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Tagged with: Reports

Jul 2004 - Heritage Gold NZ

Heritage Gold NZ Ltd (HTM) – Recently Completed Scoping Study Highlights the Viability of HTM’s Karangahake region

  • Heritage have recently completed a scoping study which focused on the mining viability of the Talisman mine within the Karangahake Project, and resulted in a conceptual relatively small underground operation treating ore at an average grade of 13g/t and producing 50,000ozpa from late 2006 / early 2007.
  • Heritage have made significant progress in the past year and recently announced initial indicated and inferred JORC gold resources of almost 110,000oz (335,400t @ 10.2g/tAu & 40.7g/tAg) in the old Talisman mine, as part of the completion of Phase 1. HTM have already started on their Phase 2 aimed at defining a 300,000ozgold equivalent resource on which to base a preliminary feasibility study.
  • Consequently HTM are in the process of refurbishing part of the old Talisman mine and have focused on the adit accessing the 8 Level Maria Lode (and extension on strike to the BM37 cross-cut), with its link through a main cross-cut into (and on the same elevation due to a different numbering system) 5A Level Crown/Welcome Lode. The main cross-cut also passes through the Mystery Lode, which has little historical record, but also appears to contain mineable resources.
  • The BM37 cross-cut was renowned in the early 1990s because of its intersection of 1.8m @ 682 g/t gold and 2,094 g/t silver, with grab samples reputedly up to 1.4% (13.8kg/t) gold. It had been overlooked because it lies in the Dubbo shoot or section which was historically regarded as unpayable. While the BM37 area has been partly “grab-mined” before the previous mine closed in the early 1990s, it appears to have been barely touched from a mining viewpoint.
  • Apart from the old Talisman section, there appears to be a number of potential ore sources within Karangahake and its adjacent region, based on the examination of the mine plans, extensions on strike north-east beyond Taukani Hill to Rahu, and south-west into the Dominion Knoll region.
  • At Rahu (north-east on strike from Karangahake) and following a conceptual downthrown model, HTM are drawing parallels between the similar geological setting, geophysical resistivity anomalies and delineated vein structures of the Favona discovery near the Martha Mine, to the geological setting and resistivity anomalies at Rahu. Some initial drilling has found encouragement.

Aug 2004 - Michelago Limited

Michelago Limited (MIC) – Approaching BioGold Plant Acquisition Final Approval

  • The approved restructure of Laizhou Jincheng Gold Mining Company (the primary vendor of the BioGold Facility) into a private company by the Laizhou City Government in June 2004, has advanced MIC into the final approval stages.
  • The submission of the final financial audit to June 2004 by Deloitte, Shanghai in mid-August 2004, infers that final approval (MOFCOM and SAFE) at the Shandong Province level to acquire 82% of the BioGold SFJV and hence the BioGold Facility is expected to be attained within the next 3 months to the end of November 2004.
  • The required acquisition cost of ~A$12m for 82% of the BioGold Facility is being met from a combination of MIC’s own cash, the almost $4m BacTech agreement at $0.13 per share and a $6m Convertible Note facility (expected to be at least $0.13 per share) with the LinQ Resources Fund (prev Rothschild Golden Arrow Fund).
  • On attaining final approval, MIC becomes entitled to up to 20% of the spot gold price for 82% of the ore being treated through the bacox and cyanide leach circuits, currently of 140,000ozpa to 160,000ozpa, but increasing to a rated 200,000ozpa, and expected to expand further beyond that.
  • MIC can also attribute 51% of 82% of the 300,000ozpa in dore treated at the refinery (on which it only receives a marginal profit), received from processing through the bacox and cyanide leach circuits and ~100,000ozpa purchased dore.
  • Virtually nothing currently appears to be being ascribed in MIC’s share price to the Shandong Exploration SFJV with Laizhou Jincheng in which MIC has an LOI to earn a 51% interest in any JV areas below 500m from surface. Based on a visit to Dongji (one of the current four mine properties), the mineralisation (which can be significant) appears capable of continuing deeper there from the last intersection of 5m @ 18.2g/t, already about 480m below surface.

