miningnews article

SHARES in Frontier Resources jumped more than 320% this morning on the back of a non-JORC compliant "hypothetical reserve" estimate for a copper-gold project in Papua New Guinea before trading was halted.

Frontier managing director Peter McNeil spoke to MiningNews.net from PNG and said the Australian Stock Exchange has contacted the company about this morning's announcement, though he was unsure what course of action the bourse would take. The trading halt was installed at the company's request.

In its announcement, Frontier said it has finalised the 100% acquisition the Kodu copper-gold-molybdenum deposit and 7500 square kilometres of gold properties in PNG.

Kodu has a JORC-compliant inferred resource of 85 million tonnes grading 0.4% copper and 0.6 gram per tonne gold with unquantified, but significant, molybdenum.

Notably though, Frontier said a preliminary desktop study by an independent consultant has estimated a "hypothetical reserve" of 120Mt grading 0.36% copper and 0.47gpt gold.

"There's a current resource of 85Mt but then there's another resource of 115Mt at that particular grades we used – 0.36% copper and 0.47gpt gold – but we couldn't gain access to all of the data that was used on that particular resource calculation so we couldn't verify it," McNeil said.

"So we have information that indicates there is about 120Mt at that grade but that is not JORC-compliant so we can't actually use it.

"Obviously it's just hypothetical so it's a reasonable guess at what we thought we might be able to get as a realistic reserve at that particular deposit given our knowledge."

Frontier went on to say the desktop study indicated the project could produce 39,000t of copper and 127,000oz of gold annually for 10 years.

Based on a copper price of $US2.80 per pound and a gold price of $640 per ounce, the project has a net present value of $US15.7 million ($A20.8 million) and an internal rate of return of 55%.

"What we wanted to do was try and determine what sort of economics the project would have if we could convert it to a reserve," McNeil said.

The study estimated a capital cost for the development of $235 million.

Frontier said it intends to start 10,000m of resource definition drilling and pre-feasibility studies in the December quarter.

Shares in Frontier last traded at 50.5c, up 38.5c (320%), before trading was halted just after midday.