NEW YORK (ResourceInvestor.com) -- Less than three years after acquiring Brazil's Jacobina mine for a song, interlisted-Canadian gold miner Desert Sun Mining [AMEX: | TSX:DSM] is nearing production at the property.
Desert Sun's first gold pour is scheduled for April, with production expected to ramp up to the 100,000 ounce per year level by the third quarter of this year. Cash costs are set to come in at a respectable $200 per ounce.
The company has also proven adept at uncovering new resources at Jacobina, earlier this week upping its total reserves to nearly 1 million ounces. Total measured and indicated resources now stand at over 2 million ounces.
Investors have been quick to take note of the company's success.
Since listing on the American Stock Exchange in August 2004 at $0.89, the company's stock has shot as high as $2.12. It closed March 4 at $1.86.
In revitalizing Jacobina - located in an historic Brazilian mining region with roots dating back to the 17th century - Desert Sun has made a name for itself as a junior with a large-scale ambitions.
In the process, it's also made its way to the short-list of potential acquisition targets for the majors.
Desert Sun acquired a 50% interest in Jacobina from William Multi-Tech in May 2002 after spending US$2 million in exploration on the property. The company later ponied up just C$5 million for the remaining stake in the mine.
At the moment, Jacobina is set for a 7-year life, with total production in the 750,000 ounce neighborhood. With $400-plus gold, the internal rate of return to the company is expected to tip the scales at over 50%.
Given its recent success and massive Brazilian land holidngs - Desert Sun holds the deed to a 155 km long tract near Jacobina - the company has also ramped up its exploration plans. And like most other juniors, Desert Sun has made liberal use of its stock-printers to fund these plans.
Last week, Desert Sun entered into an agreement to raise C$20 million through the sale of 8.6 million stock warrant units through Sprott Securities - which if fully diluted would increase the company's total float by nearly 11 million shares. It's not a small figure when one considers that only 73 million shares are currently outstanding.
More equity financing is likely to be forthcoming. The company has listed its 2005 & 2006 capital needs at US$70 million - or more than three times the amount of cash on its books prior to last week's financing.
And of course, there is endless speculation about Desert Sun becoming fish food for a bigger stock, or amalgamating with the likes of Alamos Gold [AGT] to form a new fast-growing gold play focused on the Americas.
