Mine a glittering prospect

The Katanning Gold Project is a step closer to reality after a scoping study showed the site has the potential to generate significant cash flow at low risk.

The study, released last week, involved identifying the best area of mineralisation at the site and completing an economic analysis of a conceptual pit.

The analysis took into consideration the number of ounces of gold available, the time it would take to extract those ounces, the cost of producing the gold and the cost of building a processing plant on the site.

Ausgold director Denis Rakich said the study proved a mine on the Katanning site would be commercially viable.

"What we were looking for was an analysis that was cash positive and that is what we have achieved," he said.

"We have an operating cash flow of around $140 million on a four-year life."

Mr Rakich said those figures were based on assumptions of a gold price at $1250 an ounce and a US dollar exchange rate of 75 cents.

The results of the analysis have given the exploration company confidence to move ahead with the next phase of feasibility studies, which means securing accurate quotes of the cost of building the mine and the required infrastructure.

Shire of Katanning chief executive Julian Murphy said an enterprise such as this would be great for population growth and retention in the town.

"Given the fact it wouldn't be a fly-in fly-out mine, it would give an opportunity to towns around the minesite to benefit from the workforce being based locally," he said.

"It would provide jobs for locals who might have those skills required, but it will also bring new people into the community that have the skills the gold mine would be looking for.

"It would be a huge benefit."

Mr Rakich said the process of creating a new mine would take time as the slowdown in the resources market made raising funds difficult.