minesite article

July 14, 2009

Chalice Gold Mines Plans To Be Producing 100,000 Ounces Of Gold Per Year From The Zara Gold Project In Eritrea By 2011.

By Alastair Ford

Just at about the time that the Lords Ashes test rolls around it’s not unusual to see the odd Australian swing through London on a crucial business trip. Minesite’s own Australian correspondent, Our Man in Oz, just happens to be hitting town this week, and the chaps from Catalpa are in town too, though whether they’ve got Ashes tickets we won’t know until Friday, when they are due to brief the media in detail about all sorts of things. But for Tim Goyder and Douglas Jones, the two directors currently taking the Chalice Gold Mines show on the road, there’ll be no such luxury. These two globe trotters missed the start of the Ashes by a matter of days, since after delivering several briefings across London in the capable company of Kevin Tomlinson of Thomas Weisel Partners they jetted off to Boston, and then on to New York, for high level talks with various other august financiers, few of whom, one imagines, cared two hoots for the fate of the tiny urn.

Still, they cared enough about the fate of development work at the Zara gold project in Eritrea, and Chalice’s ongoing merger with Sub-Sahara Resources, to agree to the meetings, which is probably more important – at least in the immediate term, now that the first test has been drawn. Chalice’s takeover of Sub-Sahara is now in its final throes. A shareholder meeting is set for 4th August, at which point it should all be pretty much done and dusted. The rationale for combining the two companies has always been simple – Sub-Sahara has just under a million ounces of gold at Zara, but very little money for development, while Chalice is looking for a flagship property to run, and has around A$10 million in the bank to move things nicely along.

And, with the merger nearing completion, all of Tim and Doug’s talk is of development work and timetables at Zara. “We’re looking for another Sukari”, says Tim, and while that may sound a trifle optimistic on the day that Sukari’s owner, Centamin Egypt, has just announced a further upgrade to over 13 million ounces, there are certain valid reasons for making such a statement, principally that Sukari isn’t far away - geologically speaking, that is. Both sit on the Arabian-Nubian shield, which dates back to neoproterozoic times, and which also hosts mines in Saudi Arabia said to have produced King Solomon’s gold. Since Sukari has been linked to the Pharaohs, and some in the media have linked the Zara property to the Queen of Sheba, it’s clear that we are talking about an area both of high prospectivity and high marketing potential.

Still, having mentioned the ancient royal propensity for digging up the local gold, it’s fair to say that between then and now there was something of a mining hiatus. In fact so little work has been done on the Arabian Nubian shield in modern times that Doug Jones regards it as “the last frontier”, and he should know. Apart from having a directorship of stellar Aim performer Minera IRL to his credit, he’s worked all over Africa in his former role as vice president exploration for Golden Star Resources. He likes Eritrea as a country to work in, too, emphasizing that while there’s precious little in the way of democracy to be had there, there’s precious little corruption either.

Once the Sub-Sahara deal goes through, and once that’s followed by another small-scale side deal, Chalice will hold 80 per cent of the 600 square kilometer Zara property which lies around 150 kilometres north of the Eritrean capital Asmara. This area was first discovered by artisans in the late 1990s, so exploration on this particular patch of the Arabian-Nubian shield has thus far been minimal. Work to date has established 50 kilometres of strike on a major gold mineralized corridor, with the current focus on the Koka prospect, which is where Sub-Sahara has booked its 944,000 ounces. Koka’s largely drilled off, except at depth, but Doug emphasizes that the potential for repetition of this type of deposit along the Zara strike zone is “quite good”. Koka, he says, is “a nice compact orebody. It doesn’t have multiple lodes or bits and pieces going off in all directions. It has big widths of nice good grade.” And with IP surveys showing good looking prospects to the east and south of Koka, this whole district has the potential to shape up very nicely for Chalice.

The plan now is to move quickly through the scoping study phase and have a feasibility study completed by May next year. “We think we can get this up in 2011”, says Tim, “at 100,000 ounces per year from a combination of open pit and underground”. Initial indications are that the overall development costs will come in at around US$70 million, which is why Tim and Doug are busy making the acquaintance of brokers and bankers in London, Boston and New York, and why they are also contemplating a Canadian listing for Chalice. And the short timescale from development now to production in 2011 is also why they can’t afford to spend their days sitting around watching cricket.

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