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Jan 2010 - The Lucky Break

The “Lucky Break”

Occasionally in underground mining, a company has a “lucky break”, unexpectedly intersecting mineralisation that completely transforms the geological understanding of the mine, the area, and its mineralisation.

It is usually more easier in an open-cut to see what the mineralisation has done based on looking at the walls or the floor, but underground it depends largely on development.

There are many examples both in base metals and gold that we have encountered, such as WMC intersecting Skinner in development when seeking another route round the Schmitz orebody at Lanfranchi Nickel, and later Panoramic discovering Deacon in October 2006.

Panoramic observed that the western side of Helmut South was not pinching out as expected and instead appeared to be opening out, so they drilled a hole and intersected 111m of continuous nickel sulphide mineralisation at an average grade of 2.9%Ni, which has become the >60,000tNi Deacon orebody.

Panoramic received another “lucky break” within about 6 months in early 2007, when nickel sulphide was intersected in the decline at its Savannah Nickel operation. That resulted in a fan of drillholes and the discovery of the Northern zone that was later found to link to the Main Zone and form a T-bone shape, with materially higher widths and grades of nickel sulphide.

 More recently in May 2009, Silver Lake (SLR)’s Mount Monger operation needed a drilling position to look for the potential deeper extension of Rosemary and punched east through a stockpile on the 8 Level, immediately encountering the Daisy-Milano lode (which was thought by the previous owners to have pinched out on strike). And then SLR started drilling towards Rosemary.

No one had ever drilled across from Daisy-Milano to Rosemary before because of tenement boundaries. However, on the way to Rosemary, Daisy East was encountered about 40m downhole followed by the new Emma Lode. Development and intersections on Daisy East have since established that Daisy East appears to have higher average grades than the mainstay Daisy-Milano.

The original interpretation was that the two separate lodes “Daisy” and “Milano” joined on the 8 Level and formed the Daisy- Milano lode of two lodes in the face. However, a number of the other lodes on SLR’s Mount Monger field also actually consist of two lodes.

 Instead, the Daisy and the Milano appear to have remained separate. So SLR has a developed (decline etc) for Daisy-Milano and an unmined higher grade lode parallel to Daisy-Milano (about 35m to 40m away, called Daisy East), as shown in Figure 1.

In January 2010, we visited Catalpa’s new acquisition through the merger with Lion Selection Limited, being a 30% holding in the Cracow gold mine (the other 70% is owned and operated by Newcrest). Historically Cracow was known for ~800,000oz mined from the Golden Plateau Mine/Area being an E/W dilation zone about halfway along the easternmost NNW/SSE structure.

Coincidentally, the Vera Nancy orebody that was responsible for Newmont achieving a peak production rates of ~333,000ozpa at cash costs of US$110/oz (from 718,000t @ 14.4g/t) in y/e June 2003 was also about half-way along the easternmost NW/SE structure of Pajingo (now operated by NQM).

 Hence the latest “lucky break” may have occurred in the new Phoenix decline at Cracow that is to link the Kilkenny and Royal orebodies. In December 2009/January 2010 the Phoenix orebody was unexpectedly encountered as gold mineralisation (check assay results are awaited) in the decline which was designed to skirt the Phoenix orebody.  Just how significant Phoenix could be and its potential impact on Cracow’s production has yet to be established.

It can be seen that “lucky breaks” can have a significant impact on production and the life of individual companies, so it will be interesting to see which is the next company to achieve an underground “lucky break”.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is a  Financial Services Representative with Taylor Collison Ltd, and with his associates, may hold interests in some of the stocks mentioned in this article. The opinions expressed in this article should not be taken as investment advice, but are based on observations by the author. The author does not warrant the accuracy or completeness of any information and is not liable for any loss or damage suffered through any reliance on its contents.

Figure 1. Silver Lake’s “Lucky Break” unexpected discovery – Daisy East

  • Written by: Keith Goode
  • Friday, 01 January 2010