SXG ANNOUNCES GOLD PRODUCTION STRATEGY Key Points: Feasibility Study to commence following positive open pit optimisations and scoping studies on key oxide gold deposits in the Southern Cross region of WA Deposits located on granted Mining Leases Production strategy based on establishment of a 400,000tpa modular processing facility at Marda Initial production target of 30,000oz pa over five years from existing resource base Production targeted for 2012 Targeted operating cost of ~A$750/oz based on currently identified parameters Strong potential for extensions to mineralisation at all deposits � numerous high grade drill intercepts outside of initial pit designs Development opens up significant regional exploration potential � including advanced targets with potential to deliver incremental production
OVERVIEW In keeping with the Company‟s commitment to achieve a step change in growth, Southern Cross Goldfields (�SXG�) (ASX: SXG) is pleased to announce its intention to commence a feasibility study on an integrated development of its portfolio of oxide gold deposits in the Southern Cross region of WA (see the Location Plan in Figure 5). This production strategy is based on the establishment of a 400,000tpa gold processing facility at Marda where the Company‟s resource base is centred.
It is anticipated that the gold plant would initially be fed by material mined from the four deposits (Python, Dugite, Dolly Pot and Goldstream) within the Marda project area and which immediately surround the location of the proposed gold processing facility. This would be followed by material mined from the satellite deposits of King Brown, Battler and British Hill located within the Jackson and Parker Range project areas, respectively.
Preliminary open pit mine designs using Gemcom Whittle optimisation software (Whittle optimisations) were undertaken recently on Measured and Indicated Mineral Resources from the initial seven deposits listed above. The Whittle optimisations resulted in potential production from these seven deposits of 1.253 million tonnes grading 2.36 g/t Au for 95,000 contained ounces (see Table 1).
The Company considers that the potential production estimated in the Whittle optimisations would be sufficient to support a targeted initial production rate of 30,000 ounces per year over three years based on a plant throughput rate of 400,000tpa. Based on currently known and identified parameters, SXG is targeting cash operating costs in the region of A$750-800/oz from this scale of operation.
The Feasibility study, which will be based on evaluations of the seven deposits located in the Marda, Jackson and Parker Range project areas is expected to be concluded by mid-2011.
Additional deposits at Golden Orb and Mt. King are yet to be drilled to Measured or Indicated status. The combined Inferred Mineral Resources at Golden Orb and Mt. King totals 121,000 ounces of contained gold (see Table 2). In-fill drilling is proposed at each of these deposits to allow for their inclusion in the overall production profile.
All deposits are located on granted Mining Leases with the exception of British Hill, where a Mining Lease Application was submitted in December, 2010. The establishment of a central gold processing facility at Marda would also open up the Company‟s extensive exploration portfolio in the Southern Cross region to focussed exploration to provide incremental additions to the base case production scenario.
Priority prospects considered to have the potential to deliver additional gold resources in the near term include Andromeda and Blue Peter, where significant gold mineralisation has already been intersected. The Company will also undertake a detailed study of the old Evanston mine to ascertain the potential for extensions to the deposit.
In addition, the Company‟s extensive tenement holding of approximately 3,000km2 in the region has significant exploration upside and offers excellent potential for additional discoveries.
DISCUSSION Preliminary Open Pit Designs (Whittle Optimisations) Preliminary open pit designs (Whittle optimisations) have been undertaken on seven of the Company‟s near- surface oxide deposits within the Marda, Jackson and Parker Range project areas containing Measured and Indicated Mineral Resources. The results of those Whittle optimisations are shown in Table 1 below. The Whittle optimisations from these seven deposits represent the initial production phase of the Company‟s proposed production target of 30,000ozpa over 5 years from its total resource base of 436,000oz.
Parameters used in the preliminary open pit designs (Whittle optimisations) and to establish targeted operating costs of A$750/oz to A$800/oz were as follows:
gold price of US$1,350/oz Au; mining cost of A$4/t (ore and waste) at surface increasing with depth; processing cost of A$35/t ore; State Govt. Royalty of 2.5%; industry standard transport costs; and average pit wall angles of 45 degrees.
