King of the Hills Gold Project, Leonora, to commence production in Q2 2011

Transcription

1 King of the Hills Gold Project, Leonora, to commence production in Q St Barbara is pleased to announce the King of the Hills gold project near Leonora (formerly referred to as the Tarmoola higher grade, underground project) has been approved for development. Gold production is planned at the rate of 65,000 ounces per annum over 3.5 years following a 12 month ramp up period, and is expected to commence in the June quarter of Key project attributes: Probable Ore Reserves of 1.4 million tonnes 4.3 grams per tonne of gold (g/t) for 195,000 ounces of contained gold with potential for further increases. Pre-production capital expenditure to first gold production is expected in the range of $12.5-$14 million and will be fully funded from available internal cash resources. Cash payback anticipated by mid The deposit remains open on the Eastern and Western Flanks; drilling is underway to test for extensions. The expanded Leonora Operations (comprising production from the Gwalia and King of the Hills mines) is expected to lift total annualised production to 255,000 to 275,000 ounces of gold. Details The geological controls over the higher grade gold domains are well understood The gold is hosted by arrays of quartz veins within granodiorite and ultramafic rocks intersected by the major King of the Hills Shear Zone. Steep quartz lodes occur on the Eastern flank, and shallow north-plunging lodes occur on the Western Flank (Refer Figures 1 and 2 for detail). Metallurgical recoveries are in the range 93-95%. Potential to extend mine to the north Potential exists to extend the King of the Hills gold mineralisation within the mine vicinity and at depth, plunging north along the intersection of the regional shear zone and granite surface. This potential has been confirmed at depth and over 800 metres to the north by previous drill intersections. (Refer Figure 5.) Recent gravity and magnetic surveys have identified an analogue target located 1 2 kilometres to the north of King of the Hills. Work to further define this target for drill testing is underway. 1

2 Probable Ore Reserves and Production Estimates Probable Ore Reserves of 1.4 million 4.3 g/t for 195,000 ounces of gold have been established at a gold price of A$1,150 per ounce and cut-off grade of 2.8 g/t. This ore reserve estimate will be updated as at 30 June 2010 to incorporate pre-development drilling results and further design work. It is expected that the project will produce in the target range of to 4.5g/t containing 240,000 to 270,000 ounces of gold, based on current Probable Ore Reserves and the conversion of Inferred Resources in mining areas, through additional grade control drilling. Drilling is underway for grade control and testing for ore reserve extensions. A pre-production drilling program is underway to: Identify ore reserve extensions in the lode, Eastern Flank and Western Flank (Refer Figure 4). Undertake grade control and geotechnical assessment drilling to accurately position the initial decline development and mine stoping operations. Conventional mining methods apply The decline portal will be located in the wall of the current Tarmoola open pit. The Shoot at the Eastern Flank will be mined using conventional long hole open stoping and the Western Flank will be mined using conventional cut and fill stoping with back filling from development waste. Gold production planned to commence June Quarter 2011 The ore will be hauled 42 kilometres to the Gwalia processing plant at Leonora (refer Figure 3) on the existing haul road and main road. Indicative timeframe to commencement of production (calendar quarters) Completion of Detailed Mine Design Sept Qtr 2010 Mobilisation and pre-development to commence Sept Qtr 2010 Production to commence June Qtr 2011 Life of mine, cash operating costs are forecast in the range of $850 to $880 per ounce. King of the Hills represents an attractive incremental project, with cash flows to be underwritten by securing a minimum AUD gold price with hedging. Facilities to provide hedging for the life of mine, King of the Hills gold production are currently being established. The Company s position for core mining operations (such as Gwalia and Marvel Loch Underground) is to remain completely unhedged, to retain maximum exposure to higher gold prices. Capital expenditure to be funded from available cash Pre-production capital expenditure is estimated in the range $12.5 million to $14 million. Having regard to the estimated production ramp up period of 12 months, the maximum negative cumulative cash flow for the project is estimated at $20 million, which will be sourced from existing available cash. 2

