Alkane Resources Ltd (ASX:ALK) has started an expansive exploration program at the Tomingley Gold project located in central west New South Wales.
The program will test underground ore positions at Tomingley, near mine and regional exploration targets, and revisit underground ore potential at Peak Hill.
Tomingley had a strong FY16 producing 67,812 ounces of gold for $109.1 million revenue at an all-in sustaining cost of A$1,256 per ounce of gold.
Furthermore, the Minerals Resources and Ore Reserves have been re-estimated to account for depletion, gained geological data and the maiden underground reserve advised in November 2015.
Drilling has commenced at underground deposits testing for continuity and a more detailed feasibility study is underway to enable underground development.
Resource and Reserve re-estimates
Alkane’s Ore Reserves and Mineral Resources for the Tomingley Gold Operations as at 30 June 2016 in accordance with the JORC code 2012 are:
- Total Mineral Resources: 10.32 million tonnes grading 1.75 g/t gold for 579,000 ounces; and
- Total Ore Reserves: 4.31 million tonnes grading 1.8 g/t gold for 253,000 ounces.
The total ore reserves include the maiden underground reserve advised in November 2015 of:
- Ore Reserves: 0.524 million tonnes grading 3.7 g/t gold for 61,600 ounces.
The primary differences from 2015 to 2016 are:
- Ore mined from Caloma, Wyoming Three and Wyoming One during the period;
- Inclusion of maiden underground reserve;
- Caloma reserves used an updated geological/structural model based on in-pit mapping and grade
control drilling, as well revised geotechnical parameters;
- Caloma Two reserves based on new pit design; and
- Wyoming One reserve based on new pit design.
The wider Tomingley project, which hosts the Tomingley Gold Operations that commenced in 2014, covers an area of 270 square kilometres.
Alkane is targeting a number of underground targets within the project with drilling already commenced to test for continuity within the mineralised zones at Caloma and Wyoming One deposits.
A more detailed feasibility study is also underway to enable an underground development decision to be completed early 2017.
Further drilling is scheduled targeting the historic underground Myalls United mine and surrounding area where previous drilling intersected up to 24.45 g/t gold.
Alkane also plans to revisit underground ore potential at Peak Hill, the company’s first operating mine in the region.
An initial 17,000 metre aircore drilling regional program is scheduled to commence shortly focusing on targets including Tomingley Two, Smiths and Trewilga Black Snake.
Tomingley Gold Operations update
Tomingley produced 67,812 ounces of gold for site cash flows of A$24.6 million and pre-tax profit of A$14.3 million.
Mining in the Wyoming Three pit was completed, and while pre-stripping of the Wyoming One deposit commenced, most ore was accessed from the Caloma pit.
Persistent heavy rain in the current quarter to date, combined with previous rain events in May and June, delayed ore releases from the Caloma and Wyoming One pits and gold output has been less than forecast.
Waste stripping at Wyoming One continued as per the schedule.
Subject to moderating weather conditions, full year guidance for gold production remains unchanged, but costs of production may increase by A$50 per ounce.
Alkane’s commitment to exploration at Tomingley makes for a sustainable cash-generating gold operation in an environment of high gold prices, currently at A$1,745 per ounce.
With adverse weather conditions Alkane is still able to maintain full year gold production guidance, which is positive, and in the current gold price environment the cost increase to production is manageable.
The company is now leveraged to exploration upside as it commences a large scale program to potentially expand its resource base.
Alkane is trading up 75% year to date, currently priced at $0.415.
Securing financing for the development ready Dubbo Zirconia Project (DZP) also remains a key short term milestone and catalyst for Alkane.
The project has reserves to support a 35-year mine life and it has a net present value (NPV) of US$0.92 billion and 17.5% internal rate of return (IRR).
The DZP is now construction ready with financing currently in progress with production anticipated to commence in 2018.
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