14th Jan 2016 10:07
LONDON (Alliance News) - Keras Resources PLC, formerly known as Ferrex PLC, Thursday said it expects production from the Grants Patch gold tribute project in Australia to start in the second quarter of 2016.
The company said it has made "good progress" at the project, where it will process 30,000 tonnes of ore a month, initially from two shallow laterite gold pits. If the company can get production up and running in the second quarter, it will mean the project has stayed on schedule.
The work is being conducted as part of its agreement with Norton Gold Fields Ltd. Keras has a five-year tribute agreement with Norton Gold Fields, a subsidiary of the Chinese state-owned Zijin Mining Group Co Ltd, whereby Keras will mine those gold deposits in Australia owned by Norton.
Those deposits contain an estimated 164,000 tonnes of ore at an average grade of 1.4 grammes per tonne - yielding around 7,200 ounces of gold. Those two initial pits will only feed production for five to six months - suggesting it will produce between 1,440 to 1,200 ounces of gold per month over that period, equal to around 3,600 ounces per quarter.
The ore mined by Keras will be treated at Norton's nearby Paddington processing plant. Keras will pay a 22% royalty to Norton on gold recovered.
Keras decided to push forward with the two initial pits to generate some near-term cashflow whilst it looks at the wider prospects of the project area, with the aim of moving into underground mining in the future.
The Prince of Wales underground mine will be its main focus, with an internal feasibility study being completed to restart operations at the mine, which was producing gold up until 1992 under different ownership. That mine has a historic resource estimate of around 650,000 tonnes of ore at 10.0 grammes of gold, containing 209,000 ounces of gold.
"The internal feasibility work on re-accessing the ultra-high grade Prince of Wales mine is also progressing well, and I look forward to updating shareholders on the project as it progresses as it will form the backbone of future production within the tribute area," said Managing Drector Dave Reeves.
However, the company also said the original shaft must be rehabilitated and a new headframe and winder must be installed at the underground mine before any actual mining takes place, which is expected to take nine to 12 months to complete.
Although Keras did not state when that work would begin, it did state the cashflow generated from the two initial pits would go towards funding the work - suggesting the underground mine will not be ready in time to feed production before the feed from the two initial pits runs out.
The company was unavailable for comment on the matter early Thursday.
Taking all the deposits at the project into account, the company has around 5.7 million tonnes of ore to target at a grade of around 2.0 grammes of gold, which would produce a total of 363,599 ounces of gold.
"I am pleased to report that the low-cost activities required ahead of delivering production and cash flow from our Australian gold project during the second quarter of 2016 are continuing at pace, on time and importantly on budget," said Reeves.
"Production will initially commence from two laterite pits that contain significant gold mineralisation and require no pre-stripping simplifying the start of production," he added.
Keras signed the agreement to mine Norton's gold fields to get near-term cashflow through the door so that it can develop its Nayega project in Togo, where the miner aims to produce around 250,000 tonnes of manganese concentrate per year. The company is focused on bringing the mine into production on grant of the mining permit as soon as possible to generate cashflows.
Keras also holds iron ore and manganese projects in Gabon and South Africa and is actively assessing ways to realise value from these assets.
Keras shares were trading up 1.5% to 0.457 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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