Austindo Resources Corporation N.L.

Transcription

1 Austindo Resources Corporation N.L. QUARTERLY REPORT: Three months ending 31 December 2006 MAJOR POINTS Cibaliung Gold Project Indonesia Construction of the Gold Processing Plant by PT Petrosea Tbk is approximately 75% complete and advancing in accordance with schedule; The Decline Development Contract has been terminated. The decline contractor will extract the Roadheader and demobilise at its own cost. Discussions are taking place with an alternate contractor which is presently on site undertaking an investigation of ground conditions; Both the remedial work and the consequent delay in the development of the decline have already had a significant cost impact on the project. The targeted first gold pour of May 2007 will not be achieved - the Company is continuing its analysis of the likely schedule and cost impacts on the project; The Company has commenced a detailed review of the existing mine plan including a review of the decline support methodology and is considering in conjunction with external consultants, an alternate mine plan. Progress on the decline is presently suspended pending the removal of the Roadheader by the decline contractor; The Company is seeking additional debt and equity financing. Conditional bank approval for a further US$5m in debt has been obtained. Completion of the equity raising is important to ensure that the Cibaliung project adheres to schedule. Project Generation - Indonesia Surface work continued at several prospects on the Trenggalek Project during the quarter; Fieldwork at Pekalongan in Central Java continued at a significantly reduced level during the quarter; A 4000 m drilling program testing for porphyry targets neared completion at the Aisasjur Project in Papua in which ARX holds a 20% joint venture interest. Expenditure Total exploration and development expenditure in Indonesia during the quarter amounted to A$14.9 million.

2 CIBALIUNG GOLD PROJECT INDONESIA (89.75% as at 31 Dec 2005) The Cibaliung Gold Project is operated by PT. Cibaliung Sumberdaya, a joint venture company established between the Company and PT. Antam Tbk ( Antam ). Cibaliung is located in Banten Province near the western tip of the island of Java, 150km south west of Jakarta. The Company s interest in the Cibaliung Project as at 31 December 2005 stood at 89.75%. Site Development and Erection of Gold Processing Plant At the date of this report the status of the plant is as follows: Site access roads and bridges have been essentially completed Re-erection of the gold processing plant on site is well advanced Installation of CIL tanks and Thickener Tank have been completed Cyanide mixing tank installed SAG Mill installation is in progress Foundations for crusher 70% complete Foundations for Power Plant have been completed Construction of Elution Circuit and Gold Room Plant completed by Como in Western Australian and currently in transit to site. Foundations are in progress Tailings Dam construction survey is in progress and earthworks have commenced Gold Processing Plant under construction at Cibaliung ARX - December 06 Quarter Activity Report doc Page 2 of 10

3 Capital Expenditure and Funding The Company has previously reported details of capital cost increases in the order of US$18.5 million. These cost increases have related primarily to an initial underestimate in the process plant re-erection cost, a re-rating of seismic factors throughout the region, poorer than expected ground conditions in the process plant area and additional costs associated with construction, engineering, earthworks, steelwork and process plant foundations. In addition costs increases have been incurred in the areas of project delivery, finance costs, dewatering, travel, geotechnical, site preparation, equipment, transport and camp costs. The project is continuing to experience significant cost pressure, primarily associated with the difficulties encountered in the development of the decline. As reported below decline development to date remains unsatisfactory. The Company is continuing negotiations in respect of additional debt and additional equity finance to complete the development of the Cibaliung Gold Project. To date the Company has fully drawn the original ANZ Bank primary debt facility of US$26 million. The ANZ Bank has provided an offer for an additional debt facility in the amount of US$5 million. There are a number of pre-conditions associated with this facility including a requirement to restructure the existing hedging arrangements with the ANZ Bank and a requirement that the Company raise sufficient equity funds to complete the project development before the additional debt funds will become available. Currently the Company has hedged 185,000 ounces of gold on a fixed flat (par) forward basis at a price US$651/oz. Specifically the Company will have to restructure at least the first delivery obligation which arises in June Taking into account cost increases identified to date and the continuing cost pressure associated with the development of the decline, it is envisaged that the Company will need to raise additional equity in the order of US$20 million to complete the development of the Cibaliung Gold Project. The Company has arranged a Bridging Facility in the amount of US$5 million which has been provided by PT Austindo Nusantara Jaya, AuSelect Limited, Mr. Hermani Soeprapto (Chief Operating Officer) and Mr. John Carlile (Non-Executive Director). Notice has been given to draw down this facility. Further details in relation to project costs and funding arrangements for the Cibaliung Gold Project will be provided as details are finalised. Decline Development The Company reported the status of the Decline Development on 17 January For ease of reference, key sections of that report are reproduced below. The Company has previously reported that the development of the decline had been slow due to a variety of reasons including:- delayed mobilisation of the contractor to site; adverse ground conditions initially necessitating the erection of steel sets in order to properly support the opening; the sticky nature of the material encountered has had the effect of clogging the roadheader s conveyor system; ARX - December 06 Quarter Activity Report doc Page 3 of 10

