All over the world old gold mines are being brought back to life. Long forgotten and neglected, flooded, overrun by the jungle and fallen into decay they nonetheless represent an enticing proposition at today's record gold price. Few though have quite such a history as the Raub mine in central Malaysia.
It has a dark history of plunder and neglect. With joyous early developers being driven away by invading armies and a devastating collapse in the gold market.
Today though, with gold fetching $1,300/oz, one small gold miner has returned to the Raub district. And could be about to restore a mythic mine to its glory days transforming the miner in the process.
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How a gold mine achieved mythical status
In the early nineteenth century, according to folk tales, an old man and his two sons discovered gold fields while walking in an area about 100 km north of Kuala Lumpur. As the story goes, the men claimed the fields were so rich in gold that it could be scooped out of the earth by the handful. The town and the district soon became known by the Malay word raub, meaning scoop.
The news travelled as far as Australia, where a similarity was noted between the type of gold deposit found in the spine that runs through the Malay peninsula and in the gold fields of Victoria. The Brisbane based Raub syndicate was awarded a concession. And William Bibby, of the well known Liverpool family, was engaged by the syndicate and sent out to Malaysia.
Bibby prospected along the hills north of Kuala Lumpur, and in 1893 stumbled across a particularly rich seam. He made his headquarters here at Bukit Koman and set about building the mine. It became a huge enterprise. Malaysia's first power plant was built specifically for the mine which, by 1930, was employing eight thousand people.
But this week I met Dato'Sri Andrew Tai Keow Kam, chairman, chief executive and major shareholder of Peninsular Gold (LSE: PGL), which has the mine today. He told me a little of the darker side of the mine's history.
The dark tale of the forgotten gold mine
First, he showed me photographs of the gold leaving the mine on the back of elephants, and a scorecard detailing the results of a cricket match played in 1897. Colonial life was at its height. "After the match upon the first day a dinner was given by Mr. Bibby at his bungalow, at which about 45 covers were laid and a 'sing-song' afterwards was kept up until the small hours of the morning; a most enjoyable evening was spent."
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But the fun stopped when the Japanese invaded the Malay peninsula in 1941. The workers abandoned the mine, sabotaging the machinery as they hurried away. The Japanese caught the mine's manager, took him to Changi jail in Singapore and demanded to know where the richest seams of gold lay. Refusing to reveal the secret, he was tortured and eventually executed.
After the war, the Australians returned and mining resumed. But in 1962, with gold fetching just $30 per ounce, it became uneconomic and was closed down having yielded more than one million ounces of gold since 1889.
At $30/oz the mine certainly would not make a profit today. On top of a $50m investment in processing plant, the mine's cash costs are $550 per ounce of gold produced. But with each golden ounce now fetching $1300/oz, the operation can most definitely make a profit today. This could provide a major windfall for shareholders of Peninsular Gold.
A return to the glory days
Since its first gold pour in February 2009, the plant has already yielded over 22,000 oz of gold, but Andrew Kam's sights are set much higher than this. A plant upgrade will double the processing capacity, while further exploration should increase the mine's reserves.
At present, Peninsular has some 900,000oz of gold in all categories of which around a third is accounted for by the tailings left over from past mining. The grades are not high, but the mining operation is straightforward and relatively cheap. For the future though, Peninsular is hoping to find richer seams at depth and also develop a potentially larger deposit at Tersang, some twenty km to the north.
Early drilling results have been encouraging, and we can look forward to further exploration results next year. While that is going ahead, the expansion of the plant has enabled broker Daniel Stewart to forecast a trebling of gold production over the next three years. Using a gold price of $1200, it values the operation today at 73p, with scope for a higher valuation if more gold is found or the price rises yet further.
Whether cricket will once again be played at Raub, I don't know. But Andrew Kam is determined to restore the mine to its former glory. I hope he succeeds.
Of course it helps that gold continues to escalate. And with mounting mistrust of paper currencies, I doubt that Peninsular will be the only one bringing vast gold mines back into production.
This article is taken from Tom Bulford's free twice-weekly email The Penny Sleuth
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