Aug 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) –Prominent Hill Now in Oxiana’s Production Schedule for Commissioning in late 2007 / early 2008

  • Oxiana Limited (OXR) gave a detailed presentation (which we attended) in Adelaide on 26 August 2004, on their expectations for MNR’s Prominent Hill initially averaging 90,000tpa copper and 110,000ozpa gold from 2008, and its inclusion within OXR’s production schedule on the basis of owning 100% of it.
  • OXR envisage completing an infill drilling programme/pre-feasibility study at a cost of $5m within 9 months to June 2005, earning them 35% of Prominent Hill. Followed by spending $25.5m (to earn 65%) during an up to 12 month full feasibility study and then 18-month construction period leading into 7.5mtpa open-cut production for up to 5 years from late 2007 / early 2008.
  • The estimated capex of A$350m does not include the potential 200,000oz (or more) gold halo surrounding, and gold mineralisation east of, the copper-gold orebody, which could reduce the outlay by at least $50m, pay for the 100m to 120m pre-strip and result in gold production during 2007. The capex may also be reduced by SA Government concessions and/or offtake agreements from China or elsewhere.
  • MNR’s share price has risen close to the conceptual value of $1.65/share that was based on capex of $200m in ERA’s October 2003 report. The usual “rule of thumb” for a project’s approval is to at least achieve the required capex as the NPV (at 10% or 12% and being in Australia, there is no political risk). Consequently, capex of $350m infers that MNR’s market cap has a minimum capability of $123m or $2.35 per share, implying that it could trade between $1.50 and $2.10 per share.
  • The inclusion by OXR of 100% of Prominent Hill in its new forecasts (it was included at 65% in OXR’s presentations around 5 August 2004) does enable OXR to achieve its stated 5-year targets of producing 200,000tpa of copper and 500,000ozpa in gold, and could infer that at some stage OXR may make a takeover bid for MNR. Such a bid could occur by May 2005 ahead of completion of the prefeasibility study, and possibly be in the form of scrip or scrip and cash.

Nov 2004 - Berkeley Resources

Berkeley Resources Limited (BKY) – Drilling its first Project (Xin Zhuang) in the Jiaodong Peninsular of Shandong Province

  • Berkeley has so far established two joint ventures in the Jiaodong Peninsular which is located in the eastern Shandong Province of China, being Ao Xin (an approved SFJV with the Shandong HeXi Gold Mining Group) in western Jiaodong, and Jin Xin (an applied for business licence with the 3rd (Geological) Brigade of the Shandong BGMR (Bureau of Geology and Mineral Resources) in eastern Jiaodong.
  • The first drilling programme has commenced in the Ao Xin JV over the Xin Zhuang prospect which is defining the gold mineralisation under alluvial cover on the primary Jiao Jia fault structure. There are numerous operating gold mines along the exposed Jiao Jia fault structure, and east and west of where the Jiao Jia fault goes under the alluvial cover. BKY are drilling a section between those mines.
  • The Xin Zhuang prospect covers a flexure in the Jiao Jia fault, which bears some resemblance to HeXi’s primary 1.2moz operating mine that lies on a flexure in a secondary fault east of the Jiao Jia primary structure. The initial drilling has produced similar core to HeXi being up to 8 to 9% pyrite in potassium altered (red/pink coloured) granite. However, initial intersections have only been in the
  • 0.7g/t to 2.0g/t vicinity. HeXi has a complex multiple stacked lode system, and these intersections could still be representative of a similar system.
  • On receipt of the business licence, the Jin Xin JV with the 3rd Brigade expects to focus on 3 (of the 8) properties being Shen Shan (containing Kong Xi Shan), Liu Shui Tou (containing the conglomerates), and Ying Wu Shan (containing Wen Deng). All are based on semi defunct gold mine operations, which have had some surface mining and occasional shallow underground mining.
  • With the lowest market cap (at less than half of the next lowest) of its Australian gold company peers in China as shown in Table 1 on page 6 of this report, BKY’s share price could easily suddenly increase.