4 insufficient skilled labour and supervision to achieve efficient operations; a large deformation had occurred at approximately the 70m mark resulting in a blockage of the decline; remedial work to clear the blockage of the decline has been more extensive than anticipated. 19 steel sets have been placed from the 65m mark to the 82m mark; voids have been encountered which have required filling with cement; large sections of the decline floor have required concreting; The remedial work has now extended beyond the 82m mark and the rear conveyor of the roadheader has been located. It has now been confirmed that the roadheader has been buried by the collapse of material around it The Decline Development Contract has been terminated. The decline contractor will extract the Roadheader and demobilise at its own cost. Progress on the decline is presently suspended pending the removal of the Roadheader by the decline contractor. Discussions are taking place with an alternate contractor which is presently on site undertaking an investigation of ground conditions; A large open void has been identified above the roadheader. As a result remedial work on the decline was suspended on 14 January 2007 while plans for safely dealing with the void are developed with the safety of personnel uppermost in mind. The safety of employees and contractors engaged in this remedial work remains of the highest priority. If the Company pursues the development of the existing decline, it is expected that the remedial work could be completed by mid March 2007 following which, under the present mine plan, the decline will need to be advanced by a further 1,300m. As a result the previously targeted first gold pour of May 2007 will not be achieved. A revised target date will be determined once a complete review of development options, including a review of the decline support methodology, has been undertaken. An alternate mine plan is being investigated by the Company in conjunction with external consultants. While there are many factors impacting upon the first gold pour date, a key factor remains the date at which the ore body is accessed. Until the review of development options has been completed the Company is presently unable to be more definitive about the proposed first gold pour date. Both the remedial work and the consequent delay in the development of the decline have already had a significant cost impact on the project. The Company is continuing its analysis of the likely cost impact and further guidance will be released to the market when some certainty is achieved in this regard. However completion of the equity raising is important to ensure that the Cibaliung project adheres to schedule. Alternate Mining Plan to achieve earlier gold production The Company is continuing to investigate an alternate mining plan which may enable earlier access to ore bodies so that first gold pour may be accelerated. The plan is based on the development of an alternative decline to access ore which can then be mined by hand held methods. Under the plan development would continue to the main ore body from where mechanised mining could commence. Pursuant to this plan ore would be stockpiled to permit gold production to commence at the earliest opportunity and to then ARX - December 06 Quarter Activity Report doc Page 4 of 10