3 Processing cost synergies for Gwalia ore The additional tonnage from King of the Hills will lead to operational efficiencies at the Gwalia processing plant. Leveraging long term value King of the Hills is the name of the historic, underground mine at Tarmoola adjacent to this new mine. As the new project will be a higher grade underground development, it has been decided to continue with this name, to differentiate the new project from Tarmoola which was a low grade, high volume, open pit operation mined in the 1980 s and 1990 s. At the Tower Hill gold project, located 2 kilometres north of the Gwalia processing plant, further work is being undertaken to better understand the structural geological controls over the high gold grade domains and the potential for extensions to ore reserves. Subject to satisfactory completion of this work and a final feasibility study, the Tower Hill gold project remains a potential source of ore to follow on from King of the Hills. The decision to commit to development of the King of the Hills gold project is another important step for St Barbara in leveraging long term value from Leonora Operations. Tim Lehany Managing Director and CEO 11 March 2010 Competent Person Statement Significant gold intersections and geological interpretations contained in this report have been compiled by Mr Phillip Uttley. Mr Uttley is a Fellow of The Australasian Institute of Mining and Metallurgy and is a full time employee of the company. Mr Uttley has sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves. Mr Uttley consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. References to Ore Reserves presented in this document have been produced in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves, December 2004 (JORC Code) under the direction of Mr Peter Fairfield. Mr Fairfield is a Member of The Australasian Institute of Mining and Metallurgy and is a full time employee of St Barbara. Mr Fairfield has sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the JORC Code. Mr Fairfield consents to the inclusion in this document of the matters based on his information in the form and context in which it appears. 3

4 Figure 1: Schematic cross section model of controls on higher grade gold mineralisation in quartz veins. Figure 2 Tarmoola Pit wall showing mineralised quartz veins in a major shear contact typical of that to be mined underground in the King of the Hills project. 4

5 Figure 3: King of the Hills Location Map Figure 4: Plan projection of proposed drilling for Eastern Flank and Western Flank extensions. 5

6 Figure 5: King of the Hills long projection of the granite shear contact zone and potential depth extension 6

7 Company Profile ASX Code: SBM St Barbara Limited is an ASX listed Australian gold producer and mineral explorer. St Barbara s key gold production assets are the Leonora and Southern Cross Operations located in Western Australia. The Gwalia mine at Leonora Operations is the Company s cornerstone asset. It is a long life, low cost operation. Leonora Operations Gwalia production forecast (excluding King of the Hills production) to grow to 190, ,000 ozs per annum by fiscal year 2012 The expanded Leonora Operations (comprising production from the Gwalia and King of the Hills mines) is expected to lift total annualised production to 255,000 to 275,000 ounces of gold. Current Gwalia reserves of 1.6M oz support an eight year mine life with potential for extension Gwalia is forecast to be a first quartile cash cost producer by fiscal year 2012 with cash operating costs of $ /oz Gwalia mine will produce up to 600,000 tonnes of ore per annum. The fully refurbished processing plant has capacity to treat 1.2Mtpa King of the Hills represents a development opportunity to utilise available Gwalia processing capacity. Southern Cross Operations Forecast production of 110,000 to 130,000 ounces for FY10,11 and 12 Focus on higher grade underground ore from Marvel Loch Underground Marvel Loch Underground will produce 0.8 to 1.0Mtpa. The Marvel Loch processing plant has 2.2 to 2.4Mtpa capacity. Resources/Reserves estimates Ore Reserves as at 30 June 2009 were 13.9 million tonnes at 5.8 grams per tonne of gold containing 2.6 million ounces. The gold price assumed in Ore Reserves calculations was A$1,075 per ounce for fiscal year 2010 production and $850 per ounce thereafter. Mineral Resources including Ore Reserves at 30 June 2009 were million tonnes at 2.9 g/t for 9.5 million ounces. Future Outlook Objectives for fiscal year 2010: Reliably deliver the guidance forecast gold production range of 205, ,000 oz Drive the development of Gwalia to the deeper, high grade areas of the mine Reduce cash operating costs to within or below the range of A$745 to A$820/oz Continue the improvement in safety performance. 7