costs.

"We anticipate full-year gold production to be comfortably in excess of 100,000 ounces at a cash operating cost of $340 per ounce," Mr Wendt said.

"Forecast costs are slightly higher due to the increased depth of mining, but are nevertheless outstanding and will generate strong margins for the company. Dominion is continuing the rollout of new underground equipment, which should help maintain high productivity and low equipment maintenance costs."

Hartleys resources analyst Andrew Muir said his firm still had a buy recommendation on Dominion. "Mainly because we can see that there's a lot of exploration upside still at Challenger," he said.

"Grades are excellent, costs are low and we think that they will continue to add to their resource and reserve inventory."

Mr Muir said Hartleys was forecasting the gold price to stay around $US650 per ounce in the first half of 2007 and rise to $US675 by the end of 2008.