our projects
Norseman Gold Project
Location
The Norseman Gold Project covers 124km2 of the southern Norseman-Wiluna Greenstone belt. Norseman is the southern most gold mining centre in the Norseman-Wiluna Greenstone belt and has produced over 5.5 million ounces of gold in continuous operations since 1935.
The Norseman project is located in two project areas. The Abbotshall – Mt Henry area extends 10 to 26km south from the centre of town and then extend north-west past the Abbotshall Mine 5km west of Norseman. The Everlasting area is located 8km north-east of Norseman.
Geology and Mineralization
The rocks within the Norseman Project can be subdivided into 3 distinct formations.
The Penneshaw, Noganyer and the Woolyeenyer Formations.
The Penneshaw and Woolyeenyer Formations are hosts of Norseman style high grade auriferous quartz veins.
These veins are frequently laminated and contain pyrrhotite, chalcopyrite, sphalerite and galena.
The North Scotia, Break o’ Day and Magills Lode are examples of this style of mineralization within the project area.
The Noganyer Formation is characterized by extensive banded iron formation (BIF) and dolerite sills. The BIF is a suitable host for gold mineralization where gold is deposited chemically as a result of pyrrhotite formation. These types of ore deposits are generally lower grade but they can be extensive, lending themselves to low cost bulk open pit mining. The large Mt Henry and Selene are examples of BIF hosted gold mineralization in the Norseman Gold Project.
Mineral Resources
During 2007 KBRL completed a number of exploration drilling programs centred on the Mt Henry, Selene, North Scotia, Break o’ Day, Telegraph and Everlasting areas. As a result of this successful exploration program KBRL announced a number of resource upgrades during 2007, 2008 and the final announcement was made in February 2009. In this announcement the company reported a total (JORC) Norseman Gold Project (Indicated and Inferred) resource of 26.5 Mt at 1.7g/t for 1.47 million ounces of gold. The resources are tabulated below:
Norseman Gold Project Resources (>1g/t Au)
| Indicated | Tonnes (million) | Grade (g/t) | Ounces |
|---|---|---|---|
| Mt Henry | 5.6 | 1.9 | 350,000 |
| Selene | 11.8 | 1.6 | 600,000 |
| North Scotia | 0.2 | 5.2 | 36,000 |
| Total | 17.6 | 1.8 | 990,000 |
| Inferred | |||
| Mt Henry | 4.9 | 1.8 | 280,000 |
| Selene | 3.1 | 1.4 | 140,000 |
| North Scotia | 0.3 | 2.2 | 24,000 |
| Abbotshall | 0.5 | 2.0 | 30,000 |
| Total | 8.9 | 1.7 | 480,000 |
| Grand Total | 26.5 | 1.7 | 1,470,000 |
Large Project Scoping Study
In April 2008 KBRL report the results of a high level Scoping Study into the development of the Norseman Gold Project. The Scoping Study reported robust returns from a 1.8 million tonnes per annum open pit operation, producing approximately 100,000 ounces per year over 7 years. The results of the Scoping Study are detailed below:
| Gold Price | A$990/oz |
| Mine Life | 7 Years |
| Average NPV @ 10% discount | A$80 million |
| Average IRR (Internal Rate of Return) | 40% |
| Net project cash flow after capital costs | A$143 million |
| Operating Costs | A$660/oz |
| Capital Costs | A$75 million |
The sensitivity of the project to the gold price was also assessed as shown in the following table:
| Average gold price (A$/oz) |
Average NPV (A$ million) |
|---|---|
| 900 | 36 |
| 1000 | 84 |
| 1200 | 170 |
| 1300 | 208 |
| 1400 | 250 |
| 1500 | 299 |
With current gold prices averaging around A$1,300 the Company believes that the economic potential of the project has been significantly enhanced. The Company has been continuously reviewing the Scoping Study parameters for changes in prices and costs which may affect the economic viability as well as the intrinsic value of the resources. The review to date has noted generally positive changes to these parameters including:
- A reduction in fuel prices and hence power costs.
- A slow-down in mining related contracting activities which may yield lower mining and construction costs.
- An increase in the availability of skilled and professional labour.
- The significant rise in the A$ gold price by over 30% in the last six months from below $1,000 to over $1,300.
In addition a geological review into the distribution of higher grade zones within the resource is being undertaken to investigate the potential for any increase in grade.
Resources
The Company has commenced a review of the potential for a small to medium scale open pit mining operation targeting the higher grade ore zones at Mt Henry and other prospects, utilising excess milling capacity within the region.
Included within the Mt Henry resource there are shallow higher grade ore zones that have the potential to be developed as part of a smaller scale mining operation.
A review of the Mt Henry deposit has highlighted these resources as tabulated below:
Mt Henry High Grade Resources (>1.4g/t Au, <100m depth)
| Indicated | Tonnes (million) | Grade (g/t) | Ounces |
|---|---|---|---|
| 1.4 - 2 g/t | 2.2 | 1.7 | 120,000 |
| >2 g/t | 1.5 | 2.9 | 140,000 |
| Total | 3.8 | 2.1 | 260,000 |
- All resources are reported to a lower cut-off grade of 1.40g/t.
