The Asia Miner

OCT-DEC 2015

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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60 | ASIA Miner | October-December 2015 Chinese Investment Abroad MMG Limited has approved the updated development plan for the Dugald River Zinc Project in northwest Queensland, Australia. The plan includes an annual mine production rate of 1.5 million tonnes, construction of a concentrator and annual production of approxi- mately 160,000 tonnes of zinc in zinc concentrate, plus by-prod- ucts, over an estimated 28 year mine life. MMG is listed in Hong Kong and its major shareholder is China Min- metals. MMG CEO Andrew Michelmore says, "We are positive about the long-term fundamentals for zinc. This decision refects our conf- dence in zinc at a time of shrinking global supply. Dugald River remains one of the world's highest grade undeveloped zinc deposits. "Under the updated plan, Dugald River will come online at around a time when signifcant global zinc supply will disappear through mine closures," he said. The project will be within the world's top 10 zinc mines when operational. Andrew Michelmore said the updated development plan refected a prudent response to mine geotechnical conditions. "By taking the time to understand the unique characteristics of the ore body, we now have a robust plan that maximizes long-term value." The expected remaining cost of the project to frst shipment of concentrate is around US$750 million plus interest costs. Dis- cussions to amend funding arrangements have commenced with MMG's existing lenders. Agreements with key energy, logistics and service providers will be revised based on the updated plan. Following satisfaction of remaining conditions, construction of re- maining surface infrastructure facilities will commence in 2016 with frst production expected during the frst half of 2018. Access to the ore body via development declines in 2013 led to identifcation of geotechnical aspects and ground conditions more challenging than prior assumptions which prompted a review of the proposed development method. Dugald River was excised from Altona Mining's Cloncurry project, which includes the Little Eva Copper-Gold Project. Altona has com- pleted a framework agreement with Sichuan Railway Investment Group (SRIG) to fully fund and develop Little Eva, which is permitted with proposed annual production of 38,800 tonnes of copper and 17,200 ounces of gold for a minimum of 11 years. Altona welcomes MMG's decision to approve the updated plan. Managing director Alistair Cowden says, "The area is becoming a signifcant new base metal production hub. The Dugald River proj- ect infrastructure will provide a value uplift for Altona and demon- strates the strategic value of the Cloncurry project coming close on the heels of the agreement with SRIG. SOVEREIGN Gold hopes that a funding agreement signed recent- ly with a Chinese consortium will enable it to further advance the Mount Adrah Gold Project in New South Wales, Australia. The con- sortium can earn up to a 50% interest in Mt Adrah project by funding primarily contracted diamond drilling programs. Upon meeting exploration expenditure of Aus$1.5 million the con- sortium will earn a 45% interest while a further 5% can be earned upon expenditure of an additional $500,000. This investment will effectively value the asset at $10 million. Mt Adrah, which is east of the city of Wagga Wagga, has a re- source of 20.5 million tonnes @ 1.1 grams/tonne gold for 440,000 ounces in the indicated category and 330,000 ounces in the in- ferred category. The resource is within the Hobbs Pipe 1 deposit. The consortium has fnalized on-site due diligence and is compil- ing a report for its investment committee. Sovereign is encouraged by the fact that the consortium expedited the formation of an Ex- ploration Planning Committee, which has designed an aggressive drilling campaign. This campaign is expected to start in October and will drill the potential open cut portion of Hobbs Pipe and potential repetitions of this at the Nacki Nacki Eluvial Field in the Bangadang area. It will also test the grade, width, lateral and vertical extent of existing known high grade gold structures, and test several new areas identifed as potential targets by mapping and sampling during the due diligence, including historic workings at Carters, Comedy King, Lady Clare and Breccia Lode. A grab sample at the Breccia Lode assayed 51.3 grams/tonne gold and 20.8 grams/tonne silver while another sample at Comedy King assayed 36.8 grams/tonne gold. Shallow drilling is initially planned to follow gold-bearing structures along strike and down dip. Sovereign's frst drill hole into Hobbs Pipe produced an outstand- ing intersection of 886 metres @ 1.2 grams/tonne gold, including 400 metres @ 1.4 grams/tonne from surface. Sovereign says that a key objective of the upcoming drilling is to more accurately constrain the tonnage, grade and contained ounc- es of gold from surface to a depth of 150 metres to support the scoping study on the project economics of developing an open pit gold mine. The design of a conceptual open pit, stripping ratios, environmen- tal base line studies and metallurgical studies are being reviewed to determine the possibility of transitioning to a cash generating pro- ducer that can organically fund exploration. Sovereign Gold signs funding agreement Old copper workings on Altona Mining's Cloncurry project in Queensland's northwest. MMG approves new Dugald River plan

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