Sihayo reports N. Sumatra gold project update
Thursday, February 2 2012 - 07:23 AM WIB
REVIEW OF OPERATIONS
The focus of activities during the quarter was the Sihayo Pungkut Gold Project (?SPGP?) and ongoing regional exploration. Activities included infill drilling at the Sambung Resource, community development programs across seven villages adjacent to the Sihayo‐Sambung Resource, Hutabargot Julu drilling and ongoing surface exploration work and Babisik epithermal vein system surface exploration.
1. Definitive Feasibility Study ("DFS")
During the quarter, work continued on all aspects of the DFS and each of the key areas is summarised below. Progress in all key areas is on target for completion by the end of the first quarter 2012 with the exception of the updated JORC Report for the Sambung Resource, which will be completed in April.
Geology & Resource
Sihayo Resource
There has been no further drilling completed on the Sihayo Resource, as the focus has been on developing a detailed understanding of the Geo‐Metallurgical characteristics of the ore body. An investigation program was implemented using Minerex for mineralogy and petrology and CODES for a gold deportment study. This work is now complete and a greate understanding of the geo‐metallurgical characteristics of the Sihayo ore body has been developed. The results of these studies and the results of the metallurgy test work have been integrated into the overall resource data base.
Sambung Resource
An infill drill program on the Sambung Resource is continuing with 3 drill rigs. The purpose of the drill program is to covert the limited amount of Inferred Resource contained within the overall JORC Compliant Resource of 16.3Mt at 2.7 g/t Au for 1.425 Moz into the higher
Indicated Category
This drill program is on going with the JORC Compliant Report due by April 2012.
Mining
Mining Rate
Studies have been completed to determine the optimum mining rate which the project will sustain. These have concluded that due to the nature of the ore body and the types of equipment to be used that a maximum mining rate of 1.5 Mtpa of gold bearing ore extraction rate that can be achieved. The final pit designs and mining scheduling are progressing as a result of these studies.
Mining Approach
The project will be a conventional drill and blast, excavate, load and haul open pit operation.
Grade Control
Ore blocks will be delineated by reverse circulation (RC) grade control drilling conducted over 30‐40 m vertical depths. This will provide accurate block delineation and grade estimation and can be accomplished well in advance of mining requirements. It will also enable metallurgical test work to be performed if required.
Drill and Blast
Apart from the very soft clay breccia, it was considered necessary to drill and blast all the remaining gold bearing ore. Bench heights are designed to be 5 m.
Load and Haul
It has been determined that hydraulic excavators, in backhoe configuration, are the best loading units to provide the necessary selectivity, flexibility and cost efficiency for the operation. It is proposed to utilise 80 tonne class excavators, matched with 40 tonne capacity articulated AWD trucks. These trucks have the advantage of being capable of hauling up steep gradients and are able to operate safely in high rainfall conditions. Mining Operations The studies on the mining operations have concluded that an owner operated fleet is the preferred approach.
Geotechnical
A designed selection of pit geotech holes has been completed to determine the pit wall angles. A number of further holes for the pit areas and the waste dump areas are planned but they will be completed as part of the detailed engineering phase of the project.
Hydrogeology and Hydrology
Hydrogeology (relating to groundwater) and Hydrology (relating to drainage and surface water) with the open pit and waste dump sites located within a region subject to relatively high annual rainfall requires the adoption of a ?best practice? water management plan.
In‐pit water management will consist of the following aspects:
? Run‐off control and sumps;
? In‐pit slope depressurisation and dewatering; and
? External dewatering bores.
The key operational requirements will be to:
? Minimise water flows into the pit using perimeter bunds, drains and fill, wherepracticable;
? Maintain pit wall drainage; and
? Provide permanent and temporary sumps capable of handling the expected water inflows. Piezometer holes will be drilled from surface to monitor the water table level.
