Chalice Gold's Feasibility Study On Koka In Eritrea Comes Up Trumps, As Newmont Arrives To Lend A Hand With Further Exploration.
By Charles Wyatt /www.minesite.com
Not surprising that Tim Goyder was near the top of the list of company directors our Private Investor, Susie Boeckmann, went to meet after she arrived in Perth en route to Kalgoorlie for Diggers'n'Dealers. In July alone his company made no less than four significant announcements, including the mandatory quarterlies, and the share price rose from A39 cents to A50 cents at one stage. It has now settled back to A45 cents as the excitement has died down, but as Susie pointed out, Chalice was capitalised at only A$7 million one year ago and now has a market cap of around $90million. Tim Goyder and his crew must be doing something right in Eritrea, where the company has a major land holding and it is not too difficult to find out what that is. In the first week of July Chalice announced a positive feasibility study on its Koka gold deposit, part of the Zara project in the north of the country.
Based on a gold price of US$900 per ounce the study, carried out by Lycopodium, concluded that the current reserve of 840,000 ounces at a grade of 5.3 grammes per tonne gold is sufficient for a seven year mine life producing over 100,000 ounces a year. Most important, the cash cost of production was predicted to be only US$338 per ounce from an open pit mine, which takes it way down the table as far as costs are concerned. Tim Goyder confirms that even now the feasibility study is being discussed with the Eritrean Government, which has a 10 per cent non-contributory interest, and may acquire a further 20 per cent contributory interest at a price based on an independent valuation. As a result it is in the interests of the Government as well as of Chalice to get this project moving, and Tim Goyder hopes to be awarded a mining lease before the end of this year. At the same time he is investigating ways to fund development of the project, which is expected to cost US$122 million, and says that interest is being shown by both development and commercial banking groups.
Over time it will become ever more clear that this is only the start for the Koka mine, asthere is plenty of potential for the resource base to be increased. Accordingly drilling has now commenced at the Konate prospect which lies only 4.5 kilometres to the south, so is well within trucking distance. At Konate there are extensive artisanal workings on Koka-style quartz stockwork mineralisation over a zone which measures 600 metres in length and up to 30 metres wide, so it's highly prospective. Artisan miners can only afford to exploit high grade mineralization to shallow depths, so their presence gives great encouragement to experienced African geologists. In addition to the drilling at Konate, the six kilometre long Koka-Konate corridor will be covered by a deep penetration three dimensional induced polarisation survey during the coming months, designed to map the structural and alteration architecture of this highly prospective zone. There are also plenty more artisanal workings yet to be explored in the 615 square kilometre tenement package surrounding Koka.
There are also some drainage geochemical anomalies that look worth investigating. Just a few weeks ago Chalice announced some very promising results from samples collected from streams that lie along strike from Koka. These streams emanate from several major drainage systems, highlighting pronounced gold anomalism over a strike length of at least 10 kilometres, none of which is related to previously known gold occurrences. In the latest results, a total of 59 samples were collected as part of a bulk leach extractable gold drainage sampling program completed over the Zara North and Zara South prospecting licenses. Six samples contained greater than 10 parts per billion (ppb) gold, with the best sample returning 362 ppb.
Anomalous grades such as these may mean little to investors, but they sure do quicken the hearts of geologists who even consider something between five and 10 ppb as anomalous. Similar sampling conducted around the Koka deposit returned a highest value of 75 ppb gold, which helps to put the more recent results in context. In fact, the grade of 362 ppb is an order of magnitude higher than most of those obtained in the lead up to the Koka discovery.
In terms of what happens next, the highest gold values from these samples show clustering in the northern drainage systems of Zara North, highlighting the substantial exploration potential for the areas upstream of the samples. The best values of all were obtained from streams draining from the same north-south trending package of rocks that hosts Koka.
Newmont Mining clearly appreciates the measured way in which Chalice is carrying out its regional exploration around Koka, and is entering a joint venture to carry out a regional exploration programme outside the Zara project. The area to be covered under this arrangement is round 24,000 square kilometres, but the two partners are just waiting for their applications to be granted by the Eritrean Government. Chalice will manage the initial US$1 million reconnaissance programme under instruction from a joint Newmont-Chalice committee. The exploration team will take advantage of Chalice's extensive experience in Eritrea, as well as proprietary exploration techniques developed by Newmont. Newmont is, of course, aware that this ground lies on the Arabian Nubian Shield, which hosts Centamin Egypts 13 million ounce Sukari deposit further to the north, so it is not hunting for minnows.
Eritrea is still subject to UN sanctions as a result of squabbles along its borders with Sudan, Djibouti and Somalia. The Government protests that none of these resulted from its own initiatives and is appealing against the sanctions, which appear to have more to do with the US Governments favoured relationship with Ethiopia, which is landlocked by Eritrea, than anything else. In the meantime the country is viewed by mining companies on the ground, big and small, as being highly prospective, but under-explored. These companies also have had the sense to band together, as mining laws are relatively new, and although based on a combination of those in Western Australia and Northern Territory, are largely untested. In September EMEC, a body representing the mining companies operating in the country, is holding a GeoCongress, and one of its main aims is to strengthen and develop relationships with the Eritrean Government. Co-hosts will be the Ministry of Energy and Mines and the Geological Survey. After all the talking and a dinner there will be visits to the first major modern mine in the country at Bisha, as well as to Chalice's Koka deposit. Doubtless Tim Goyder will make the most of such an opportunity to press for his mining lease.
August 03, 2010
Diary Of A Private Investor At Diggers And Dealers.
By Susie Boeckmann
Next, on to meet Tim Goyder at Chalice Gold Mines, a company capitalised at only A$7 million one year ago and which now has a market cap of around $90million. Chalice has a massive land holding in Eritrea where mining laws are based on West Australian mining law. This is very beneficial to mine projects starting in the country. The government will also move on artisan miners, as was recently shown when 1,000 were moved off Chalices ground. At the companys Koka deposit it has a high-grade JORC compliant indicated reserve of 840,000 ounces of gold at 5.3 grammes per tonne. The company is shooting for production of 104,000 ounces per year at US$338 per ounce operating costs (as compared to some Australian gold producers, who shall be nameless, who are up to A$1000 to A$1300 per ounce!).
The bulk of the Koka resource is shallower than 150 metres deep. Chalice is on the Arabian Nubian Shield, which hosts Centamin's 13 million ounce deposit in Egypt, and counting. Chalice has what seems to be an ongoing feasibility study, because it keeps finding high-grade new targets. Nonetheless, mined development is planned for 2011. The company is concentrating its exploration along the paths of dried up old creeks, and although average rainfall is only five inches a year, there is plenty of water underground in the long valley where the Chalice exploration effort is focussed. Chalice has recently announced that it has agreed principle terms with Newmont Mining Corporation to explore for gold in the areas in Eritrea covering parts outside its Zara Gold Project.
CHN Price at posting:
44.3¢ Sentiment: None Disclosure: Not Held
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