Nov 2004 - Dragon Mining

Dragon Mining NL (DRA) – Bringing Scandinavian Gold Mines into Production

  • Dragon are currently completing construction of their first gold mine in Scandinavia, being their 80% owned Svartliden in northern Sweden commencing in the December Quarter 2004 at an expected production rate of 65,000oz to 70,000oz and cash cost of ~US$190/oz in the first year of the project, based on treating 300,000t at 7.2g/t. Production has been estimated to average 55,000ozpa at cash costs of ~US$230/oz over the mine’s current 5-year life.
  • This is expected to be followed by the wholly owned Vammala operational centre (comprised of Orivesi and Jokisivu) in SW Finland. Exploration is currently extending the reserves and resources at Orivesi, while delineating the extent of Jokisivu for a decision to mine to be made in December 2004. Should the expected approval be given, then production at 60,000ozpa to 80,000ozpa could commence perhaps as early as July 2005 at cash costs of ~US$210/oz.
  • Pampalo in SE Finland could become the third operation for Dragon possibly from mid-2007 at production of 40,000ozpa to 50,000ozpa or so. Resources of almost 200,000oz (0.9mt at 6.9g/t) have been established, and deepening of the decline and establishment of the drill positions for deeper extensions has commenced. There are a number of smaller resources amongst nearby possible satellite operations.
  • Our 5%NPV for Dragon is A$0.30 per share based only on the above 3 potential operations and not giving any credit for the number of other, mainly Finnish, exploration properties that could also become operations. It should be noted that the mine lives should be longer, and our modelled grades could easily be more than 10% higher (each 10% increase in realised grades currently adds A$0.09 to the NPV)

Nov 2004 - Michelago Limited

Michelago Limited (MIC) – Heading for Attributable Gold Production of 215,000ozpa based on 50% ownership of Gold Ridge and its BioGold SFJV (once approved) in China

  • On 29 November 2004, MIC announced that it has become a 20% shareholder in a consortium to acquire the Gold Ridge mine in the Solomon Islands from the American Home Assurance Company (AIG), with a strategy to acquire an additional 30% in the ASG consortium and fund 50% of the acquisition.
  • As part of the funding, MIC has placed 200m shares at 10c (with a 1-for-2 free option at 15c to December 2006) to raise A$20m subject to shareholder approval in late December 2004. The A$20m is to be used to pay the first funding requirement of A$13m (US$10m), $6m as part of the entry into the BioGold SFJV and A$1m for general working capital.
  • The ASG (Australian Solomons Gold P/L) consortium estimates that up to US$90m could be required to purchase the Gold Ridge mine and return it to production of 150,000ozpa for 10 years from the second half of 2006, based on 2.3moz of resources and 1.7moz of reserves as at June 2000.
  • Gold Ridge operated successfully for almost 2 years before it was suspended in unrest following a coup in June 2000. However, the intervention of the Regional Assistance Mission to the Solomon Islands has since restored sovereign stability, and aid has been injected to significantly improve the Islands’ infrastructure.
  • With 75,000ozpa for 10 years and 82% (after SFJV approval) of BioGold’s 170,000oz (ahead of the expansion), MIC could be able to attribute 215,000ozpa of production from 2006. There is a further 51% of 82% of 90,000ozpa from the gold refinery, although margins on dore are almost negligible at 1%.
  • Conceptually Michelago’s market cap could increase to over $200m representing an almost doubling of its current share price of about 10 to 11c. Our target of >20c for MIC remains, rating it as a SPEC BUY.

Dec 2004 - Minotaur Resources

Minotaur Resources Ltd (MNR) – Just How Much Is MNR Worth ?

