MEDIA RELEASE WEDNESDAY, 14 JULY 2004 RECORD PRODUCTION QUARTER FOR KAGARA AS CASH COSTS FALL TO US23c/lb STRONG PRODUCTION AND CASH FLOW FROM NORTH QUEENSLAND ZINC OPERATION Kagara Zinc Limited (ASX: KZL) has affirmed its position as the lowest cost zinc producer in Australia following an outstanding production quarter at its Mt Garnet Project which saw record output of zinc, lead and copper metal and cash costs fall to US23 cents per pound of payable zinc. Net revenues for the Quarter from the Mt Garnet Project, located in North Queensland, were US45 cents per pound of payable zinc, resulting in an excellent cash margin of US22 cents per pound of payable zinc – with the substantial cash generation confirming Kagara’s status as a leading mid-tier resource group. The Company said it had applied cash generated to debt repayment, pit cutbacks at its Surveyor pit and capital development, leaving a cash balance at the end of June of A$3.6 million. Kagara also unveiled an aggressive A$3.5 million exploration program over the next 6 months at the Mt Garnet Project designed to increase its resource and reserve inventory to underpin future expansion plans. For the June 2004 Quarter, zinc concentrate production increased by 20% to 20,644 tonnes (10,363 tonnes of zinc metal), with zinc recoveries of 90.3% achieved from processing high-grade Surveyor ore. Output of lead metal (4,005 tonnes) and copper metal (391 tonnes) was also a record, while recovery of payable by-product silver is running at more than 1.5 tonnes per month. Lead and copper recoveries were also well above feasibility expectations at 83.1% and 79.8% respectively. Kagara’s Executive Chairman, Mr Kim Robinson, said the Surveyor ore body where mining operations are currently based was continuing to perform well against the ore body reserve model, with milled grades of both base and precious metals significantly higher than reserve grades. “This is an exceptional quarterly performance which confirms that Mt Garnet has well and truly hit its straps, with production now exceeding design capacity of the treatment plant by 30%” he said. “The de-bottlenecking of the treatment plant is proceeding on schedule and will be completed during August,” he added. “Given the increased output currently being achieved with the existing plant, we expect the modifications to result in production of around 130,000 tonnes per annum of concentrate.” “This level of output negates the need for the larger plant expansion to 148,000 tonnes per annum announced last year, and enables us to consider moving directly to more wide-ranging expansion opportunities, including the potential establishment of a second stand alone plant at Chillagoe.” Kagara has committed to a substantial A$3.5 million exploration program over the next 6 months, with the bulk of expenditure planned for Chillagoe, where intensive drilling of the Mungana, Montevideo and King Vol deposits will be undertaken. In addition, the Company has recently commenced a program of deep diamond drilling of the Red Dome Mine Corridor targeting high-grade gold-copper deposits. The Company is currently calculating a new resource for Red Dome which is scheduled for completion by mid-August.
2 “Our view is that the Mungana deposit, located 3km north west of Red Dome, has the greatest potential in the short term to develop the tonnages necessary to justify a stand alone plant,” Mr Robinson said. “This area will be a major focus for us both in terms of base metal and gold exploration.” Kagara has also upgraded the potential of its Balcooma North copper deposit during the quarter (located near the Surveyor mining operations) and plans to undertake further drilling at the Balcooma deposit itself as well as exploratory drilling beneath the known deposits of Surveyor, Dry River South and Balcooma. Kagara will continue mining at Surveyor for the next two years under a sequential mining and processing plan from several high-grade deposits feeding the centrally located Mt Garnet processing facility, which was commissioned early last year. Background Information Kagara Zinc Limited (ASX: KZL) is a low-cost zinc producer with a growing production base and a significant portfolio of gold and base metal exploration projects in North Queensland, Australia. Kagara is based in Perth and listed on the Australian Stock Exchange in the S&P ASX 300 index. Kagara commissioned the $43 million Mt Garnet Project, which sources ore from a number of regionally located deposits, in February 2003 with Stage 1 achieving full production of 70-80,000tpa of zinc concentrate by June. Ore production was sourced from the Mt Garnet open cut during the first three months of operations, transitioning to the high-grade Surveyor deposit, 160 kilometres to the south, during September 2003. Kagara is continuing exploration to further increase its reserve/resource inventory with the objective of becoming a top-10 zinc producer in global terms within the next 5 years with a mine life in excess of 10 years. All zinc concentrates produced at Mt Garnet are sold under a long-term off-take agreement with Korea Zinc Ltd’s Sun Metals Refinery in Townsville, 500 kilometres to the south east. - 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 www.kagara.com.au
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