I have compiled an overview of MCO for those interested in this exciting company. Much of it is from your own informative contributions and in many cases I just edited and polished the commentary.
If I've made a blue anywhere let me know.
MCO -Morning Star Mine
Located 3hrs out of Melbourne, WMC walked away from the mine in 1961 due to a lousy gold price of $35 an ounce they and to focus its resources in other areas such as Nickel in WA. At the time they left they had developed levels 7 - 9 & levels 19 - 22 in readiness to mine but did not proceed. In addition, they had almost completely ignore a gap from levels 7 to 15 referred to by MCO as the “The Gap Zone”. "The Gap Zone”(levels 9 –15)or zone 2 out of the 3 gap zones in the mine is the main focus of MCO’s current drilling program and Jorc resource work.
The mine is 1100 metres in depth. 340 metres has been mined to date (i.e 1961 and prior) and 760 metres remains unmined. It is estimated by MCO that there are 2,000 ozs per vertical metre (historical output was 2,000 to 5,000 ozs per vertical metre) which equates to 1,520,000 ounces contained in "The Gap Zone”.
At current gold prices of $AUS980 /oz this calculates out to a gross value of $A1.49 Billion. After applying a rough 90% reduction for operating costs the net surplus is $149 Million. It should be stressed that "The Gap Zone" needs to be drilled out to validate this numbers and this is what the company is doing right now.
The next batch of drill assay results are due out in the next 2 weeks. It is already know from company announcements that most of the holes have visible gold in the cores.
Only 6 drill holes have ever been aimed at the "Gap Zone" in the past (by WMC). All hit reef & gold.
WMC Data (1961):
There are over 44000 pages of technical reports & mining & exploration data that were assembled by WMC and recorded on microfilm in a massive data retrieval program.
The gold ore extracted from underground never dropped below 11.6g/t as the gold processing technology of the day could not profitably extract any ore with a lower grade. This has left large volumes of remnant ore which could be mined today. There is also tailings material which varies in grade from 2g/t to 6.2g/t and high grade remnant ore stashed on different levels that can be readily mined.
Regional Potential: There are 10 known Dykes on MCO’s ground, only 1 has been explored. The company has a large land holding of 220 sq kms after recent grants and farm-in agreements.
Resource:
We know there is a 1998 non-Jorc resource model of 430000 ounces of gold. The company is currently working on a Jorc resource.
Main Focus (Zone 2 “The Gap Zone”)
There are 3 gap zones in the mine (not mined or developed or adequately explored)
Zone 1 : On level 2 and called the AAA reef. In 1998 MCO drilling on the AAA-s2 vein system outlined 140,000t @ 5g/t - 14.2g/t. (Lets say 50,000 ozs @11 g/t).
Zone 2: “TheGap Zone". Which follows the floor of Whitelaws reef ( from level 4/5 in the south thru to sub level 7 in the north. This is here where MCO is targetting 1.5 to 2 million ounces of gold. The current drilling is aimed at defining “The Gap Zone” between levels 7 and 15 contains 66Mt of Dyke material (5% of which is estimated to be Quartz Reef).
Zone 3. The deepest of the 3 gap zones and is located below the 19th level. This zone was ready for production in the early 60's however the closure of the mine by WMC in 1961 (to pursue nickel in W.A. and due to the low $35 /oz price of gold) without any production from this level means the ore remains intact
Exploration
Channel Samples (Levels 4 – 8)
27/02/07 Channel samples produced had an average grade (from 129 samples) of 78.8g/t from levels 4 - 8. The co. took the conservative approach and in all instances only published the lowest grades
Channel Samples (Level 5-6)
Burns reef grades on level 6 were from 149g/t up to 577g/t, for an average grade of 356.72g/t. As staggering as it may seem the Burns reef assays would have averaged 490g/t gold if the higher assay results were used.
Bulk Sampling (Level 6 – Sub Level 7)
Whitelaw’s reef Bulk Sample returned an average grade of 21.4 g/t.
Channel Sample (Level 7)
Campbell’s reef from Level 7, averaged 18g/t from 17 samples taken in 2006 with 4 samples returning grades of 35g/t with a maximum grade of 78g/t.
Note: The 7th level which hosts Campbell's Reef has been left intact with only minor stoping.
Drilling
Previous work includes over 600 WMC auriferous (gold bearing intersections) drill holes from the surface. 100 or so deeper holes" were put down below level 10. Only 6 WMC holes were drilled in the “Gap Zone” between 7 – 15. The rest of the holes were drilled between the levels 19 - 22 (as levels 16 - 18 had already been mined decades beforehand). When WMC walked away from the mine in 1961 (with a lousy gold price of $35 an ounce) they had developed levels 7 - 9 & levels 19 - 22 in readiness to mine. Those gold zones remain intact & read to be mined in due course. The resource contained in the deeper zone is not estimated nor provided.
MCO currently have 5 diamond drill rigs (owned by the company) of which 4 are in work or will be as off January 7, 2008. They 7 days a week, 12 hour days.
2 rigs begin underground drilling from the 9th level to the 15th level (virgin territory) in early January. 2 rigs are operating at Surface to extend the known North and South boundaries of the Dyke.
A further surface rig and another underground rig are being prepared for use.
Grade factoring
The mine has consistently averaged 8 - 10 g/t gold from sampling & drill assays.
In production however, the mine actually produced at an average gold grade of 26.5 g/t over its history
The company 2004 annual report on page 8 states : It must be pointed out that grade factoring studies have consistently shown recovered grades between 2 - 5 fold of drill & face sample assays.
Recovery
At a coarse 250 microns crush, Morning Star found that the bulk samples returned up to 88% gravity gold recoveries through the first crush. WMC records show that 80-85% of the gold was recovered as free metal by gravity separation. MCO have achieved 93% recovery using gravity separation.
Native Title
Agreement reached over all titles
Dewatering & Refurbishment
The mine has been significantly de-watered and the much of the mineshaft has been refurbished.
MCO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