  • This report determines a potential value for MNR of A$2.70/share according to perhaps its base case worst scenario. Applying seemingly realistic copper price sensitivities soon enhances the underlying value to beyond A$3.00 per MNR share.
  • On 9 November 2004, Oxiana Limited (OXR) announced that it had reached an agreement to takeover MNR by a “scheme of arrangement” in which MNR shareholders would receive 1.85 OXR shares –for- 1 MNR share (representing the Prominent Hill assets and liabilities), and 1 MinEx (Minotaur Exploration share, representing the rest of Minotaur, at an estimated IPO of 40c/share)
  • Although we do recommend that MNR shareholders vote in favour of OXR’s offer when it occurs on its expected date in January 2005, it does beg the question as to what MNR is actually worth through OXR and MNR’s remaining assets. ( Note : We have never been commissioned to visit OXR’s operations. Consequently this report is based mainly on presentations, ASX releases, a visit to Pan Australian in Laos, and general knowledge).
  • MNR has been ascribed a value of A$2.29 per share in the OXR merger offer based on A$1.89 for OXR at about A$1.02 per share and 40c for MNR Exploration. However, our analysis infers that very little if anything has been included for Prominent Hill and instead the value appears to be closer to A$2.70/share.
  • OXR is a growth story, which MNR shareholders can access effectively from the first day of Sepon’s new copper production building up to 60,000tpa Cu at cash costs ~US$0.37/lb and a gold expansion to 230,000ozpa at cash costs of ~US$180/oz. Excluding Prominent Hill, OXR has 5-year targets of 400,000ozpa gold and 100,000tpa copper which appear to be attainable. Hence valuing OXR at A$1.02/share just on its Sepon assets appears to be conservative, especially if copper prices >US$1.10/lb are achieved.
  • Minotaur Exploration’s ascribed 40c (actually 42c) value is based mainly on its investment holdings in Mithril and Petratherm, plus the cash to be raised and net cash left within the company, hence valuing the exploration assets at a cost of only A$2.5m. Given the scope and expenditure being incurred on these numerous exploration properties, this appears to be very conservative.

Feb 2005 - Bluestone Tin

Bluestone Tin Ltd (BTX) – Becoming a Significant Listed Tin Producer

  • Bluestone’s operations could be producing at 9,000tpa of tin in concentrate by December 2005 based on 5,400tpa of tin (Sn) from Renison in Tasmania (treating ore at 1.5%Sn, although 1.7% or more appears to be more likely) and 3,600tpa of tin in concentrates from Collingwood in Queensland. Production is capable of increasing by a further almost 6,000tpa of tin from Mt Bischoff at the end of 2006 and the approval of the Rentails project.
  • Our current 7.5%NPV values BTX at A$0.73 per share. Bluestone is extremely sensitive to tin prices and the exchange rate, a US$1000/t higher price increases the NPV by 34% to A$0.98 per share, and premiums paid appear to be often >US$300/t.
  • All of BTX’s properties, namely Renison, Mt Bischoff and Collingwood display characteristics inferring that higher grades (than the current JORC reserves or resources) could be achieved, with greater volumes (for longer life) and probably lower costs than we have used. Structural re-interpretations are currently underway on all 3 projects, with the high grade Mt Bischoff not mined since 1947, Collingwood apparently undersampled, and Renison previously limited by historical theories.
  • A correlation has been made between Mt Bischoff and Collingwood, and although current grades are relatively low at ~1% to 1.2%Sn, 80% to 90% recoveries appear to be achievable just from gravity due to coarse cassiterite being present at both deposits, which should result in lower treatment costs and lower capex required.