At this stage, the Whittle optimisation results exclude potential production from the Company‟s two other deposits at Golden Orb and Mt King, which comprise Inferred Mineral Resources as shown in Table 2 below. These deposits are yet to be drilled to Measured or Indicated status. Further drilling at Golden Orb and Mt King will now become a priority in order to quantify more accurately the production potential from these deposits. The proposed production base case is sensitive to incremental increases in the production. Processing and Metallurgy
SXG‟s production strategy involves the establishment of a 400,000tpa modular processing facility at Marda, where the Company‟s resource base is centred. A conceptual process flow sheet is shown in Figure 4. Preliminary discussions for a plant design using the innovative Ballarat-based company Gekko Systems have commenced. Gekko specialises in modular process plant designs which reduce the time and cost of on-site construction. Other alternatives to the conceptual process flow sheet shown in Figure 4 would be for the front end of the plant to comprise a mobile crushing and semi-autogenous grinding (SAG) milling circuit ahead of the carbon-in-leach (CIL) circuit. The preferred process flow sheet, capital and operating cost estimates will be confirmed as part of the feasibility study. Metallurgical testwork demonstrates excellent recoveries through conventional CIP/CIL processing. Gravity recovery from the Battler deposit is between 30 and 40% of the overall recovery. In addition, previous metallurgical testwork on the primary mineralisation at Python achieved a gravity recovery of between 28 and 63% and an overall recovery of between 96 and 98%.
Feasibility Study Work Programme Feasibility study and project development activities required for each deposit will be undertaken by independent consultants assisting SXG. Work to be undertaken includes: in-fill and extensional drilling; updated resource estimates; geotechnical drilling and analysis; additional metallurgical sampling and testwork; process flow sheet design and capital and operating cost estimates; updated mine designs and operating cost estimates; infrastructure cost estimates; and environmental studies and approvals.
In addition, a comprehensive project development and approvals schedule has been prepared for each deposit. This will provide an estimate of the lead times involved prior to potential production from each deposit.
Project Schedule Feasibility study work has commenced on the Company‟s base case production scenario. The feasibility study is expected to be completed by mid-2011. The Company will then aim to finalise funding arrangements and hedging programmes in the 3rd quarter of calendar year 2011 followed by project development with production targeted for mid-2012
Gold Exploration The establishment of a central processing facility at Marda and the significant upside potential for incremental increases to the Company‟s production base enhances the exploration potential of the Company‟s existing gold exploration prospects. These prospects include Andromeda and Blue Peter, where significant gold mineralisation has already been intersected. The Company will also undertake a detailed study of the old Evanston mine (historical production 60,000oz) to ascertain the potential for extensions to the deposit. In addition, the Company‟s extensive tenement holding of approximately 3,000km2 in the region offers excellent potential for the discovery of significantly larger deposits in soil covered areas along strike from known gold mineralisation. The Company will undertake an aggressive exploration programme targeting the Evanston Shear zone south of the Red Boomerang prospect, where porphyry-hosted mineralisation has been previously identified. This porphyry host demonstrates the potential for large mineralised systems along that trend by analogy with other porphyry-hosted systems in the Yilgarn Craton such as Kanowna Belle.
Other Assets The Company is currently pursuing opportunities to realise value from its other non-gold assets. As previously announced, it has undertaken a review of its iron assets in the Southern Cross region and is evaluating commercial exit opportunities.
SXG will continue with exploration for nickel sulphide deposits as part of its regional exploration programmes and will also seek to attract joint venture partners to accelerate activities with external funding.
The Company will maintain its copper exploration activities around Copper Bore based on the results of a review of the prospectivity of this area by consultants Newexco. The full results of this work will be released once they have been received and analysed. Work in the immediate future will include geophysical surveys, data review and drill target generation. As noted in the December quarterly report, the Company will complete its feasibility study into the Dulcie gold laterite project in the current quarter.
SXG Price at posting:
6.0¢ Sentiment: Hold Disclosure: Held
