Kenai Resources begins initial gold production at Sao Chico
2011-04-18 12:52 ET - News Release
Shares issued 62,406,734
KAI Close 2011-04-15 C$ 0.28
Mr. Greg Starr reports
KENAI RESOURCES LTD.: TEST GOLD PRODUCTION COMMENCED AT SAO CHICO, BRAZIL
The board of Kenai Resources Ltd. has commenced preliminary gold production at the Sao Chico mine in northern Brazil. As detailed in Kenai's news release in Stockwatch dated Sept. 21, 2010, Kenai has a loan and option agreement with Australian Stock Exchange-listed Gold Anomaly Ltd., the parent company of Gold Aura Do Brasil Mineracao Ltda., which holds provisional rights to the Sao Chico project's 1,416-hectare area of exploration licence AP12836. Kenai's initial option is to acquire 50 per cent of the Sao Chico project through loans and expenditure of up to $3-million (Australian).
Commissioning of a Gekko gravity concentrating plant was undertaken using low-grade weathered vein material excavated and stockpiled over the last several weeks. Following successful plant commissioning, mining of higher-grade run of mine vein material has now commenced and forms the basis for continuing gold production. Mining will provide a better understanding of the gold mineralization and will form part of a planned feasibility study for substantially expanding the operation.
Kenai president and chief executive officer, Greg Starr, commented: "Initial production will be modest and quite volatile given the nuggetty nature and uneven distribution of the gold. Given the buoyant gold price, any positive cash flows would refund existing investment and fund the feasibility study required for the successful application for a mining licence.
"The Sao Chico project is now transitioning to a gold-producer status, which is an excellent achievement for our company. The investment strategy for this project was developed less than nine months ago. This has been a great achievement for Kenai, the existing local work force and contractors, our partner Gold Anomaly, and the key construction managers, DENM Engineering and geological advisers, Exploration Alliance Limited.
"Our vision of near-term production from the project has been achieved. The next step is to realize the exploration potential."
While GOAB had initially planned to commence production at a rate of about 50 tonnes per day and over two months progressively build up to a steady rate of 100 tonnes, 100 tonnes per day was shown to be readily achievable immediately during the commissioning.
In addition, planning for underground mining is under way. Promising high-grade gold assays from recent sampling confirmed earlier sampling of a drive developed along the main shear-hosted vein at 18 metres depth. A feasibility study has not been completed, and there is no certainty the operations will be economically viable.
About Sao Chico
The project is more completely described in Kenai's NI 43-101 technical report on the project, details of which were contained in Kenai's news release in Stockwatch of Jan. 20, 2011. It has since been filed on SEDAR and on Kenai's website.
Sao Chico is located within the Tapajos region in Brazil, the site of one of the biggest gold rushes in recent history. In the late 1970s and 1980s, approximately 500,000 garimpeiros rushed to the region to exploit extensive areas of newly discovered alluvial gold, producing approximately 20 million to 30 million ounces of gold before the easily won alluvial gold deposits were largely depleted. Despite the gold rush, little modern exploration has been conducted over the region to date, with excellent potential to expand gold operations at Sao Chico. The Sao Chico project team has extensive experience and expertise of operating within the region, which will provide a focused and systematic effort to gold production and exploration at Sao Chico. As previously advised, Gold Anomaly through its shareholding will receive all cash flow generated by GOAB at Sao Chico until Kenai exercises its option.
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