5 continue at a limited rate until such time as the decline has been sufficiently developed to permit continuous mining at the originally anticipated rate of 220,000 tonnes per annum. Subject to confirming the plan s technical merit, the Company anticipates that this plan will generate revenue for the Company from gold sales at an earlier date while the development of the decline continues. Implementation of the plan will require approval from ANZ Bank as the project financier. While this plan, if adopted, may result in an earlier first gold pour date, the amount of ore to be processed will be limited and likely to be at a relatively low grade. At best, it is anticipated that this plan could see limited production achieved by the end of the second quarter of Expenditure Expenditure in relation to development of the Cibaliung Gold Project totalled A$14.5 million during the quarter. Cibaliung Exploration Last quarter it was announced that scout diamond drilling had commenced on the testing of several vein targets located within 2 km of the Cibaliung mine development area. The program was completed during this quarter with an additional three holes drilled (AC-124 to AC-126). This brings a cumulative total of 1,795 m completed in 15 holes for the entire program. These holes have tested the Ramada, Rorah Kadal, Cijagen, Cikamancing and Ilalang veins. Gold and silver assay results were received from all of the holes completed in the program. The best mineralised intersections from each hole are tabulated at the end of this report. As reported in the previous quarter, an intersection of 2.4 m (true-width) at 5.4 g/t Au and 45 g/t Ag, was returned in AC-118 on the Rorah Kadal vein. This intersection was interpreted to be a shallow up-plunge projection of a higher grade shoot within the Rorah Kadal vein. The plunge on this shoot appeared to be steep to the southeast and so two deep holes, AC-124 & AC-125, were drilled to test this interpretation. Both holes intersected the Rorah Kadal vein but returned only low-grade gold and silver intersections. This is not unusual at Cibaliung ARX - December 06 Quarter Activity Report doc Page 5 of 10

6 where the two known ore-shoots, Cikoneng and Cibitung, are enclosed by a low-grade vein structure. The plunge on the higher-grade mineralisation within the Rorah Kadal vein may still be open at a shallower angle and requires further drill testing. AC-126, drilled about 300 m north of the Cikoneng ore-shoot, intersected a barren 20 cm wide calcite beneath a 30 m thick sequence of younger volcanic cover rock. This narrow vein intersection occurs on a prominent geophysical resistivity and magnetic break, and is interpreted to lie on the northern strike-projection of the Cikoneng and Cibitung ore-shoot host-structure. Widespread argillic alteration surrounding this narrow calcite vein indicates that it may be a high-level expression of a deeper, mineralised vein target. Indeed, there is significant potential for the discovery of additional ore-shoots both down-plunge and along the strike of the Cibaliung host-structure because it is largely underexplored outside of the mine development area. Also reported in the previous quarter was encouraging drill intersections obtained from the initial testing of a +400 m long, MMI-soil gold anomaly over the northern strike projection of the Ramada vein. Narrow mineralised vein intersections were returned in three holes, AC- 114, AC-116 and AC-117 (see table of intersections), which confirmed the strike projection of the Ramada vein beneath shallow cover rocks. Follow-up work has included further prospecting due south of the MMI soil anomaly, which has confirmed the presence of relatively high-grade vein float shedding from the conglomeratic base of the cover rock sequence. Two float samples taken during the quarter assayed 8.1 and 30.3 ppm Au, respectively. The source of this float is uncertain but may be another vein located close to and parallel to Ramada and beneath the cover. A program of MMI soil sampling is planned to evaluate this area. The northern of the MMI soil anomaly is open and requires further evaluation. ARX - December 06 Quarter Activity Report doc Page 6 of 10

7 Table of Best Mineralised Intersections Cibaliung Exploration Hole ID Vein From (m) To (m) Interval (m) Au g/t Ag g/t Core Recovery True Width (m) AC-112 Ramada % 0.6 AC-113 Ramada NSR AC-114 Ramada % 0.3 AC-115 Ramada NSR AC-116 Ramada % 0.9 AC-117 Ramada % % 0.5 AC-118 Rorah Kadal 91.7 Incl/ % % 1.1 AC-119 Cijagen NSR AC-120 Cijagen NSR AC-121 Cijagen NSR AC-122 Cikamancing AC-123 Cikamancing NSR NSR AC-124 Rorah Kadal Incl/ % % 5.1 AC-125 Rorah Kadal % 0.25 NSR no significant gold or silver results (<1 g/t) Expenditure Expenditure in relation to Cibaliung Exploration totalled A$260,000. ARX - December 06 Quarter Activity Report doc Page 7 of 10

