Brisbane, Apr 30, 2008 (ABN Newswire) - North Queensland Metals Limited (ASX: NQM) and its joint venture partner Heemskirk (HSK) completed a Sale and Purchase Agreement with Newmont Australia Pty Ltd (Newmont) on 28 December 2007, whereby NQM as Manager for the JV took control of the Pajingo Gold Mine on 30 December 2007.
The purchase price of $25M included all surface plant and underground mining equipment plus 830km2 of highly prospective exploration tenements. NQM's share of $15M was settled by $9.4M cash and the allocation of 15.1M shares to Newmont. The acquisition was funded through the issue of $12.1M in new shares. NQM has no borrowings.
Since the end of the quarter NQM has made significant progress toward bringing the mine to full operation at the revised production rate of up to 80,000 oz a year (see Production table below) and extending the mine life to six years based on current Reserves and Resources.
Underground mining has recommenced with the objective of delivering ore at a rate of 300,000tpa. The processing plant is being modified to run continuously at that lower rate, improving efficiency in the operation.
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Quarter ending
31 March 2008 *
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Development (m) 404
Mine Production (t) 35,951
Mine Grade (g/t) 7.6
Mill Production (dry t) 42,808
Mill Grade (t) 8.28
Recovery 96.0%
Gold Produced (oz) 10,816
Average Gold Sale Price AUD/oz $1025
Silver Produced (oz) 11,514
Average Silver Sale Price AUD/oz $19.33
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*NQM's equity is 60% of this production
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Gold sales totalled 10,816oz at a cash cost of A$560/oz. NQM received an average gold price of $1025/oz for the quarter. NQM has not hedged any of its gold production.
The JV partners announced a JORC compliant Reserves and Resources estimate for Pajingo Gold Mine totalling 486,000 oz gold (refer to tables below). The Reserves and Resources were at the upper end of the joint venture partners' expectations and at higher than anticipated grades.
Reserves
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Proved Reserve Probable Reserve
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Source Tonnes g/t oz Tonnes g/t oz
Underground 194,000 8.6 53,000 114,000 6.6 24,000
Open pit 230,000 3.3 24,000
Total 194,000 8.6 53,000 344,000 4.4 49,000
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Reserves 538,000 5.9 102,000
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Resources
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Indicated Resource Inferred Resource
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Source Tonnes g/t oz Tonnes g/t oz
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Underground 81,000 10.1 26,000 1,044,000 9.4 317000
Open pit 350,000 3.7 42,000
Total 81,000 10.1 26,000 1,394,000 8.0 358,000
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Resources 1,475,000 8.1 384,000
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- Note: Due to rounding on tonnage, the numbers
in the above tables may not always mathematically
add correctly
- Note: Resource does not include Reserve
Based on the Reserves and Resources, production at Pajingo is forecast to total 390,000 oz gold over a life of mine extended to six years. In the Life of Mine plan only the underground Reserves and Resources have been considered. The open pits, while potentially viable, are not a priority for the joint venture partners.
Production Plan
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Financial year 07/08 08/09 09/10 10/11 11/12 12/13
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Tonnes Milled(t) 106,000 278,000 300,000 300,000 300,000 149,000
Grade(g/t) 7.3 8.6 9.0 9.0 9.0 9.0
Recovery(%) 96.5 96.5 96.5 96.5 96.5 96.5
Ounces Forecast 24,000 74,000 83,800 83,800 83,800 41,600
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The acquisition included 830km2 of highly prospective tenements covering the Pajingo epithermal system. Exploration is expected to resume around mid-year with a review of the extensive database. From this the JV partners expect to develop drill targets for late 2008.
Baal Gammon Project Feasibility (100% NQM)
The feasibility study into the development of the Baal Gammon copper-tin-silver-indium project near Herberton was completed during the quarter and is under consideration.
Conditional on approval the Project team will move to detailed engineering, securing of key plant and equipment, finalisation of marketing and securing of finance. Details of the outcome will be released following a review by the Board..
As part of the Pajingo Gold Mine acquisition NQM secured the existing secondary ball mill which has been earmarked for use at Baal Gammon. This removes uncertainty on lead time for this major piece of equipment
Following a process of selection a North Queensland based earthmoving contractor has been nominated to complete the mining of the pit and a contract has been prepared. The finalisation of the contract is subject to the project approval. .
With the completion of the study on the immediate pit there is now renewed focus on adding additional ore stocks in the immediate area Exploration Agreement was reached with the applicants of EPMA 14016, which is adjacent to Baal Gammon, to acquire the tenement when granted. The tenement is in the final stages of grant.
Once granted NQM will undertake exploration work on several exciting advanced indium rich base metal prospects which have potential to prolong the operating life of the proposed Baal Gammon treatment plant.
Previous drilling information from the prospects is being compiled and sorted for modelling which will allow the Company to move quickly to establish JORC compliant estimates on the mineralisation.
Data from the airborne survey over the Company's far north Queensland tenements is being reviewed. The survey has shown a number of previously unidentified structures which link historic mines in the area. These structures will be the focus of field work.
NQM continues to consolidate tin prospects within its permit areas and nearby. The EPM area has potential to host significant deposits and the Company is looking at a range of prospects in order to further their evaluation and development.
Outlook
- At the Pajingo operation mine output is expected to continue to rise as planning and scheduling provide consistency of access to additional ore sources.
- The mill will run on a continuous basis from early May when modifications are made to reduce throughput thus improving efficiency.
- The operation will benefit from the arrival of the newly appointed General Manager, Alex MacDonald and Mine Manager, Simon Jackson.
- The Baal Gammon Project feasibility study is completed and, subject to Board approval, will move to detailed engineering, key plant procurement, marketing and finance.
- Approval of the Baal Gammon mining leases is expected in July / August with the registration of the Indigenous Land Use Agreements.
Note:
The information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Geoff Phillips, who is a Member of the The Australasian Institute of Mining and Metallurgy. He is a full time employee of NQM Gold 2 Pty Ltd which is a 100% subsidiary of NQM. Geoff Phillips has sufficient experience which is relevant to the style of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Geoff Phillips consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
