Mutiny Gold: Deflector's road to production a step closer after...

Mutiny Gold: Deflector's road to production a step closer after maiden gold Reserves delivered
Tuesday, June 12, 2012 by Proactive Investors
With the milestone delivery of Ore Reserves and the Bankable Feasibility Study nearing completion, the Deflector deposit is becoming a near term production reality. The milestone is value accretive and moves Mutiny Gold further along the road toward a market re-rating. With the milestone delivery of Ore Reserves and the Bankable Feasibility Study nearing completion, the Deflector deposit is becoming a near term production reality. The milestone is value accretive and moves Mutiny Gold further along the road toward a market re-rating.

Mutiny Gold (ASX: MYG) has ticked off another milestone on the road to production from the Deflector gold copper deposit by delivering its maiden high grade Ore Reserves - and outlining the production plan.

The Deflector maiden initial ‘LOM production plan’ produces 450,000 ounces of gold equivalent including, 349,000 ounces of gold, 17,530 tonnes of copper and 429,000 ounces of silver.

This ‘LOM production plan’ includes reserves of 332,000 ounces of gold equivalent. The Reserve breakdown is 1.95 million tonnes at 3.9 grams per tonne (g/t) gold for 243,000 ounces, 0.8% copper for 15,530 tonnes, and 5.9g/t silver for 368,000 ounces.

Highlighting the upside of Mutiny, the recent highly successful exploration expansion results will see Deflector as potentially reaching a 10 year plus mine life - rather than the initial forecast of seven years.

John Greeve, managing director, said that the Bankable Feasibility Study is nearing completion, and the Mutiny team is keen to show the wealth of potential present at Deflector. "We have a corporate goal of reaching 2.5 million gold ounces for Deflector, and with the upside present this is now firmly in our sights."


Recent exploration success not in resource update

Adding some spice to the future contained metal resource at Deflector, the latest resource update includes the infill drilling completed by the company, but does not include the recently reported high grade intersections from the 2012 exploration program.

Deflector contains mineral resources of 3.26 million tonne at 5.1g/t gold, 6.01g/t silver and 0.82% copper for 532,000oz gold, 630,000oz silver and 27,000t copper.

Of this resource, Measured and Indicated Resources total 2.35 million tonnes at 4.7g/t gold, 6.82g/t silver and 0.90% copper for 354,000oz of gold, 514,000oz silver and 21,000t of copper.

This latest estimation was performed using Ordinary Kriging, with the original reported resource calculations completed using an Inverse Distance Squared method of estimation. The benefits of changing the methodology is that it is a more robust and conservative estimation for the project.


Open Pit Reserves

Deflector now hosts open pit Reserves of 908,000 tonnes at 3.26g/t gold for 95,000 ounces, 1.05% copper for 9,500 tonnes and 6.43g/t silver for 187,000 ounces; which forms 149,000 ounces of gold equivalent.

The surface mining reserve has been optimised by Xstract Mining Consultants using Minesite commercial software to generate an optimal pit shell on Deflector.

The ore reserve is that part of the mineral resource which can be economically mined by open pit mining methods. Dilution of the mineral resource and allowance for ore loss was included in the ore reserve estimate.

Worth noting:

- Ore reserves are based on a cut-off grade of AUD$50 Net Smelter Return value for the material classifications of; 1.32g/t gold equivalent for oxide; 1.16g/t gold equivalent for transition; and 1.17g/t gold equivalent for fresh material.

- A minimum mining width of 2 metres and a 0.3m dilution envelope has been applied reflecting mining equipment constraints.

- Metal price assumptions for ore reserves are US$1,700 per ounce of gold, US$9,000 per tonne of copper and US$40 per ounce of silver, with a foreign exchange rate of US$/AUD$1.05.

- Throughput rates used were 480,000tpa for oxide and transition material and 320,000tpa for fresh material.

Slope angles used in the ore reserve estimation were based on previous geotechnical studies from Snowdens and were a base recommendation by Xstract Mining Consultants.


Underground Reserves

In regards to the underground Reserves, Deflector currently hosts 1.042 million tonnes at 4.4g/t gold for 148,000 ounces, 0.5% copper for 6,000 tonnes, and 5.4g/t silver for 181,000 ounces; which forms 183,000 ounces of gold equivalent.

The underground mining reserve has been optimised by Entech Mining Consultants using Mine 2-4D commercial software to generate the optimised development and stope shapes for Deflector.

The ore reserve is that part of the mineral resource which can be economically mined by underground mining methods.

Worth noting:

- Ore reserves are based on a cut-off grade of AUD$145 NSR value per tonne.

- The mining method at Deflector is long hole open stoping with a minimum mining width of 2 metres being applied reflecting mining equipment constraints.

- Metal price assumptions for ore reserves are US$1,700 per ounce of gold, US$9,000 per tonne of copper and US$40 per ounce of silver, with a foreign exchange rate of US$1.00/AUD$ 1.05.

- Throughput rates used were 320,000tpa for fresh material.

- A review of the geotechnical reports from Snowdens and Dempers & Seymour into the stability and ground support requirements was undertaken and recommendations for support regimes and dilution were incorporated into the generation of the reserve statement.

- A state royalty of 2.5% was applied to the reserves, and mining costs were derived from contractor estimates obtained as part of the original Scoping Study.

- Metallurgical recovery data was based on studies undertaken by an independent third party (SGS) and reviewed by Design Engineers (GR Engineering Services Ltd).


Analysis

A maiden reserve statement at Deflector provides a baseline LOM production plan for Mutiny Gold. It is also a value accretive step for the company. At a current market cap. of around $30 million, it does not take into account current intrinsic worth or value to be added in 2012.

The recently completed Deflector Gold/ Copper Scoping Study provided a blue print for a high grade, low cost, high profit project. With the final Feasibility study for Deflector, nearing completion, the strategic finance facility with world class bank Credit Suisse should not be overlooked as a precursor and endorsement to obtaining further financing.

The resource is sufficient to underpin production growth to plus 100,000 gold ounces annually with potential to increase this resource/reserve given the strike extensions and planned drilling at depth. The move from explorer to producer will pave the way for a valuation enhancement over the next 12 months.