Pit Design
The final pit design and mining schedule is currently being completed. The schedule will include the Sihayo and Sambung Resources. The movement of ore from both pits will be transported via truck to the ROM pad where it will be either directly dumped into the crusher or stock piled to be loaded into the crusher with a front end loader. Waste from the Sihayo Pit will be transported via truck to the pit rim where it will then be placed on to an overland conveyer to be transported to the waste dump. A discharge stacker at the end of the conveyer will stack the waste material where it will be loaded onto a truck to be placed into the engineered waste dump cell. The waste material from the Sambung Pit will be deposited onto a waste dump adjacent to the pit area.
Metallurgy and Engineering
Metallurgy
A comprehensive metallurgy cyanide leach testing has been completed on all the ore intercepts within the Sihayo Deposit. This involved approx 4,500 lab tests which were designed to simulate the normal plant operating conditions that are expected at the project. All the information has now been integrated into the resource data base and the mine model which will deliver a mining and recovery block model. The ore intercepts from the Sambung Area are being completed on the same basis and will be included into the models as the information becomes available. The final Au recovery model will be completed as part of the mine scheduling output.
Process Plant
The process plant is a conventional CIL (carbon in Leach) process with single stage jaw crushing and single stage SAG milling at a throughput rate of 1.5 Mtpa. The waste material from the plant will be thickened pre detox and placed on the mine waste dump as a co‐dispersal and as such no tailings dam will be constructed. Recovered water from the thickener will go back into the process plant. Only a small proportion of makeup water will be required for the normal plant operation.
Power
A detailed study into Biomass Power is progressing with the outcome due mid February 2012 to DFS standards. This study will include the Capex and Opex for the power plant.
Overland Conveyor
The DFS for the overland conveyor for the movement of mine and plant waste material will also be completed by mid February 2012.
Infrastructure
Overall design for the entire infrastructure has been completed.
Safety and Security
The operation has been designed to operate 24hours, 7 days per week, 52 weeks per year with all design parameters being subject to risk reviews to ensure the safety and security of the companies personal.
2. Sihayo ‐Sambung Gold Resource
The current Sihayo‐Sambung Gold Resource of 16.3Mt at 2.7 g/t Au for 1.425 Moz lies on about 2.25km of the potential 5.5km trend of gold mineralisation. Gold within the Sihayo Resource is contained within ?Jasper? that has replaced calcareous stratigraphy. Geological mapping and soil geochemistry have defined gold bearing jasper mineralisation over a 5.5km strike length. The drilling program commenced aiming to upgrade the JORC Compliant Sambung Inferred Resource of 123,200 ounces Gold @ 2.2 g/t Au to the higher JORC Compliant Indicated Category.
Infill diamond drilling over the Sambung Resource commenced in October 2011 with a single drill rig. A second drill rig arrived on site in November 2011 and a third rig arrived in early January 2012. During the quarter, 1658m from 15 holes were drilled. Results containing greater than 1 g/t Au from these 15 diamond drill holes.
Geological modelling based on logging of 101 diamond drill holes through the Sambung Prospect has defined three settings of gold bearing jasper mineralisation:
1. Structurally controlled;
2. Stratigraphy controlled; and
3. Surface regolith.
The original Sambung infill drill plan designed in October 2011 budgeted 3000m for upgrading the current JORC Compliant Inferred Resource to the JORC Compliant Indicated Category. Recent geological modelling has shown that sub vertical structural control on a component of the gold mineralisation at Sambung requires further drill testing to achieve the JORC Compliant Indicated category geological confidence. Accordingly, an extra 3,000m of drilling has been allocated to test the sub vertical gold mineralisation. Notably, sub vertical mineralisation has returned anomalous to highly encouraging silver results. SAMDD096 intercepted 19.15m@ 1.92g/t Au and 36.82g/t Ag from 70.9m. Silver intercepts will be reviewed throughout the Sambung Prospect.
