Sihayo reports N. Sumatra gold project update
Friday, July 29 2011 - 08:58 AM WIB
REVIEW OF OPERATIONS
1. Definitive Feasibility Study (?DFS?)
DFS capital cost estimates are now 98% complete and the operating costs (per tonne of ore basis) are 97% complete. All capital and operating cost estimates have been completed to the required DFS level of accuracy of +1- 10%.
The following key parameters provide a high level summary of the DFS outcomes to date:
? Capital cost of US$80.4 million plus 10% contingency allowance
? Standard Carbon In Leach (?CIL?) processing plant with 1.25Mtpa capacity
? Life of Mine (?LOM?) average tonnes processed of 1.2Mtpa
? LOM average gold production of 72,0000zpa
? Estimated mine life of 7.2 years
? LOM average strip ratio of 5.4:1
? LOM average gold process recoveries of 70% - 72%
? LOM average cash operating costs (including royalties, excluding corporate) of US$45.40 per tonne of ore processed or US$752/oz gold produced (power costs based on diesel generation using Tapis oil reference price US$115/bbl)
The key components of the capital cost estimate of US$80.4 million are:
? Owners cost to first gold pour: US$10.2 million
? 1.25Mtpa CIL Processing Plant: US$24.2 million
? Infrastructure & Services: US$39.4 million
? EPCM contract: US$6.6 million
The key components of the forecast LOM average cash operating costs are:
? Mining costs: US$20.22 per tonne of ore processed
? Processing costs: US$20.77 per tonne of ore processed
? Total mine admin plus royalties: US$4.41 per tonne of ore processed
Current forecast cash operating costs are above the LOM average in the initial years of operation reflecting the combined impact of below average head grades and the flat 70% - 72% gold process recovery factor currently being estimated of the projected mine life.
The remaining work to fully complete the DFS is focused on the gold process recoveries on a year-by-year basis. Whilst this additional work does not impact capital costs or cash operating costs on a per tonne basis, it does potentially have a significant impact on the derived cash operating costs per ounce of production.
The primary benefit of this additional process recovery work relates to the improved predictability of gold recoveries throughout the entire mine life.
There are a number of key areas where the results projected in the DFS to date can potentially be improved:
Mine life estimate- The current mine life estimate does not include any Inferred Resources. Planned infill drilling at the Sambung deposit is likely to contribute to an increase in overall Indicated Resources and mine life. In addition, drilling along the strike from the current Sihayo pit, to the northwest and southeast, has highlighted potential to substantially increase overall resources.
Higher throughput potential- Further infill drilling at the Sambung deposit and drilling along the strike from the current resource boundary may provide scope to increase the throughput rate of the plant beyond the current 1.25mtpa rate. As drilling is completed, pit optimisation and mine scheduling will be reviewed to ascertain the potential economic benefits of an increase in plant capacity.
Gold process recoveries- Actual metallurgical test work recoveries of 85% - 95% have been achieved within sections of the more highly oxidised shallow mineralisation at Sihayo. However, based on the existing ore classification parameters any benefit from above average recoveries in the early years of operation has not been defined. The additional process recovery work may determine that recoveries above the 70% - 72% average are achievable in the early years of operation, however this will only be validated when the additional work is completed.
Power costs- Current operating cost estimates reflect the sole use of diesel generated power across the operation. At current Tapis oil prices of US$115/bbl, power costs are significantly impacted. Work continues on a seperate feasibility study for a dedicated hydro power plant of approximately 6MW - 8MW capacity. If the feasibility study is successful this would have a significant positive impact on operating costs in the future. Estimated hydro power costs are approximately 50% lower than current diesel power costs. The feasibility study is forecast to be complete by October 2011.
The focus of work over the next quarter is to complete the outstanding metallurgical recovery work.
2. Sihayo Pungkut Gold Project
Following the previously announced upgraded JORC compliant resource estimate of 15.7Mt at 2.8g/t containing 1,402,000 ounces in late March, activities for the June quarter were designed to further extend the known resource boundaries of the Sihayo deposit and to commence infill drilling at the Sambung deposit with the aim of upgrading that resource from Inferred to Indicated status.
Table 1 below summarises significant results for drill holes SHDD5O5 to SHDD514, which included high grade intersections at depth in SHDD5O6: 17m @ 6.5 g/t Au from 252m and 3m @ 7.6 g/t Au from 302m.