8 PROJECT GENERATION INDONESIA Java Total Expenditure for exploration completed on the Trenggalek and Pekalongan projects totalled A$142,000 during the quarter. Trenggalek Project, East Java (ARX 95%) The Trenggalek KP exploration area in East Java covers 17,586 ha. Surface work continued at several prospects on the Trenggalek Project during the quarter. Geological mapping and prospecting have helped identify further mineralised float on the Paces prospect, including three grab samples of vein float assaying 3.8, 5.9 and 57 ppm Au respectively. These samples were found on a ridge located on the western side of the prospect. As reported previously, the area containing the moderate to high grade vein float is about one kilometre-square and the float is believed to be sourced from thick soil-covered ridges. Soil sampling has so far failed to clearly define the potential bedrock sources. Trenching is planned to evaluate the ridges in the next quarter. Further mapping undertaken at Dalangturu and the Jati prospect, located east of Paces, has extended the previously known distribution of hot spring-related epithermal features such as silicified eruption breccia, mineralised vein-stockwork and silica sinter. This is further confirmation that these prospects, in particular, have potential for high-level preservation of high-grade lode systems at depth and perhaps stockwork and hydrothermal breccia targets nearer to surface. All three of these prospects, including the mineralised vein system reported at the Sentul Prospect in the previous quarter, lay within forestry production areas. A permit is awaited from the Department of Forestry, which will allow access in these areas to do trenching and scout diamond drilling in the first or second quarter of ARX - December 06 Quarter Activity Report doc Page 8 of 10

9 Pekalongan Project, Central Java (ARX 95%) The Pekalongan KP exploration area in Central Java covers 5,618 ha. Fieldwork continued at a significantly reduced level during the quarter due to the shift of work priorities to the other projects. A ground magnetics and soil geochemical survey is planned for the next quarter to investigate prospective structures extending for 3 to 4 km between the Kuning and Mudal prospects. As previously reported, the Kuning Prospect contains widespread gold anomalies associated with silicified fracture zones, whilst the Mudal Prospect is highlighted by mercury anomalies associated with silicified eruption breccias and possible silica sinters located at about m higher elevation than Kuning. The main prospects lay within forestry production areas. A permit is also awaited from the Department of Forestry, which will allow access in these areas to do more extensive trenching and plan a scout diamond drilling program if results justify. Papua Aisasjur Project - Anglo Strategic Alliance (ARX 20%) The Company has a strategic alliance with the Anglo American Group to explore for large copper/gold porphyry deposits in Papua. The Company has a 20% joint venture interest in the Aisasjur Project while the Anglo American Group has the obligation to fund all exploration activities pursuant to the terms of the strategic alliance. The Aisasjur Project covers an area of 9,486 hectares in the Kepala Burung area of Papua. Geologically, the project area lies within one of Indonesia s young Tertiary volcano- plutonic arcs and is prospective for both porphyry copper-gold and epithermal gold mineralisation styles. Last quarter it was announced that a 4000 m drilling program had commenced testing of porphyry targets on the Aisasjur Project. This drilling program is nearing completion. Results will be reported once all assays are received and fully evaluated by Anglo America Group, the operator of the project. ARX - December 06 Quarter Activity Report doc Page 9 of 10

10 The information in this report that relates to Exploration Results is based on information compiled by Mr. Brad Wake, who is a member of the Australian Institute of Geoscientists. Mr. Wake has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Wake consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. ABOUT AUSTINDO RESOURCES CORPORATION NL (ARX) Formed in 1983, Austindo Resources Corporation NL is an Australian listed gold company focused on developing projects in Indonesia. The company s key project is Cibaliung, a high-grade epithermal gold/silver vein system located southwest of Jakarta in Banten Province, western Java. Cibaliung is expected to produce at an annual rate of 70,000 oz (gold equivalent) with an average life of mine cash operating costs of approximately US$215 per ounce. Two key strategic alliances in Indonesia are taking Austindo closer to achieving its growth objective. In association with Anglo American Group, the Company is exploring for large porphyry copper/gold deposits in Papua. In addition the Company has a 95% joint venture interest with PT Sumber Mineral Nusantara in the Pekalongan and Trenggalek tenements located in Central and East Java respectively, areas prospective for low sulphidation epithermal gold/silver deposits similar to the Cibaliung project. BOARD OF DIRECTORS Bruce Watson Chairman George Tahija Non-Executive Director John Carlile Non-Executive Director Christopher Melloy Non-Executive Director For further information please contact: Andrew J. Cooke Company Secretary Tel: andrewcooke@arx.net.au ARX - December 06 Quarter Activity Report doc Page 10 of 10