kzl risk reward, page-5

gself,
I found this article from Aug 08 which answers a number of my queries. Thanks for the info you supplied too.

LOWEST QUARTILE
Kagara unveils huge lead/zinc/silver resource at Admiral Bay
Glamour mid tier zinc-lead and copper miner Kagara Zinc now has a major project in its home state of Western Australia after announcing a large resource and a positive scoping study at Admiral Bay.

Author: Ross Louthean
Posted: Friday , 22 Aug 2008

PERTH -


A big mineral deposit at Admiral Bay, about 250 kilometres south of the pearl farming and tourist centre of Broome in the Kimberleys of Western Australia, was today declared to have an inferred resource of 72 million tonnes grading 3.1% zinc, 2.9% lead, 18 grams/tonne silver and 11% barium.

In detailing this Kagara Zinc Ltd's (ASX: KZL) executive chairman Kim Robinson said the resource was calculated at a 2% Zn cut-off grade and is a subset of a larger inferred resource of 97 Mt @ 2.4% zinc (2.3 million tonnes of contained zinc) 2.9% lead (2.8 Mt lead), 16 g/t Ag (48 M oz) and 16% barium.

He said a scoping study demonstrated potential to develop a "low cost" 10 million tonnes per annum of ore underground mine. This would produce annually 300,000t of Zn, 250,000t Pb and 4.5 M oz silver.

Metallurgical test work has shown that coarse-grained lead and zinc concentrates will be produced at recoveries of in excess of 95% into very high quality concentrates.

"The cost of production is expected to be in the lowest quartile of cash costs worldwide," the company said.

Robinson said the initial resource was significantly above the company's target, highlighting "the world-class scale and quality of the deposit and vindicating the substantial exploration programme conducted over the past 18 months."

"We have spent $A35 M ($US30.49 M) on exploration at Admiral Bay over the past 18 months including a technically challenging deep drilling program which has enabled us to test in more detail just over 10% of the overall strike length of known mineralisation," he said.

"We are currently considering a number of development options for taking the project forward. Drilling over the past 12 months has shown that defining a reserve from surface drilling is not possible and therefore an exploration shaft with 2.5 kilometres of lateral development will be required to bring the project to a bankable status.

"We are currently obtaining geotechnical information in preparation for the sinking of a shaft, which represents the next major step forward for this exciting project," Mr Robinson added.

The Admiral Bay deposit, was originally discovered in 1981 by Meridian Oil NL during an oil exploration programme in the Great Sandy Desert. Exploration subsequently moved into a new phase with CRA Exploration (now part of Rio Tinto) spending over $A20 M ($US17.43 M) between 1986-92.

Kagara acquired Admiral Bay from CRA in 2004.

Robinson said metallurgical test work is also continuing on recoverability of barite to a saleable product. It is expected that a proportion of the 2 Mt of barite processed annually will be recovered, which will further reduce the cash cost of production.

Kagara is one of Australia's most profitable zinc-copper and nickel and precious metal producers from high grade deposits in north Queensland.

The company said today its medium-term objective is to increase copper production to 35-40,000 tpa of copper metal and zinc production to 100,000 tpa of zinc metal by the end of this decade.