Dual-listed West African gold producer Cluff Gold (LON:CLF, TSE:CFG) confirmed that it is on track to complete a definitive feasibility study on its Baomahun Gold Project in Sierra Leone in the third quarter of 2011.
Among the key developments reported by the company was confirmation that an additional 15,000 meters of drilling completed has increased confidence in the continuity of the mineralization compared to the last resource model.
Additional assays released from some of the aforementioned drill campaign included 16 meters averaging 7.1 grams per tonne from 346 meters, 19 meters averaging 5.7 grams per tonne from 611 meters and 22 meters averaging 4.2 grams per tonne from 322 meters.
Baomahun currently hosts 1.4 million ounces of measured and indicated resources and 1 million ounces of inferred resources. The company expects to complete a new resource block model during the second quarter, and also informed investors that it would now look at a open pit mine rather than a combined, more complex, open pit / underground mine development.
Cluff also sees other opportunities to cut both capital and operating costs at the mine. The company noted today the potential to cut capital costs through the addition of an intermediate flotation stage, which would reduce grinding requirements at the mill.
The London headquartered gold producer is also undertaking a new study that will consider the potential economic benefit of building a 20MW run of river hydro-electric power station, which could significantly cut power costs at the mine.
"We are very pleased with the progress we have made to date, and we remain on track for the completion of the feasibility study in Q3 2011,” said Peter Spivey, CEO of Cluff Gold.
“With the hydro-electric power and flotation options, together with the along strike exploration program currently underway, there is significant potential to further improve the project economics beyond the feasibility study."
Indeed, any material reductions in capital or operating costs at Baomahun would be a significant boost for the company. With gold currently trading confidently above $1500 per ounce, emerging gold producers have an opportunity to capitalise on the potential to generate strong cash flow literally from commencement of mining.
As recently as April, London broker Evolution Securities had a ‘buy’ recommendation for Cluff, with a target price of 140 pence (CDN$2.20) a share.