I'm thinking the current UG resource is worth about $14M - $16M, still a lot of work to be done prior to confirming that its economic.
Some takeaways from the announcement:
"Managing Director, Mr Simon Mitchell: “An evaluation of the Cannon underground resource is now underway to assess the potential for a mineable reserve and to evaluate a suitable cost model to the Company. The high confidence of the Cannon mineralisation, the good history of ore reconciliation within the now fully mined open-pit and good geological understanding points to the underground inventory being a small but high quality resource. Taken with the proximity to Kalgoorlie and the presence of many contractors with experience in underground operations in the Eastern Goldfields, there is every confidence that Cannon will move into its next mining phase.”
“Our technical team at Southern Gold is very confident that the Cannon mineralisation below the open-pit can convert to cash flow. Over the next few months the Company will investigate ways to do that and will keep an open mind on the development model. The mineral resource announced today displays consistent high grades and good widths that should result, on current indicators, in very profitable underground mining.”
Next Steps The Cannon underground resource represents a sound opportunity to mine a high confidence, closely defined zone of gold mineralisation from the base of the Cannon pit to at least 90m below. The ore body consists of 5-6 separate lodes or shoots that compress together as they plunge and dip into the hanging wall contact of the Cannon shear.
The Cannon underground resource is 142,000t @ 5.2 g/t for 23,600 contained ounces of gold. It is highly probable that this resource can be increased with further drilling. Potential upside to Southern Gold from the Cannon mine extension can be summarised as follows:
The high ratio conversion of mineral resources to ore reserves and the generation of further significant cash flow to the Company (more than net $13.6m has been received by Southern Gold from the open-pit operation);
The deposit is currently untested at depth and additional footwall lodes can add to the mineral resource after infill and extensional drilling;
Should Southern Gold proceed with an underground development, there is the opportunity to drill from the 190mRL horizon (i.e. from underground) and explore for repeat structures sitting in parallel or structurally offset positions; and
Stepping back from the Cannon deposit itself, Southern Gold geologists are now targeting the Cannon shear as a potential host for additional mineralisation along strike, particularly to the north-east where additional old mine workings have been noted on surface.
SAU Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
