Lucky lizard, google is your freind. ABM Resources path clear for trial mining start at Old Pirate, self-funded
ABM Resources' (ASX: ABU) projects include the Twin Bonanza Project – a cluster of high grade and bulk tonnage targets.
Following the acquisition of certain Exploration Licenses and Exploration License Applications from Tanami Gold (ASX: TAM) and Newmont (NYSE: NEM) in the Northern Territory, ABM Resources is now one of the largest land-holders in Australia exploring for gold and gold-copper deposits.
ABM Resources (ASX: ABU) has received the trial mining permit for its Old Pirate High Grade Gold Project in the Northern Territory, paving the way for a start date of June 2013.
Significantly, trial mining with be funded from the A$14 million cash in hand the company held at the end of December 2012, and could be potentially cost neutral from the sale of gold.
ABM is targeting around 3,000 ounces of gold during the trial mining period, which at a gold price of about $1,600 per ounce would deliver some $4.5 million in gross revenues.
Equipment has been ordered and planning is now complete for the 10,000 tonne trial mining phase.
Following the start of trial mining in June 2013, processing of the gold is expected to begin in July.
Darren Holden, managing director, commented: “The path is now clear for ABM to commence the trial mining work at Old Pirate.
“The staged approach is a stepwise development and assessment path that is designed to become self-funding through each stage of operations growth.
“Commencing with stage one trial mining, the company can assess the mining factors for stage two hence mitigating risk and providing valuable feasibility information.”
The mine management plan has been accepted and authorisation has been issued by the Northern Territory Department of Mines and Energy for the extraction of 10,000 tonnes of gold-bearing material.
ABM will also undertake the installation of a pilot plant and tailings facility, associated site works and ground water extraction, and extensional exploration in the Old Pirate corridor.
The pilot plant will comprise a 15 tonne per hour gravity gold plant including crushers, coarse gold jig, ball mill, Knelson gravity concentrator and tabling/gold room.
The plant cost is estimated at around $2 million with installation costs of about $1 million.
The plant will be scalable, with minor adjustments, to 150,000 tonnes per annum and adaptable for use in the ongoing mining operation.
During trial mining ABM plans to mine from a selection of high grade veins in the top 2.5 to 5 metres of the deposit.
The company is targeting a recovered grade of 10 grams per tonne (g/t) gold from 10,000 tonnes, which could deliver about 3,000 ounces of gold.
The total cost of trial mining, including capital purchases, contract mining, mobilisation and technical analysis is anticipated to be about $5 million.
Prized project
The Old Pirate Gold Deposit has a total uncut Resource of 1.88 million tonnes at 11.96g/t for 723,800 contained gold ounces.
The project has a number of key advantages over other projects including high gold recoveries of up to 97% via low cost/low capital expenditure gravity processing methods.
There is also abundant high grade gold observed in multiple quartz veins extending from surface.
The project has a high coarse-gold effect (statistical nugget effect) resulting in a high variability of grade between samples.
Through trialling multiple techniques, ABM has established that the collection of larger sample sizes results in a generally higher grade assay.
This sampling effect is typical in coarse gold systems where drilling generally under-calls the overall grade.
Staged approach
As a result, ABM is not undertaking the standard feasibility study process involving detailed drilling, but is instead conducting a staged approach to development where the trial mining (bulk sampling) forms a key part of determining the costs and feasibility of a full-scale mine, and allows for ongoing “in-mine” exploration.
The trial mining involves installation of a gravity gold plant that will be used and expanded in the subsequent stages.
The staged process takes advantage of the low engineering risk at Old Pirate and allows ABM to keep up-front capital expenditure to a minimum.
The objective is for each stage of development to be profitable with quick payback periods, and to provide the capital required for the subsequent stages from cash flow.
Exploration will continue during all stages to expand the Resource base.
The 2013 field season has begun and ABM is in the process of sampling veins that have been identified as a result of reconnaissance work towards the end of the 2012 field season.
Mineral lease
ABM has lodged a mineral lease application covering the Old Pirate trend and surrounding areas required to support full-scale mining operations.
Initial environmental assessments have been lodged with the various statutory offices including the Northern Territory Department of Mines and Energy, the Northern Territory Environmental Protection Agency and the Central Land Council.
The company is aiming to conclude the mineral lease application early in the second half of 2013 and around the time stage one trial mining is completed.
Analysis
The receipt of the trial mining permit for Old Pirate is a significant milestone and a transformational one at that for ABM.
Not only does it put ABM firmly on course, and closer, to production, but it is the equivalent of a Feasibility Study for future open pit operations at the company’s Twin Bonanza Gold Camp.
This move will mitigate risk and provide valuable feasibility information for the stage two development.
Additionally, the trial mining will be funded from existing cash reserves, with each subsequent stage to be self-funding, meaning no additional outside funding is likely to be required.
Trial mining will deliver around $4.5 million in gross revenues, and could be potentially cost neutral from the sale of gold.
Old Pirate has several key advantages over other projects including high gold recoveries of up to 97% via low cost/low capital expenditure gravity processing methods.
With trial mining locked in and based on ABM’s Ev/Ounce we calculate a share price of $0.05-$0.06 as closer to intrinsic value for ABM Resources.
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