Mar 2005 - Goldstar Resources

Goldstar Resources NL (GDR) – Aiming to Start Trial Mining by April 2006

  • With four gold companies having market caps greater than A$100m in Victoria as shown in Table 1 on page 4 of this report, and all of them expecting to be in production by June 2006, Victoria has become a “hot-spot” from a share market perspective.
  • Walhalla was one of the richest of the Victorian goldfields, producing 1.5moz from 1.43mt (average of 33g/t) between 1864 and 1914, and Goldstar is aiming to start trial mining of its newly discovered Lomond Reef there by April 2006. Should the trial prove successful, Goldstar could attain a market cap of A$50m to A$100m based on production of 50,000ozpa to 100,000ozpa (especially when it is compared to other expected Victorian gold producers in Table 1).
  • GDR’s Lomond Reef lies behind and adjacent to the renowned Cohen’s Reef of Walhalla, and so far GDR has delineated about 1.1mt of mineralisation based on dimensions of 550m long on strike by 120m high by an average of 6.5m thick (it in fact varies between 2m and 12.5m thick). A mineralised 1.1mt ore block at a grade of 7g/t or 12g/t could contain 250,000oz to 450,000oz (and possibly contain higher grade shoots up to ~25g/t based on historical mining by the Royal Mint Company).
  • Current step-out drilling to the North has already extended the dimensions of the Lomond Reef by a further 100m on strike and 50m at depth (or a northern block 100m long by 170m high) for an additional 300,000t of mineralisation, and conceptually the potential resource could be extended to 2.2mt and still be open, north, south and at depth. Once the existing campaign to the north has been completed, step-out drilling to the south begins.
  • In addition to the Lomond Reef, GDR is also focusing on the second main feature of the field – namely dyke bulges with drilling results from the Black Diamond dyke bulge – fissure lodes system on the West 1 Structure (immediately west of Cohen’s) expected in the second half of 2005.

April 2005 - Avoca Resources

Avoca Resources Limited (AVO) –Bringing Trident Into Production

  • After acquiring Higginsville from Gold Fields in 2004, Avoca has discovered a new orebody called Trident, comprised of two steeply dipping mineralised zones immediately north of the old Poseidon South open-cut and underground workings (which contained near vertical and shallow dipping mineralised gold lodes of ore).
  • The two near vertical zones designated Eastern and Western appear to each contain at least 3 significant (5g/t to 20g/t) gold veins, which may be amenable to a combination of bulk and narrow vein mining with treatment through a gravity plant due to the extremely high gravity recoveries averaging 86% (total recovery ~97%).
  • In its latest announcement on 27 April 2005, Avoca reported its latest assay results indicating the presence of a very high grade shallow dipping vein with 7m @ 72g/t below the Western Zone, and possibly another steeply dipping vein in the hangingwall of the Eastern Zone with 1m @ 162g/t, plus infill in the centre of the Western Zone with 60m @ 7.6g/t, and 31m at 8.2g/t in the Eastern Zone.
  • Currently part of a scoping study, the pit (which is dry except for the portal access in the north corner being a relatively shallow ~15m under water) could be dewatered and the old underground workings (which averaged 7.5g/t over 26,000oz from a vein) extended northwards on strike towards the Eastern Zone.
  • Higginsville appears to be a relatively new goldfield (it was discovered by Samantha Gold in 1988) that was apparently abandoned when Resolute was distracted by its new African gold mines, and consequently contains a number of targets that can be followed up both from an open-cut & underground perspective. There also appears to be a number of similarities between Higginsville and St Ives.
  • Avoca has a number of other prospective exploration targets being those in its own right such as most of Lake Way (south of Wiluna) which is prospective for uranium, gold and nickel and joint ventures, such as with Barrick and Teck.

May 2005 - Minotaur Exploration

Minotaur Exploration Limited (MEP) –Finding the Next Prominent Hill

  • Having sold Prominent Hill and its tenements for 1.85 Oxiana Resources (OXR) shares per 1 Minotaur Resources (MNR) share, the discovery team (who now operate Minotaur Exploration (MEP)) are searching for the next Prominent Hill.
  • The search is based on some of the key elements that are particular to Prominent Hill, namely location near the Hiltaba or Lower Gawler suite of rocks, structure (ideally NE or NW), and gravity/IP anomalism.
  • MEP have at least 14 joint ventures plus its own wholly owned projects, covering more than 50 tenements in various stages of exploration from access approval through to drilling and evaluation. The majority of the projects being in South Australia (the main location for the Hiltaba suite), and targeted areas such as in the vicinity of Broken Hill on the border with NSW and Mt Isa in Queensland.
  • In the March Quarter 2005, MEP formed a new joint venture with Helix (HLX) farming-in to earn a 51% interest in HLX’s Tunkillia project, which can be increased by 24.5% to 75.5% through including OXR to complete a prefeas study with an indicated resource exceeding 1moz. Tunkillia already has a resource of 730,000oz (10.5mt at 2.2g/t), and a recently completed IP survey that (after MEP interpretation) has identified a number of drill-ready gold targets.
  • MEP are able to spend A$4m to A$5m on exploration during the coming year to December 2005, and yet only ~A$1.5m is from their own funds (out of A$11.5m cash), because of the joint ventures MEP has with major companies such as BHP Billiton, the generative strategic alliance that it is forming with Oxiana to find world class copper-gold orebodies in Australia, and to some degree the SA Mines Department’s PACE initiative funding 50% of selected drillhole programmes.