Unfortunately activity levels were impacted by social issues during the quarter.
On Sunday 29th May, a group of local demonstrators, believed to be supported by the representatives of illegal artisanal miners from the region, arrived and disrupted Sihayo?s exploration camp.
The demonstrators caused significant damage to the Company?s exploration camp.
Police reports received By the Company, confirmed that a significant number of demonstrators have been arrested and detained (awaiting prosecution) over the damage to the exploration camp.
The swift action of the police has sent a very clear message to the broader community and specifically those associated with the illegal artisinal miners, that unlawful actions will not be tolerated and those people responsible for such actions will be held accountable.
To facilitate an efficient re-build of the exploration camp, the Company has recently secured the short term lease of a Bell 206 Longranger helicopter.
With drilling activities expected to resume in September, the initial focus will be infill drilling at both Sihayo and Sambung deposits. At the completion of the infill drilling program, focus will shift to continued resource extension and exploration drilling along strike of the two deposits.
Figure 1 below shows the Sihayo and Sambung resources and highlights the potential resource extensions to the northwest and southeast of the Sihayo deposit.
3. Regional Exploration
Despite activities being impacted at the Sihayo deposit during the quarter, regional activities continued uninterrupted throughout the quarter.
Drilling continued at the Tambang Tinggi gold copper prospect, pre-drilling exploration work continued at the exciting Hutabargot Julu epithermal gold prospect (located only 8km from the Sihayo deposit) and work commenced at a new area, the Huta Pungkut gold copper skarn prospect which is located along trend from Tambang Tinggi.
Tambang Tinggi gold I copper prospect
The highlight of the quarter was the high grade gold results achieved in holes TTDD010 and TTDD060.
TTDD010: 10m @ 39.2 g/t Au from 18m including 2m @ 193 g/t Au from 20m.
TTDD006: 30m @ 3.90 g/t Au from 104m including 12m @ 8.60 g/t Au from 122m.
Exploration drilling within the Tambang Tinggi region has been planned in two phases; firstly, the drilling of four near surface gold prospects and secondly, the drilling of deeper potential copper / gold mineralisation targets.
The Tambang Tinggi region is underlain by intercalated andesitic volcanics and limestone. Younger dacitic volcanics and sandy conglomerates overlie the andesite / limestone sequence. A hornblende diorite, weakly to moderately magnetic, has intruded the andesite / limestone sequence. Quartz diorite as later intruded the hornblende diorite in interpreted favourable structural settings. Macro structural features of the Tambang Tinggi region are controlled by the deep seated Trans Sumatran Fault System. Figure 2 below is a surface plan of the Tambang Tinggi Region.
The intial results of the first nine holes of the new drilling program at the Tambang Tinggi prospect have been encouraging. Gold mineralisation is related to quartz-pyrite?chalcopyrite stockwork veining within a broad quartz-sericite-tourmaline-pyrite?chalcopyrite alteration (phyllic alteration) zone.
Figures 3 and 4 below show the current drilling plan and a cross section of the Tambang Tinggi drilling to date.
The current Tambang Tinggi drilling plan is to complete two diamond drill holes at the Tambang Bawah prospect and then begin scout drilling at the Tambang Ailul prospect.
Tambang Ailul is potentially an extension of the Tambang Tinggi mineralisation. Field inspection at Tambang Ailul (refer figures 2 and 3) demonstrated that mineralisation and alteration is the same style as Tambang Tinggi and suggests a potential strike length of approximately 850m of gold stockwork veining, which requires significant drill testing.
Tambang Tinggi phyllic alteration is similar in style to known phyllic alteration zones adjacent to a number of significant porphyry copper-gold deposits. Notably, highly anomalous Cu was intersected in drill holes TTDD008 and TTDD011:
TTDD008 63m @ 0.55 g/t Au and 0.09% Cu from 196m including 27m @ 0.39 g/t Au and 0.12% Cu from 232m (Note: No cut off or dilution factored in gold calculation)
TTDD011 46m @ 0.35 g/t Au and 0.13 % Cu from 116m including 18m @ 0.52 g/t Au and 0.09% Cu from 116m (Note: No cut off or dilution factored in gold calculation)
These highly anomalous copper results indicate that copper mineralisation is stronger at depth, which is consistent with the interpretation of an underlying Porphyry Copper-Gold system.
