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Alkane Resources assays to extend Tomingley gold operations

Alkane Resources looks to extend Tomingley's life of mine.

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Alkane shares are trading up 60% over the past 12 months, currently priced at $0.36

Alkane Resources (ASX:ALK) has received assays from drilling designed to extend known mineralisation and improve continuity within the ore zones at the Tomingley gold operation located in New South Wales.

Reverse circulation and diamond core drilling programs totalling 6,837 metres tested mineralisation adjacent to and below the Wyoming One and Caloma open pits.

Results from the 27-hole program produced results including 19.7 metres at 5.36 g/t gold from 271 metres depth.

The drilling was part of the feasibility to develop an underground mining operation at the Tomingley gold operations.

The data from this current program will be incorporated into the resource model to form a basis for the underground mining study.


Drill result details

The program comprised of 9 diamond holes totalling 3,659.4 metres, which tested targets below the Wyoming One open pit and 18 reverse circulation holes, which tested mineralisation at the Caloma pit.

Wyoming One results included:

- 8.7 metres at 5.09 g/t gold from 399 metres including 1.2 metres at 19.05 g/t gold;
- 20.0 metres at 4.19 g/t gold from 311 metres including 8.0 metres at 5.53 g/t gold;
- 11.0 metres at 4.21 g/t gold from 196 metres including 2.0 metres at 8.73 g/t gold; and
- 19.7 metres at 5.36 g/t gold from 271 metres including 8.1 metres at 9.34 g/t gold.

Caloma results included:

- 20.0 metres at 2.71 g/t gold from 97 metres including 2.0 metres at 11.7 g/t gold;
- 15.0 metres at 4.84 g/t gold from 80 metres including 3.0 metres at 18.7 g/t gold;
- 15.0 metres at 2.79 g/t gold from 104 metres including 1.0 metres at 5.03 g/t gold; and
- 5.0 metres at 2.44 g/t gold from 135 metres including 2.0 metres at 8.04 g/t gold.


Background

Alkane has two key assets both in New South Wales, the cash generating Tomingley Gold Operations (TGO) and the construction-ready Dubbo Zirconia Project (DZP).

While the TGO continues to generate cash inflow for the company, the development of the DZP valued at US$0.92 billion represents a significant opportunity for Alkane.

The DZP is located 400 kilometres northwest of Sydney and is a large polymetallic resource containing zirconium, hafnium, niobium, yttrium and rare earths.

The project is construction ready with financing negotiations currently in progress and production anticipated to commence in 2018.

Securing financing for the DZP is a key milestone for Alkane.


Analysis

As Tomingley is Alkane’s cash producing asset, any extensions to gold resource will provide an opportunity to extend the life of mine, which will extend cash flows.

Cash flows from Tomingley have allowed Alkane to progress the DZP without diluting shareholders and with gold recently trading at A$1,600 per ounce, it is an opportune time to be a gold producer in Australia.

The DZP has been referred to by market commentators as the most advanced and arguably best rare earth elements and specialty metal project in the world.

Alkane recently conducted an internal review that found an opportunity to lower capital costs through construction on a two-stage modular basis.

A study from 2015 concluded a capital cost estimate of US$930 million was required.

The new two-stage construction proposal would break up the capital costs into US$480 million for stage 1 and US$360 million for stage 2 for a total capital cost of US$840 million.

This not only significantly lowers the initial capital cost required to develop the project but also the overall cost.

Revised financials will be released following completion of a detailed assessment of this concept in the 2017 March quarter.

Alkane shares are trading up 60% over the past 12 months, currently priced at $0.36.

Quick facts: Alkane Resources Ltd

Price: 1.49 AUD

ASX:ALK
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Market Cap: $885.64 m
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