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Kagara Zinc
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Posted: '05-APR-06 07:02' GMT © Mineweb 1997-2004

5 APRIL 2006 KAGARA COMMENCES MUNGANA DECLINE, UPGRADES BASE METAL RESOURCE FURTHER STEPS TOWARDS DEVELOPMENT OF THIRD PRODUCTION CENTRE Base metal producer Kagara Zinc Ltd (ASX: KZL) has taken further key steps towards the development of a third production centre at its Mt Garnet base metal operations in North Queensland with the commencement of the exploration decline to access the Mungana deposit and the announcement of a substantial upgrade to the base metal resource at Mungana. Kagara said today (Wednesday) that the exploration decline, which is planned to initially access the upper levels of the high-grade BM1 base metal resource at Mungana, had commenced on schedule and was expected to reach the ore body in January 2008. The decline development is being run by Kagara personnel, using Kagara-owned equipment. Kagara’s Executive Chairman, Mr Kim Robinson, said mine planning was also currently underway on the BM1 and BM2 resources, which would provide the initial feed for any treatment facility constructed in the Mungana area, with these resources expected to be progressively converted to reserves over the coming months. “Staffing for the underground development is essentially completed and surface infrastructure is currently being constructed,” Mr Robinson said. “The commencement of the exploration decline, which will initially access the high-grade BM1 resource which grades 21.9% zinc, represents another significant step in Kagara’s continued growth path as a leading Australian base metal producer.” The Mungana deposit is located approximately 150km north-west of Kagara’s Mt Garnet base metal processing facilities, one of two treatment complexes now owned by Kagara in the region following its recent acquisition of the Thalanga base metals plant. The Mungana/Red Dome complex represents a third potential production centre and is subject to an ongoing intensive exploration and feasibility program. In this regard, Mr Robinson said the quality of the Mungana deposit had been further reinforced with the announcement today of a substantial upgrade to the base metal resource based on the results of intensive drilling programs carried out over the past 12 months. The new resource, which is now more than 90% in the Indicated category, is 2.85 million tonnes grading 12.6% zinc, 2.7% copper, 2.4% lead, 190g/t silver and 1.2g/t gold and contains 348,000 tonnes of zinc, 77,000 tonnes of copper, 17.5 million ounces of silver and 110,000 ounces of gold. “This is a significant upgrade, with the resource still remaining open at depth,” Mr Robinson commented. “In addition, a resource for the large porphyry-related zone of gold-silver-base metal mineralization that envelopes the Mungana base metal resource will be calculated over the next 1-2 months, which we expect will result in a substantial increase in this resource.” The two treatment plants at Mt Garnet are currently treating ore from the Dry River South underground mine and nearby Balcooma open pit. Kagara recently exercised its option to purchase the Thalanga treatment facility and is scheduled to commence production from this plant in October 2006 sourcing ore from the Balcooma copper deposit, at a production rate of more than 20,000 tonnes of copper contained in concentrates. ENDS Released by: On behalf of: Jan Hope / Nicholas Read Mr Kim Robinson Jan Hope & Partners Executive Chairman Telephone: (+61-8) 9388-1474 Kagara Zinc Ltd Telephone: (+61-8) 9481-1211 Kim Robinson Mobile: 0427 440 045 www.kagara.com.au Background Kagara Zinc Limited (ASX: KZL) is a low-cost Australian base metal producer with a strongly growing production base at its 100%-owned Mt Garnet Project and a significant portfolio of gold and base metal exploration and development projects, all located in north Queensland, Australia. Kagara is based in Perth and listed on the Australian Stock Exchange in the S&P ASX 300 Index. Over the past 12 months, Kagara has laid the foundations for its continued strong growth as a producer of both zinc and copper concentrates from Mt Garnet Project in North Queensland. Kagara has been in production at Mt Garnet since 2003, currently producing around 100,000tpa of zinc concentrate with ore sourced from the Dry River South underground mine and nearby Balcooma open cut. In addition, with the commissioning of a new copper circuit at Mt Garnet in February 2006 and campaign processing of high-grade supergene copper ore from Balcooma during 2005, the Company will produce approximately 9,000t of copper metal in concentrate in 2005/06, rising to at least 25,000 tonnes in 2006/07. In January 2006, Kagara announced that it had negotiated a 4-month option to purchase the nearby Thalanga base metal treatment plant for A$2 million, which it intends to utilise to treat the substantial copper resources already delineated at Balcooma (3.3Mt @ 3.9% copper). This has the potential to add production of a further 20,000tpa of payable copper metal in concentrate by September 2006 at cash operating costs forecast to be less than US$1.00/lb of payable copper. Kagara is also well advanced with development plans for the Mungana/Red Dome base metal complex, 150km north-west of Mt Garnet, where an exploration decline has commenced. The Company plans to fast-track development of the base metal resources at Mungana leading to a development decision, subject to regulatory approvals, on construction of a fourth treatment facility in early 2007 and production in April 2008. The Mungana/Red Rome development has the potential to add a further 15,000tpa of copper metal production and significant additional zinc production to Kagara’s portfolio, cementing its position at the forefront of Australian base metal producers. ENDS