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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (74387)	1/22/2011 6:07:12 PM
From: LoneClone	Read Replies (1) \| Respond to of 192834

Spanish Mountain’s PEA Shows A Gold Operation With The Makings Of Some Scale In South-Central British Columbia By Chris Cann minesite.com Toronto-listed Spanish Mountain Gold is confident that a programme of ongoing work can improve the numbers released in November’s preliminary economic assessment (PEA) on its four million ounce namesake gold project in south-central British Columbia. Conservative estimates showed a 10 year operation producing more than 170,000 ounces per annum from a low-grade bulk tonnage mine. But the likely strength in the gold price combined with the project geology promise significantly more. The Spanish Mountain PEA was based on a gold price of US$1,100 per ounce, but the pit design used an even lower figure of just US$950 per ounce. Gold is now trading at close to US$1,400 presently, with many analysts bullish that there’ll be further price strength in 2011. The company itself feels that gold has a floor of US$1,000 per ounce in the near-to-mid term, while Morgan Stanley is using a price of US$1,150 per ounce for its internal analysis. Either way, anything above US$950 per ounce immediately adds ounces to the 1.37 million delineated within the current pit-design. As far as costs are concerned, the 40,000 tonnes per day plant will set the junior back US$213 million and make up the biggest chunk of the projected US$447 million capital expenditure figure. Tailings and related infrastructure costs also likely to account for a substantial portion of the total capex. Likely operating costs are likely to come in at an average of around US$600 per ounce for the mine life, though president and chief executive, Brian Groves, is convinced that the company can “refine and reduce the operating costs” during more formal technical and economic studies in 2011, and that the results will show “a significant impact on the overall project economics”. Perhaps even more promising is the underlying geology at Spanish Mountain. Spanish Mountain is a sedimentary-hosted gold system, the style of which has historically delivered huge deposits, like the Natalka and the Sukhoi Log deposits in Russia. The former hosts somewhere in the region of 45 million ounces, although that’s a bit of a stretch in Spanish Mountain’s case. Something on a more comparable scale to Spanish Mountain is the Macraes deposit on New Zealand’s south island, which is owned and operated by OceanaGold andwhich has been producing up to 150,000 ounces of gold annually for the past 20 years. The latest scenario at Macraes is for another five years of mining at least at a rate of 200,000 ounces per annum. “What is common in these systems is that you have sedimentary ardulites/soapstones and mudstones, which in most situations have a low level of gold mineralisation disseminated throughout them”, Brian Groves told Minesite. “The real grade potential is where the sediments are cut by cross-cutting structures, which are probably the mechanism by which the gold bearing fluids are introduced into the sediments. What we’ve discovered after reviewing the research and the literature on other big deposits around the world is that you’ll have these long, very extensive sedimentary sequences that extend for kilometres and where you see a repetition of these cross-cutting structures hitting the sediments you get increased gold grades, which tend to be the economic parts of these sedimentary sequences. “At Spanish Mountain we have hit similar rock types. We have one fairly well recognised cross-cutting structure now that seems to control the higher grade distribution of gold, and the quartz veining in the Main Zone at Spanish Mountain. We believe there might be the potential to see a repetition of those north-south-oriented structures elsewhere on the property. That’s one of the exploration targets that we intend to refine for next year.” Groves is optimistic about the likelihood that the company will turn up further mineralised zones to the east and west on the northern part of the property. The focus has primarily been on the Main Zone to this point, and there is still a lot of interpretation to do across the rest of the property. The PEA represents an excellent starting point for development at Spanish Mountain, and proof for the market that the resource the junior has spent several years drilling out has the makings of a gold operation of some scale. How efficiently Spanish Mountain can streamline its initial cost structures and expand on its resource figures will be something investors will be keeping a close eye on over the course of 2011. The results will determine how significant this would-be mine eventually becomes.