TORONTO (miningweekly.com) - Aim-listed Vatukoula Gold Mines expects to be producing at an annualised rate of 100 000 oz/y by the company's second quarter - the three months ended February 2011 - and is considering an expansion to double throughput and gold production in the medium term, CEO Dave Paxton said on Wednesday.

The company is also planning to apply for a secondary listing in North America, with the goal of improving its market value through greater exposure, he said in an interview in Toronto.

"It's down to valuations," Paxton said. "We are currently valued at $40/oz, while North American underground gold-mining companies are valued at $200/oz-plus.

"So the London market's just not giving us the valuation that I think we should have."

Vatukoula shareholders will also vote next week on a proposal to consolidate the firm's shares on a 50-to-one basis, partly in preparation for the listing in North America.

Paxton declined to comment on which exchange the company is looking at. Vatukoula's two biggest shareholders are Sprott Asset Management, with 18,3%, and Vancouver-based Canadian Zinc Corporation, with 15,4%.

EXPANSION PLANS

Vatukoula produced 21 107 oz of gold in its fourth quarter (ended August 31), and Paxton said he expects to be up to 25 000 oz in its second fiscal quarter, the three months ended February 28.

The company - then called River Diamonds - bought the Vatakoula gold mine in Fiji in 2008. The mine has produced seven-million ounces over 74 years.

However, South Africa's DRDGold had put the operation on care and maintenance in 2006, after it decided that mining was not economically viable. The asset was sold to a company called Westech Mining a year later, and then onto what was then River Diamonds.

The company has worked hard to get the mine operating smoothly, increase underground development and push costs down, and the effort is now paying off, Paxton said.

The firm will not need to raise funds for exploration or development at the mine over the coming months, and Paxton said he would prefer to see the share price rise before considering any future financings.

"We've got 13-million pounds cash, we're making a profit at the moment, we are well covered for what we are doing at the moment.

"Any money that we would raise in the future would be expansion money."

The company is looking at doubling production at Vatukoula in the future by adding additional hoisting capacity, Paxton said.

The timing will be determined by exploration progress, but a second shaft could probably be developed reasonably quickly once the decision is made, he said.

The Vatukoula mine has a 43-year mine life, based on 100 000-oz/y production rates. Paxton is also optimistic about the exploration potential for the area surrounding the mine.

POWER PLANS

Vatukoula reported average cash costs of $647/oz in its fiscal fourth quarter, and is targeting costs of below $600/oz, which Paxton said should be achievable as underground production ramps up.

In the longer term, the company is looking at shaving a significant piece off operating costs if it can get plans for a 25-MW wood-fired power station off the ground.

Power at the moment comes from diesel shipped to the mine site, and represented around 40% of operating costs in the company's 2010 financial year.

Vatukoula is in talks with a New Zealand-based company that would build, own and operate the power station, which could begin commercial operations by around 2013, Paxton said.

The gold-miner would expect to buy 20 MW itself through an offtake agreement with the power station developer, and the other 5 MW would go into the local grid.