3. Community Development Activities
Social mapping of local communities has identified three major areas that Sihayo Gold can assist in community development:
1. Agriculture ? cocoa, rubber, rice, vegetables, fruits and animal husbandry;
2. Services ‐ health, education and small business generation; and
3. Infrastructure ? water, sanitation and microhydro potential
Currently, 26 separate projects setup under 13 cooperatives involving 566 people from the local community are in progress. The Company has identified that the main issues that the local community have in regard to agriculture are:
1.Access to markets to sell produce
2.Access to quality seed or animal stock
3.Access to training for best practice applicable agricultural techniques.
Current programs have included setting up nurseries supplying quality seed / fruit tree stock, establishing breeding stations for different livestock including goats, chickens, pigs and fish.
Training has commenced in best agricultural practices such as composting, pruning, and contour planting.
Once agricultural products reach required quality levels through best stock and best agricultural practice, the company will assist local communities in improved marketing strategies.
Ultimately, cooperatives involved in these agricultural projects will become profitable and self sustainable providing extra income to communities.
In line with our overall Community Development Plan, the first of 3 community centres has been opened. The Community Centre will initially be used as a children's library and basic computer training centre, followed by other educational programs that will be determined by the local community.
4. Hutabargot Julu Exploration
The Hutabargot Julu Prospect is located 7km south east of the Sihayo‐Sambung Resource. The Hutabargot Prospect is underlain by a dactitic dome complex and dissected by the Trans Sumatran Fault Zone. Dacitic stratigraphy has been hydrothermally brecciated and magnetite destructive claysilicapyrite altered defining an approximate 6km * 2km intermediate epithermal gold complex footprint. Significant mineralisation is structurally controlled veining within hydrothermal breccias. Historic drilling yielded a best significant intercept of 5m @ 36.7 g/t Au from 47m from Quartz‐ Sulphide veining.
Reporting period drilling (7 diamond drill holes for 1711m) has focussed on low grade gold / high tonnage gold targets defined by surface geochemistry, geological mapping and an induced polarisation survey. A surface plan summarising diamond drilling to date. Drill results have been encouraging with a best intercept of 5.9m @ 3.82 g/t Au from 54.3m in HUTDD026 and are shown in Table 2. Gold mineralisation is hosted by colloform banded chalcedonic and vuggy white quartz associated with pyrite arsenopyrite, sphalerite, and galena with localized chalcopyrite.
The next step for drilling at the Hutabargot Prospect will be to target known veins yielding significant historic drill results. The aim of the drilling will be to test the strike and depth extent of veins for economic gold mineralisation (high grade / low tonnage gold). Drilling will commence on the Sarahan Vein where a number of historic significant gold intercepts were achieved.
Currently, the Hutabargot drill rig is being utilised in the Sambung infill drill program. On completing the infill drilling at Sambung the rig will return to Hutabargot. Surface exploration (soils, geological mapping) will continue throughout the first quarter of 2012.
5. Babisik Epithermal Gold Prospect
Babisik surface exploration programs commenced in October 2011 and have progressed well. Exploration activities included geological mapping and grid soil within a 2km2 area. Fifty one rock chip samples and 858 soil samples were collected.
The Babisik Prospect is underlain by Permian volcanic agglomerates that are unconformably overlain by sandstones and conglomerates to the north of the prospect area. A number of quartz veins +‐ manganese +‐ limonite up to 15m wide are traceable over 500m of strike length. Best rock chip results to date yielded 5.32 g/t Au and up to 400 g/t Ag.
Local Mining Activity
Local miners continue to operate in a number of locations within the COW Area. Whilst this activity is illegal under Indonesia law, unless the miners have a valid permit, the activity levels tend to be most closely linked to the gold price movements.
Our responsibility is to report all occurrences of local mining activity to the relevant Government authorities on a regular basis.
From an environmental and health perspective, we have also produced information sheets for distribution to villages nearby the locations of local mining explaining the range of possible negative impacts of the mining.
At no time during the quarter did the activities of the local miners interfere or impact our own work programs. (end of excerpt)