Australia's Magnum Gold to acquire gold project in Lampung

Australian mining firm Magnum Gold NL said Friday it had signed a Letter of Intent to purchase a 12,790-hectare mining concession in Lampung province, the Way Linggo project, which contains defined gold resources and could be profitably mined.

?All approvals for the start of mining including camp sites, mill sites, tailings dams, etc., are in place and it is hoped that construction and stockpiling can be commenced immediately due diligence is completed,? Magnum said in a statement.

Magnum said the consideration for the purchase of Way Linggo will be US$3 million cash and 9 million of its Fully Paid shares.

According to Magnum, the Way Linggo Project is part of a mineralised epithermal system containing gold and silver bearing quartz veins. Veins and alteration have been identified over approximately 800m strike length in dacite and andesite volcanic host rocks.

Way Linggo has been extensively explored, initially by Ashton Mining Limited and later by Meekatharra Minerals Limited, with, reputedly, in excess of US$9 million being spent on exploration, resource definition and mining, metallurgical and other studies, Magnum said.

Magnum also said the project?s vendors had already successfully modelled a mining technique using a production rate of 60,000 tonnes per annum over a period of 6 years to produce totals of 135,000 ounces of gold and 1,350,000 ounces of silver at average operating costs of approximately US$200 per ounce.

Magnum said its directors confident that additional resources could be found and that the mine will have a life longer than the expected 6 years.

?Preliminary studies indicated that with an anticipated recovery of more than 20,000 oz Au per year the company should be debt free within 18 months and, with costs below US$200 per oz Au, show a profit in excess of US$4 million per year ? or more than 5 cents per share on current issued capital,? Magnum said.

Magnum said once 100,000 oz Au have been extracted it will pay the vendors a royalty of US$20 per oz Au on further production up to a maximum of 500,000 oz Au.

Magnum added that it had appointed ACA Howe, a geological and mining consultants, to prepare a bankable feasibility study for Macquarie Bank. (Robert)