May 2005 - Independence Group

Independence Group NL (IGO) –Lightning Nickel Providing the Driving Force towards IGO becoming a Mid-Tier Mining House

  • IGO’s Long mine of Lightning Nickel appears to be settling down as a 9,000tpa Ni operation (5,760t Ni attributable at 64%) at the lowest cash cost per lb in Australia of payable metal at A$3.05/lb in MQ05. IGO’s aim is to find another stand-alone Ni orebody that can be accessed from Victor South or Long South, so that production could be increased to 12,000tpa to 15,000tpa Ni (attrib : 9,600tpa).
  • The MQ05 production results from Gibb South have been spectacular, averaging 8.3%Ni milled for the current ‘04/05 year, with the March quarter itself averaging 10.3%Ni (according to ERA’s records, this is the highest achieved from any orebody by any mine in WA). Ni metal reconciliations at Gibb South are a very impressive 3.6 times compared to reserve. Now Victor South in the same channel is increasing production, with the potential for higher grades and greater reserves.
  • IGO is making progress with its intention to have its own producing gold mine possibly at Frances Furness and/or at Dalwallinu. Frances Furness appears to have the potential to become a small ~15g/t underground operation, while Dalwallinu could become a newly discovered goldfield.
  • There appears to be a market rating disparity between Independence (IGO) and Jubilee (JBM) in that IGO has higher reserves (+50%), twice the reserve life, ~10% lower cash costs in MQ05, and half the attributable production, yet JBM’s market cap even after adjusting for net cash is more than 4 times IGO’s.
  • As part of its aim to become a mid-tier mining house, IGO is evaluating its acquisition of almost 20% of Matrix (MRX) for possible copper production and is making progress in its other areas of exploration in gold and nickel.

July 2005 - Michelago Limited

Michelago Limited (MIC) – MIC Finally Receives its BioGold Approval!

  • On 4 July 2005, MIC announced that it had received its BioGold SFJV approval from the Chinese Government, and expects to transfer and take over 82% of the BioGold assets within the next 30 days (by the end of July 2005). The approval process ultimately occurred, but there were more steps and time to complete the transaction than originally envisaged. MIC has consequently now received all of its approvals, for BioGold and for the acquisition of 47.5% of Gold Ridge and transfer of its ML to the Australian Solomon Gold (ASG) consortium.
  • Michelago currently appears to be well undervalued in the market at 5.6Ac, and with an NPV (at 5%) of A$0.21 at a gold price of US$425/oz and A$/US$ exchange rate of 77USc. This is based on assuming that MIC exercises its option to increase its equity in BioGold to 99% by October 2005 for Rmb10m, and that the 15Ac options are converted in 2007, (which results in 864m shares in issue in 2007).
  • With an attributable 70,000ozpa for 10 years from 47.5% of Gold Ridge and 99% of BioGold’s 170,000ozpa (omitting the refinery production as too marginal). MIC could attribute ~240,000ozpa of production by the end of 2006. Should the 80,000ozpa expansion of BioGold be completed in 2006, then production could increase to ~320,000ozpa, with the potential to achieve higher production levels when BioGold attains its rated capacity and/or Gold Ridge treats higher grade ore.
  • The ASG consortium’s acquisition of Gold Ridge has been based on 2.3moz of resources and 1.7moz of reserves as at 30 June 2000 (at a gold price of A$450/oz), with initial production commencing in the second half of 2006 at an average production rate of 150,000ozpa for 10 years with cash costs of US$235/oz.

