Central China Goldfields (to be renamed GGG Resources) has defined a 1.98Moz inferred JORC-compliant resource at its Bullabulling gold project. The resource is shallow and expected to be amenable to open pit mining as a low-grade bulk tonnage operation. A scoping study is currently under way, with a feasibility study planned for commencement in October 2010.
Company highlights include:
Central China Goldfields has defined an inferred JORC-compliant resource at the Bullabulling gold project of 41.5Mt at 1.5g/t gold, for contained gold of 1.98Moz at a 0.7g/t cut off.
The mineral resource has been defined over a 9km2 area and remains open in all directions including at depth. The resource was completed as a desktop study and is expected to increase as the company conducts further drilling across the entire 14km strike length.
GGG will now drill twins of the historic holes to get the resource up to the JORC measured and indicated categories. This will be completed in tandem with an economic scoping study, followed by full feasibility studies, expected to commence in October.
The company will complete optimisation studies, due late September, to determine the economic depth of mining. This will be closely followed by a further mineral resource upgrade to include the results of all drilling done by GGG and its partner Auzex Resources.
We fully expect the company to take Bullabulling into production. This was evidenced by the appointment of Michael Short, who has substantial expertise in the construction and optimisation of plants, as a Non-executive Director in June 2010.
This is a substantial resource upgrade which will allow GGG to migrate to the development cycle of the project. Given the project?s history as a producing gold mine, we are confident that GGG, in conjunction with Auzex Resources, will take Bullabulling swiftly towards production.
Considering 50% ownership of the Bullabulling gold property and including the company?s investment in Auzex, our peer-based valuation of GGG is ?41.5m or 18p per share. The news flow over the next few months should be substantial, as the company completes economic scoping studies, optimisation studies and announces a further update of the JORC resource to include GGG?s drilling at Bullabulling.
We rate GGG Resources a BUY and believe there is substantial upside
in the share price to rerate it to the level of its pre-production peers.
AZX Price at posting:
33.6¢ Sentiment: LT Buy Disclosure: Held