- The lower cut-off grade of 1.40g/t is applied to reflect the higher unit costs of mining, transporting and processing expected in an external treatment operation.
- This table reports Indicated Resources only, within 100 metres of the earth’s surface. This is to report that portion of the Mineral Resource that has reasonable prospects of economic extraction in an open cut toll treatment mining scenario.
- Rounding or conforming to the JORC code may cause computational errors.
Another deposit that has been reassessed for potential to be a high grade open pit is the North Scotia deposit. A resource upgrade was completed in February 2009:
North Scotia Resources (>1g/t Au)
| Indicated | Tonnes | Grade (g/t) | Ounces |
|---|---|---|---|
| Lode FW1 | 120,000 | 7.5 | 28,000 |
| Lode HW1 | 100,000 | 2.5 | 8,000 |
| Total | 210,000 | 5.2 | 36,000 |
| Inferred | |||
| 340,000 | 2.2 | 24,000 | |
| Grand Total | 560,000 | 3.3 | 60,000 |
- All resources are reported to a lower cut-off grade of 1.0 g/t
- Rounding and conforming to the JORC code may cause computational errors.
This resource upgrade comes as a result of remodelling the North Scotia Deposit, incorporating the 2007 RC drilling results. The upgrade was completed as part of the Company’s review of the potential for higher grade ore within the Norseman Project that improves the potential of either of the two development options for the project:
- Lower risk early development of small to medium scale open pit mining operations utilising excess milling capacity within the region.
- Early high profit tonnages that improve cash-flow and capital pay-back for a large-scale development based on the 26.5 million tonnes @ 1.7 g/t (1.47 million ounces).
The Company’s new management is extremely encouraged with the definition of this new resource. When coupled with the 260,000 ounce shallow resource at Mount Henry (3.8 Mt @ 2.1 g/t, >1.4 g/t and <100m depth) announced in the Company’s December 2008 quarterly report, it underpins the option that profitable mining can be targeted within the next 12 months.
Mining Scoping Studies
A High-grade mining Scoping Study has recently been completed and has shown very encouraging results from shallow high-grade Indicated Resources at Mt Henry and North Scotia deposits. Feasibility Studies including negotiations with regional mills has commenced to enable mining to proceed before the end of 2009. Results to date are:
| North Scotia | |
|---|---|
| Cash Surplus: | $15 million to $20 million |
| Production: | 90,000 to 120,000 tonnes |
| Ore grades: | 6.8 to 7.2 g/t |
| Opex costs: | $570 to $610 per ounce |
| Mt Henry | |
| Cash Surplus: | $12 million to $30 million |
| Production: | 260,000 to 560,000 tonnes |
| Ore grades: | 2.8 to 3.2 g/t |
| Opex costs: | $660 to $730 per ounce |
These results strongly indicate that the Company has multiple ore sources suitable for treatment at regional toll milling facilities.
Executive Chairman Paul Poli said "These new high grade nodes at Mt Henry provide a huge boost to the previously announced North Scotia Study results. The combined cash-flow potential of some $50 million puts the Company in a position of strength and increased value. It's full steam ahead to expand our drilling to include nodes 3 to 6 at Mount Henry, fast-track mining approval for these shallow high grade areas and simultaneously undertake work on milling options including looking at building our own mill."
Exploration Prospects
The Company has identified a number of potential near surface higher grade targets that might be developed as shallow, open pit mines in the medium term.
Exploration targets include the Magills prospect and the newly acquired Lake Kirk prospect. There are currently no resources at these prospects however historic drill results are regarded as encouraging:
| Magills | |
|---|---|
| 86MRAB008 | 2m @ 3.35g/t from 22 metres |
| 86MRAB006 | 3m @ 2.75g/t from 15 metres |
| 86MRC018 | 5m @ 3.10g/t from 22 metres |
| 86MRC032 | 3m @ 4.51g/t from 21 metres |
| Lake Kirk | |
| LK6 | 0.4m @ 18.6g/t from 31.15metres |
| LK7 | 1.1m @ 11.5g/t from 3.6 metres |
| 0.25m @ 10.8g/t from 8.4 metres | |
Planned Exploration
Activities in 2009 will primarily focus on work required to define reserves suitable for treatment at third party facilities. This may include drilling to confirm resources and provide metallurgical and geotechnical samples. In addition data review and studies required for mining approval will be commenced.
Discussions will also be conducted with the owners of treatment facilities in the region.
Secondarily activities will focus on reviewing all parameters associated with the 2008 Scoping Study.
Finally, the Company has identified the potential for both magnetite and hematite Iron Ore within the project and intends to implement exploration to quantify this as soon as possible. The presence of extensive infrastructure in the region significantly enhances the economic potential should Iron Ore resources be defined.