A deeper capacity rig will be required to properly explore the porphyry copper potential and this will be scheduled for later in the year.
Hutabargot Julu epithermal gold prospect
Exploration work during the quarter included mapping, soils and rock chip sampling.
The work program has significantly expanded the known mineralisation potential of the prospect to the north east and west (refer figure 5 and 6 below).
New mineralised vein systems have been discovered to the east (Fault vein) and to the north (Kapora prospect). Soil and IP programs will be extended to the north and west to cover the expanding anomalous zones.
The Kaporas soil gold anomaly is approximately 1 x 1 km sq and open to the north and under cover to the east The anomaly is consstent with a broad area of magnetite destruction (alteration) and represents a high priority target for bulk tonnage gold potential.
A second anomaly located in the northwest of the current grid (500 x 500 m sq) is open to the north and west and is consistent with a mapped granodiorite intrusive.
Gold mineralisation at Hutabargot Julu is hosted in epitheral veins and structures within a north-south trending belt of dacitic volcanics. The mineralised vein systems are covered to the south by post-mineral acidic (dacite rhyolite) flows and pyroclastics and to the east by quaternary alluvium.
An initial drilling plan comprising 7 holes (approximately 2,100m) has been prepared for the Saharan vein system (refer figure 6 below) targeting down-dip extensions of the vein at the 200mRL level.
A further 16 - 20 holes (approximately 4,000m) has been planned or the Sunday - Fault vein systems to test the coincident soil, IP and geology anomalies.
Plans for drilling the Kaporas prospect will be finalised when all soil and IP results are returned.
Hutabargot Julu is a high priority for further exploration and potential discovery of both high grade - low tonnage gold deposits and bulk tonnage - low grade gold deposits.
Drilling is expected to commence in the December quarter.
Huta Pungkut gold and copper skarn
This new area is located 5km northwest and along trend of Tambang Tinggi. Refer figure 7 and 8 below.
The area was identified from the regional stream geochemistry survey and confirmed by the recent aeromagnetic survey. The area comprises a broad zone (5.1 km strike length) of strong stream sediment gold anomalism (>10 ppb Au in 30 mesh BLEG). The prospect area is the most geochemically anomalous region within the COW with all drainages sampled along the trend returning anomalous values. The anomalous stream sediments appear to have a close relationship to magnetic anomalies suggestive of skarn type mineralisation.
The area presently has been divided into 3 prospects (Red Hill, Crown Hill and Blue Ridge) identified in reconnaissance exploration associated with small scale mining activity and possible vegetation anomalies similar to that at Tambang Tinggi.
Gold and copper skarn style mineralisation is hosted in limestones intruded by porphyry and the Mauri Sipongi granite.
A fly camp has been established in the Red Hill area to facilitate geological mapping and soil sampling on a 100m nort-south grid with samples at 50m spacings. Initial rock chip sampling of the skarn alteration zones has returned values as high as 30 g/t Au and 5% Cu.
Field work will be ongoing during the September quarter.
Airborne Magnetic Survey
The aeromagnetic survey of the COW - North and South blocks, has been completed.
The surveys, flown by GPX Surveys Pty Ltd, of Perth, Western Australia, used 20Dm line spacings (flown east-west), closing to 50m spacings over areas of higher interest. The nominal flying height was 80 metres.
The magnetics for the North block has been effective in highlighting known prospects and identifying new opportunities. The survey highlights the dominant northwest trend of the geology and structure related to the Sumatran fault system. The most obvious anomalies appear to be:
? Arcuate linear highs enveloping broad lows reflective of potential skarn mineralizationrelated to porphyritic intrusions into enclosing sediments and / or volcanics;
? Broad zones of ?flat? magnetic signature possibly reflective of magnetite destruction (alteration of magnetite to clay) related to porphyry intrusive activity.
The magnetics of the South block are dominated by a west-northwest trending magnetic complex near the centre of the survey area and a similar complex zone of magnetic highs on the northern edge of the survey that has a general northwest trend (Huta Pungkut area). The northern magnetic anomaly is directly coincident with the strong gold geochemistry of the Huta Pungkut area and further confirms this as a priority target for skarn hosted mineralisation.
As with the North block, the South block survey was effective in highlighting known prospects and identifying new targets.(end of edited excerpt)