groundrush resource

ntnews.com.au
February 15th, 2010


"Gold mine given new lease of life

A TERRITORY gold mine is to reopen after being bought by a West Australian company.

Tanami Gold paid Newmont $22 million for the Groundrush project. Managing director Graeme Sloan said the desert mine could employ up to 100 workers.

Tanami Gold already operates the highly successful Coyote mine, 30 kilometres inside the WA border, which produces 50,000 ounces a year.

Mr Sloan said the company would increase production from both mines to 200,000 ounces a year.

Ground rush has:

A JORC compliant resource of 500,000 ounces;

A TREATMENT plant that can handle 1.2 million tonnes of ore per year;

A "WORLD CLASS" 2000 square kilometre exploration package;

AN airfield; and

A workers' camp with 140 beds.

The treatment plant is out of use and will need to be refurbished. Groundrush has 43 open pits, ranging in depth from 40 metres to 120 metres.

The main pit was mined from 2001 to 2005 and produced more than 600,000 ounces of gold at an average grade of 4.3 grams per tonne.

Another pit, known as Hurricane- Repulse, produced more than 250,000 ounces.

About 2.1 million ounces of gold were mined at Goldrush from 1987 to 2005.

The project lies only 130 kilometres west of the 10 million ounce endowment of the Callie- Granites production centre.

Mr Sloan said the Tanami was one of the most productive gold mining areas in Australia.

Newmont, the world's biggest gold miner, did not carry out any drilling or remodelling at Groundrush since a resource estimate was made in late 2001.

Tanami Gold believes there is "excellent potential" to increase the surface and underground resources at the mine site and surrounding exploration leases.

It said significant mineralisation existed beneath Hurrican-Repulse and that would be remodelled and included in a new resource estimate.

Drilling will be carried at several other likely spots.

Mr Sloan said the present resource estimate was "extremely conservative", especially considering the lack of deeper drilling below the pits.

"The vast, sparsely explored areas of the associated exploration licences, with their prospective rock packages and favourable structural features, affords a further opportunity for the company to discover new gold deposits," he said.

Mr Sloan said the open pits would be reopened as soon as possible and plans for underground mining drawn up.

Tanami Gold has also bought exploration packages in the Territory's Barrow Creek and Lander River regions for $10.775 million.

The company's double-headed move is another boost to the NT gold mining industry.

Crocodile Gold has restarted mining at Pine Creek and several explorers are drilling near Tennant Creek."


Positive article for TAM holders and shows potential for the company's future. Newmont produced 150,000 oz pa @ 4.3g/t for four years. Not sure of $$ costs/oz but let's say A$700 and sales in AUD of $1200. That's $500 profit/oz X 150,000 oz pa = $75M pa. Divide by no. of shares on issue $75,000,000/3,500,000,000 = $0.021 = 2.1c eps. That's just for Groundrush. Add to that Coyote 50,000 oz pa X $600 profit/share (Coyote is ~$600/oz conservative AND production should continue to increase) = $30M profit pa. EPS = 30,000,000/3,500,000,000 = ~0.8c. Total EPS for both GR and Coyote = ~3.9c say 4c/share.

Doesn't sound much BUT already producing from Coyote and 200K oz CAN be achieved within 2 years whereas other explorers have huge legwork to do and capex to acquire. Also IMO the resource base for Coyote and GR tenements have potential to increase tonnage and gold ozs dramatically. In addition, if throughput of mill is 2.1Mt @ 4.3g/t = 166,000 oz pa if plant operates to it's nameplate. Interesting to note that 200,000 oz of gold production would lift TAM up to one fifth of LGL's output!
Just being positive.

I doubt whether capex for GR will be raised through further dilution of shares. A loan facility from Allied in HK is more likely IMHO.

All open to conjecture and just my opinions only.
Always DYOR!