Ann: Koka to be a highly profitable gold mine - S, page-4

re: Ann: Koka to be a highly profitable gold ... Koka numbers stack up: Chalice

Tuesday, 3 November 2009

CHALICE Gold Mines’ Koka gold deposit in Eritrea could host a relatively low-cost 110,000 ounce a year operation.

Chalice Gold Mines' Zara project in Eritrea.

The company said today it had done the numbers on the Koka deposit, which is part of the Zara project in northern Eritrea.

The prefeasibility study estimated Koka could produce 110,000oz at cash costs of $US424/oz over a six-year mine life.

Capital costs should come in at around $97.8 million for a 500,000 tonne per annum plant and open pit mine.

Chalice looked at mining the deposit both as an open pit and an underground, sublevel cave operation and decided the open pit option was financially more attractive and lower risk.

The project’s cash flows are, however, sensitive to pit wall angles due to the steep terrain and high strip ratio.

Chalice will pursue geotechnical drilling over the coming months to improve its understanding of the ground conditions and potentially re-optimise the pit shells.

The mine will be operated by a contract miner as a drill and blast operation.

The Koka deposit is currently sitting at 944,000oz at 5.8 grams per tonne gold.

The entire Zara gold project is a joint venture between Chalice (80%) and Dragon Mining (20%).