GBM Resources (ASX: GBZ) has finalised a Resource of 34,800 ounces of contained gold for the Tailings Dam Project, supporting redevelopment of its Lubuk Mandi Gold Mine in Terengganu, Malaysia.
It also highlights the potential for early cashflow as early as April 2014 from the retreatment of tailings that will also underpin hard rock mining.
The resource, of which 94% is in the Indicated category, is at the upper end of the exploration target of between 23,000 ounces and 38,000 ounces.
“The successful estimation of indicated resource at Lubuk Mandi is a key milestone for the project as it potentially underpins the redevelopment to achieve recommencement of hard rock mining at the Mandi gold mine,” chairman Peter Thompson said.
“The resource blocks indicate that 83% are above 0.5 g/t of gold, indicating a relatively tight grade distribution, adding further confidence in the economic retreatment of the Tailings Dam.”
Commencement of the hard rock drilling program is on track to start this month while the metallurgical testwork program is in its final stages.
Path to Redevelopment
The key milestones to redeveloping the Lubuk Mandi Gold Mine are:
- Retreatment of tailings dam to achieve production by April 2014; - Complete hard rock drilling program and achieve exploration target between 174,000 ounces and 443,000 ounces; - Complete Initial public offering of Lubuk Mandi on the Singapore Stock Exchange (SXG) in 2014; and - Post Listing on SXG, recommence open cut operations and re commission the existing Carbon-in-Pulp plant.
Tailings Drilling
GBM had completed a 29 hole core drilling program in September to provide data for the resource estimation by independent consultant Skandus.
This tested the Tailings Dam on a 50 metre grid pattern yielding 439 tailings samples which were analysed to provide the primary database, which led to the estimate of 1.5 million tonnes at 0.7% grams per tonne gold.
About 94% of this is in the Indicated category with the remaining 6% in the Inferred category reflecting lack of sampling data due to access conditions on the dam.
Lubuk Mandi
The company has acquired a 40% stake in Angka Alamjaya Sdn Bhd (AASB), which holds the project, for 15% of its ordinary shares in August.
GBM and AASB have agreed on a total budget of up to S$8 million (A$6.7 million) to be used for completion of resource estimation programs, metallurgical testing, plant design, capital equipment purchase and plant construction to commence retreatment of tailings.
This includes provisional costs for an initial public offering listing on the Singapore Stock Exchange with the first Tranche of S$3million secured.
The Lubuk Mandi Gold Mine was previously owned and operated by government body Terengganu State Economic Development in the 1990's and produced 108,000 ounces of gold from two shallow pits.
Its associated CIP processing plant is rated at 300,000 tonnes per annum and involves single stage crushing to a stockpile and mill.
Both were placed on care and maintenance in 2000 with the plant requiring minimal refurbishment.
Lubuk Mandi is located along one of four recognised gold belts in Peninsula Malaysia that together have at least 28 significant gold deposits.
The project covers 221 hectares and is close to existing infrastructure and the regional centre of Terennganu State.
Analysis
GBM Resources has clearly defined a resource of 38,000 ounces of gold for the Tailings Dam Project and is well on track to early cash flow as early as April 2014.
Importantly, it also supports the company’s decision to redevelop the Lubuk Mandi gold mine with hard rock drilling set to begin this month.
For investors, there is a clear pipeline of Catalysts ahead that include:
- Results from metallurgical testing and hard rock drilling, - The start of gold production from the tailings dam and - IPO of Lubuk Mandi on the Singapore Stock Exchange, which allows the company to tap Asian capital
This underpins current valuation and provides a growth path for valuation upside (from <$10M Market Cap.) as there is a total JORC Exploration Target estimated to contain between 174,000 and 443,000 ounces of gold.
This is from multiple gold discoveries that offer exploration potential in an established gold mining region.
GBZ Price at posting:
4.8¢ Sentiment: Buy Disclosure: Held
(20min delay)