Sumatra Copper plans new drilling program at Tembang gold project

By Ruli Setiawan

ASX-listed Sumatra Copper & Gold Plc said it plans to carry out another three-month drilling program at its Tembang gold project in Sumatra mid-December to help further improve the economic prospect of the project amid the current volatility in commodity prices as it wants to seek additional external funding.

?Sumatra therefore intends to undertake an additional drilling program of approximately three months duration, commencing in mid-December 2013, with the objective of converting further Inferred Resources into Measured and Indicated Resources and also to test near-surface exploration targets at Tembang where there is strong potential to delineate additional shallow mineral resources at low cost which could be included in the early part of the production schedule,? the company said in an update statement of the project received Wednesday.

The new drilling plan came after the company said it has completed a previously announced program to upgrade the Mineral Resources of for Asmar Main, Belinau and Buluh main deposits at the Tembang project to 2012 JORC compliance and develop a new mine plan in response to the tougher debt funding condition brought about by the sharp fall in price of gold during the June 2013 quarter.

?The work program outlined in the ASX Announcement of 17 September 2013 has now been successfully completed and the Mineral Resources for the Belinau, Buluh and Asmar Main deposits have been upgraded to comply with 2012 JORC requirements. These Mineral Resources are now based 100 per cent on diamond drilling, which significantly increases the confidence in the Project resources,? the company said.

A revised LOM (life of mine) Plan has also been developed, incorporating the new Mineral Resources and using more conservative gold price assumptions. This plan demonstrates robust Project economics, with targeted production peaking at 44,000oz of gold and 365,000oz of silver per annum by year 3 at a highly competitive forecast C1 cash operating cost of US$555/oz (excluding royalties) and an all-in-sustaining-cost (AISC) of US$872/oz, it added.

Elsewhere, Sumatra said that following the proposed in-fill drilling and exploration program, the existing Mineral Resource models will be further updated to incorporate the additional drill results enabling a revised LOM Plan to be developed. This is expected to enable the Company to finalise the financing process to complete project funding.

?Sumatra has stopped Project construction activities while the additional drilling program is being conducted and until financing for the Project is finalised. This will necessarily delay the timing of the proposed commencement of operations,? it said.

However, the company considers that the incorporation of additional low-cost ounces in the early years of the Project and targeting mine life extensions through the conversion of further Inferred Resources is a prudent response to the current low gold price environment and will ultimately minimize shareholder dilution.

To date, the company has incurred capital expenditure of US$15 million at the Tembang Project with the Cost-to- Complete estimated at a further US$35 million of pre-production expenditure. This estimated Cost-to-Complete may be revised subject to completion of the final revised LOM plan following the proposed additional drilling program.

Sumatra also said that has entered into a letter agreement with Provident Capital Partners to provide an unsecured convertible debt facility of US$4 million under the company?s available ASX Listing Rule 7.1 placement capacity and subject to compliance with all regulatory guidelines including the ASX Listing Rules. The facility can be draw down in two tranches; the first tranche of US$2.5 million, expected to be drawn on completion of documentation in the coming weeks, and the second tranche of US$1.5million available to be drawn based on certain conditions precedent including satisfactory progress on the planned drill program at the Tembang Project.

Editing by Reiner Simanjuntak