mining, page-3

intersuisse gln http://www.intersuisse.com.au/notes/mnwednesday.html
right next door to GPN greater pacific gold.

Gleaneagle Gold (GLN)
Gold production commences at Fortnum
Speculative Buy
$0.38
GLN has successfully recommissioned the Fortnum treatment plant at the Peak Hill Goldfield project and is now producing gold from low grade stockpile material. Fortnum production is expected to ramp up to design capacity during the current quarter, with treatment plant throughput to increase to 1.0 million tonnes per annum rate. Ore is currently being mined in the Toms and Eldorado open pits.

The gold project has an initial life of approximately three years, producing a total of 156,000 ounces based solely on open pittable deposits. Production is to be sourced from the Toms, Yarlarweelor and Horseshoe deposits, supplemented with feed from a series of satellite deposit within close proximity of the plant.

In addition to the open pittable deposits there is potential to develop an underground operation based on the Starlight group of deposits. Currently the resource base is 1.97 million tonnes averaging 4.1 g/t gold and containing 259,000 ounces of gold. A proposed work plan involves the dewatering and refurbishment of the existing underground development to facilitate drilling from underground to further define the resource.

The Peak Hill Goldfield resource is 13.1 million tonnes averaging 2.5 g/t and containing 1.045 million ounces of gold. In excess of 1.0 million ounces of this resource are within 30 kilometres of the Fortnum plant, with the majority of this located within 2 kilometres of the plant.

Revenue from the project has been secured with GLN entering into a mix of flat forwards at a $900/oz gold price and deferred premium put options at a $800/oz gold price. The flat forwards cover approximately 61,000 ounces with deliveries scheduled over the first two years of the operation, while put options cover approximately 54,000 ounces. Forecast revenue in each of the first two years of production is expected to be in excess of $50 million.

Although not yet established it is expected that cash costs would be in the order of $550 per ounce.

GLN plans to commence follow up drilling at the Forrest Gimp prospect in late July. Forrest Gimp is located 12 kilometres south of the Fortnum treatment plant on the Peak Hill joint venture (80%). Results of first pass drilling identified a wide zone of ore grade mineralisation associated with a previously untested geochemical anomaly. Intercepts included 11 metres averaging 3.26 g/t from 64 metres down hole within a broader 28 metres averaging 2.02 g/t gold from 53 metres. Follow up drilling will consist of a series of step out RAB drill lines across the geochemical anomaly along strike of the previously defined mineralisation.

Near term exploration activity in the immediate Fortnum area will consist of RC and RAB drilling of a number of targets adjacent to the Toms deposit, while regional exploration will consist of surface sampling.


Impact
The resumption of production at the Fortnum project is the key to GLN’s strategy of becoming a self funded explorer, with cash flow being used to fund exploration activities across the company’s prospective 2,500 square kilometre Peak Hill Goldfield landholding.



Prepared by Peter Russell