The first cut of the Beresford portal has been taken from the base of the Westralia open pit.

Development of the decline will work towards accessing high-grade lodes at the southern end of the Beresford deposit, which is expected to occur in November.

Dacian executive chairman Rohan Williams said the start of underground mining was a major milestone.

“This is a tremendous result for the company, its shareholders and employees,” he said.

“We started as an exploration IPO just four and a half years ago, and as a result of our exploration success, we are now firmly on the path to becoming Australia’s next mid-tier gold producer.

“We are fully funded to first gold production in March next year.”

Production at Mt Morgans is set to average 186,000 ounces of gold per annum in the first four years at all-in sustaining costs of $1039 an ounce via the Jupiters open pit and Westralia underground.

The Westralia underground has a reserve of 492,000oz and yesterday Dacian released numerous high-grade intersections from outside of that reserve.

Hits from outside the planned upper levels of Beresford included 7m at 31 grams per tonne gold from 174m; 1.7m at 56.5gpt from 189m; 1.9m at 46.8gpt from 288m; and 2.9m at 9.4gpt from 198m.

The company said the results highlighted the potential for additional early production sources and allows the company to consider bulk mining methods.

Argonaut Securities analyst James Wilson said the news was positive and maintained a buy rating and $3 price target.

“We believe the recent pull back in the sector has seen Dacian retreat from the recent raising price of $2 per share and provides an opportunity to accumulate this quality developer at 0.6x p/NAV vs the sector average of 0.8-0.9x,” he said.

“June quarter expenditure is forecast at $42 million and we believe that as construction progresses that de-risking of the project will occur and the discount to our valuation will unwind.”

Dacian shares were up by 2% in early trade to $1.73.