Brisbane, July 31, 2008 AEST (ABN Newswire) - North Queensland Metals Limited (ASX:NQM)(NQM or the Company) ended the June quarter and the 2007/08 year as a gold miner, having acquired a 60% share in the Pajingo gold mine on 30 December 2007 with NQM as the operator.
Since that time, NQM has been working to return the mine to full production under a revised schedule from previous ownership.
The Company expects to record a maiden profit for the year, as previously reported, due to the successful initial operation of the Pajingo mine.
Pajingo Gold Mine (60% NQMl
During the June quarter, NQM prepared the Pajingo mine for mining under the Company's revised plan for sustainable production.
Production for the quarter was 9,791 oz gold, bringing the total for the six months under NQM management to 20,607 OZ, against the initial forecast of 24,000 oz. Year to date cash cost of production is $624/oz.
As foreshadowed in last month's Company Update, the average cash cost of production for the quarter (A$733/oz) was higher than in the previous quarter. This was due to difficulty in recovering ore from remnant stopes left by the previous owner and associated dilution, and to preparations for full production under the revised plan. These preparations included underground mine development drives which produced low grade development ore, processing plant modifications and the engagement of additional staff to prepare for running continuous shift production.
Operations are now focussed on the planned mining and processing of 300,000 tonnes per year to produce approximately 70,000 to 80,000 oz gold per year, together with silver.
In the mine, the new schedules are now being implemented in line with the changed mine plan. Mining moved into new stoping areas providing greater certainty on grade and tonnage delivered to the mill. The mine has gone from a two-shift operation four days a week to continuous shift production. Development activity will continue at a high level in the current quarter, with jumbo development drilling being the priority in order to access new ore sources for the operation.
The processing plant was converted to continuous milling with the decommissioning of the secondary mill. All the work was undertaken by NQM for a minimal cost.
Exploration at Pajingo has also commenced with a review of the extensive database to identify future drilling targets.
NQM received an average gold price of A$955 oz for the June quarter. The Company has not hedged any of its gold production. However, NOM has taken put options with a strike price of A$850 oz for two thirds of production. This insurance, at a cost ranging from A$9.50/oz to A$19.70/oz, ensures that the Company will be protected from any market downturn below A$850/oz while continuing to benefit from higher prices. The put options extend to April 2009 and are subject to frequent review.
Kev staff appointments: During the quarter, Dr Alex MacDonald and Mr Simon Jackson took up key senior executive appointments as General Manager and Mine Manager respectively at Pajingo. Both have had 20 years' experience in the mining industry, Dr MacDonald most recently as a Chief Operating Officer in West Africa, and Mr Jackson with Barrick Gold in Nevada.
Herberton Proiect (100% NQM)
The feasibility study into the development of the Baal Gammon copper-tin-silver-indium project was approved to move forward to sales of product and financing. Baal Gammon is the first in a number of projects expected to feed a processing plant located at Herberton, south-west of Cairns
The company has committed to a pilot scale test program to demonstrate the viability of toll smelting concentrate in Australia. A 300 tonne bulk sample is being collected from underground at Baal Gammon to enable preparation of a concentrate at Pajingo for the trial at the Ausmelt demonstration plant in Dandenong, Victoria, beginning in mid-August. The objective is to produce separate copper and indium-tin products from the same plant.
Permitting and licensing progressed with no apparent hurdles in having mining leases granted in the current quarter.
A range of finance options for the project is being considered, however, no decision will be made until the smelting option has been proven.
With a focus on sourcing additional ore stocks in the immediate area, NOM acquired a tenement adjoining Baal Gammon during the quarter. EPM 14016 is highly prospective for copper as well as silver, lead, and zinc, all with indium credits. Drilling is planned on the Consolation project to the immediate north of the Baal Gammon deposit. Previous drilling indicated the presence of Baal Gammon style mineralisation in a steeply dipping structure.
Exploration
EPM 14016 has been granted and is in the process of transfer to NQM. The company expects to undertake exploration work on several exciting advanced indium rich base metal prospects which have potential to prolong the operating life of the proposed Baal Gammon treatment plant.
Previous drilling information from the prospects has been compiled and sorted for modelling.
While most of the previous work is not of JORC standard, it will still allow the Company to move quickly to establish JORC compliant estimates on the mineralisation. The first prospects to be drilled will be Consolation (see above) and Isabel.
NQM continues to consolidate tin prospects within its permit areas and nearby. The EPM area has potential to host significant deposits and the Company is looking at a range of options to further their evaluation and development.
Outlook
- At Pajingo, gold production is expected to continue to increase as mine planning and scheduling provide consistency of access to additional ore sources.
- The focus on reducing costs to longer term forecast levels will continue, now that the start up and ramp up costs have been incurred. However, the level of mine development to access new ore sources will continue to have an impact on costs.
- The Company will pursue opportunities for additional sources of feed to the Pajingo processing plant to boost gold production.
- The Baal Gammon Project feasibility study will continue to progress to detailed engineering, key plant procurement, marketing and finance, as well as the Australian smelting trial.
- Approval of the Baal Gammon mining leases is expected in August with the registration of the Indigenous Land Use Agreements.
Contact
John D McKinstry
Tel: 1300-308-832
Fax: +61-7-3666-0510
Email: info@nam.com.au
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