Jul 2005 - Kingsgate Cons

Kingsgate Consolidated Limited (KCN)– Targeting up to 5mtpa and >300,000ozpa gold by 2007

  • Kingsgate have found that there is a significant correlation between three-dimensional IP (a discovery technique) and their mineralisation, such that they have been able to determine that the main orebody that they have been mining to date (from pits C and H), appears to lie on the south-western edge of a “Mega-Pit”, possibly >2km long by ~650m wide that could average at grades ~2.2g/t to 2.3g/t.
  • KIngsgate announced a resource upgrade for Chatree North of 640,000oz on 23 June 2005 (based on exploration in the past 5 months), to result in resources (for A, AE, Q, KE and KW) of 31.2mt @ 1.9g/t for almost 2moz of gold and 18moz of silver. Together with Chatree, KCN’s resources now extend beyond 3moz, and a further US$9m has been budgeted for exploration in the coming year to June 2006 at a discovery cost of ~US$7/oz.
  • Production is already building up from 1.8mtpa to 2.3mtpa by January 2006 using scats recycling, which should increase production from the current ~125,000ozpa up to 150,000ozpa at cash costs of ~US$200/oz. Kingsgate are reviewing the possibility of installing a duplicate plant to more than double production up to ~5mtpa and produce >300,000ozpa, which does appear to be achievable.
  • KCN only quotes its gold production, crediting silver against its gold cash costs. However, silver grades increase significantly northwards at Chatree, especially in the vicinity of A and AE where the gold/silver ratio increases to >24 to 1. Using our modelling at 20g/t silver infers that Chatree could also be producing >1.6mozpa of silver, yet alone applying the implied grades of 50g/t that equate to a 24 to 1 ratio.
  • KCN’s Chatree appears to be located at the centre of a major volcanic complex with possibly 9 historic volcanoes, major North, NW/SE and SW/NE sutures, faults and/or structures and >29 drill ready targets covering a range of gold mineralisation styles including visible gold, all identified within its tenements.

Aug 2005 - Independence Group

Independence Group NL (IGO) –Lightning Nickel Continues to Provide the Driving Force behind the Independence Group

  • IGO’s Long mine of Lightning Nickel appears to be settling down as a relatively low cash cost, 9,000tpaNi operation (5,760tpaNi attributable at ~64%). IGO’s aim is to find another stand-alone Ni orebody within the Long mine, so that production could be increased to 12,000tpaNi to 15,000tpaNi (attributable : 7,700-9,600tpaNi).
  • The recent discovery of the McLeay deposit south of Victor South could evolve into a stand alone orebody, being open in all directions and with a number of surfaces. Drilling is expected to establish an initial resource by September 2005.
  • The Gibb-Victor lava channel is establishing a record as one of the highest grade lava channels at Kambalda, with Gibb South averaging 8.0%Ni (largely due to occasional 18% to 20% Ni zones), and Victor South averaging 4.6% to date. Both Victor South and the new McLeay deposit lie within this lava channel. Depending on the dilution at Victor South in the coming year, IGO could produce between 8,500t and 9,500t Ni based on average grades for the mine of 3.5% to 4.0% Ni .
  • The lava channels shown to date are simplified schematic representations of what the orebodies within them broadly follow. The recent drillhole intersections by IGO outside of these lava channels and beyond perceived boundaries within the channel (such as the 3.4m @ 4.5%Ni below 12 Level at Long) and the spectacular 4.4m @ 16.2%Ni show that there appears to be the capability to add material resources to Long and Victor, and extend Lightning Nickel’s life.
  • IGO continues to mine significant ore outside of its reserves, averaging up to 46% more nickel since IGO started in October 2002 (at 8% lower on grade), which also infers further extensions to Lightning Nickel’s life (usually based on reserves).

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