Quarterly. Activities Report. For Quarter ended 31 March Exploration Activities. Corporate Activities

Transcription

1 Quarterly Drummond Gold Limited Activities Report ABN ASX: DGO Shares on issue 235,688,642 Directors: Chairman Eduard Eshuys Director Brice Mutton Director Ross Hutton Coy Secretary Michael Ilett Exploration Manager Erik Norum Address: Suite 8 60 Macgregor Terrace Bardon Queensland 4065 Contact: Eduard Eshuys Executive Chairman Drummond Gold Limited Telephone: www drummondgold.com.au For Quarter ended 31 March 2011 Exploration Activities FarmIn agreement announced for the Bendigo Region, Victoria (Drummond with a right to earn 70% interest) for a new exploration play for large scale sedimenthosted Au deposits. Drilling commenced at Mt Cannindah CuAu porphyry near Gladstone, Queensland, (Drummond with a right to earn a 75% interest) to test for both strike and depth extensions to existing resources. Drilling commenced at Drummond Basin Yandan East Hill, near Mt Coolon (Drummond with a right to earn 51% interest) to substantially extend known Au resources at depth based on new geological interpretation. Drummond awarded Queensland Government grant of $133,000 for drilling of a new target at Billabong, Yandan. Corporate Activities The Exploration Strategy for 2011 was finalised. Total issued capital is 235,688,342 fully paid shares. Cash position at end of quarter is $4,689,566.

2 Exploration Activities Exploration activities at Drummond Basin Yandan East Hill, near Mt Coolon, Queensland, and at Mount Cannindah, near Gladstone, Queensland, have commenced. Ongoing rainfall in Queensland continues to cause disruptions to the drilling programmes. Mount Cannindah Diamond drilling has commenced at Mount Cannindah to test for significant strike and depth extensions of previously defined porphyry coppergold mineralisation. Mount Cannindah, held by Planet Metals Ltd is located 120 kilometres south of Gladstone in central Queensland. Drummond is undertaking exploration to assess the potential of the Mount Cannindah coppergold resource by spending an initial $750,000 by September Drummond then has the right to earn up to 75% interest in the project by spending an additional $6 million within a further 4 years. Mineralisation at Mount Cannindah is hosted within a zone of brecciation between two intrusive bodies. The mineralisation occurs as subparallel steeply west dipping tabular zones which, in the upper portions of the deposit, merge into a single wider zone. Previous explorers had considered that the mineralisation was simply emplaced into a preexisting brecciated body of sediments. However, recent interpretation of the deposit style indicates the brecciation to be caused by upwelling of pressurised mineralised fluids and dykes from depth. Relogging of diamond core shows that copper mineralisation (largely chalcopyrite in the primary zone) was emplaced throughout the depositional history of the system, with at least four distinct episodes of chalcopyritebearing veins identified. This indicates that the host rocks were repeatedly being weakly fractured by copperbearing fluids. Rather than coppergold mineralisation being of a latestage brecciainfill style, it now appears likely that the known mineralisation is a part of a larger mineralising porphyry coppergold system. Previous drilling has only been to 250m depth, covering approximately 250m strike extent. The current drilling will test to a depth of over 500m and extend drilling coverage 200m south and 100m north. Drilling has not tested the depth and strike extents of the breccia zone. Encouragement from previous drilling includes deeper intersections of: 71m at 0.73% Cu, 0.2g/t Au, 9.6g/t Ag (from 291m in QMCMDD027), 25m at 1.69% Cu, 0.4g/t Au, 27.1g/t Ag (from 214m in QMCMDD013), 72.54m at 1.43% Cu, 0.1g/t Au, 20g/t Ag (from 175.9m in DDH006) and 71m at 0.95% Cu, 0.3g/t Au, 12.1g/t Ag from 164m in QMCMRC010. Relatively shallow intersections 200m to the south of the main area of drilling that have not previously been followed up and will be tested with the current drilling include: 18.5m at 1.2% Cu, 0.3g/t Au, 10.1g/t Ag (from 108.5m in DDH027), 14m at 1.6% Cu, 0.6g/t Au, 28g/t Ag (from 244.9m in DDH016). The planned drilling has the potential to delineate significant extensions to the Mount Cannindah Mineral Resource Estimate of 7.5 million tonnes at 1% copper, 0.4g/t gold and 15g/t silver (Mineral

3 Resource Estimate at 0.5% Cu cutoff, Golder Associates Pty Ltd, 2008). Bendigo Region Farm In Drummond announced a Farm In agreement to explore for sediment hosted gold mineralisation under shallow cover in the Bendigo Region of Victoria. This style of mineralisation has not been a target for previous explorers in the Bendigo area. Exploration activity will specifically focus on two exploration licences held by Unity Mining Limited (formerly Bendigo Mining) surrounding the Bendigo Goldfield which has historically produced over 22M oz of gold. The mining lease covering the Bendigo Goldfield is not part of the agreement. Although numerous historic workings have been documented within the exploration leases no systematic exploration has been undertaken by previous companies with only a few areas covered by surface geochemistry and only one drillhole completed outside the mining lease in the past 15 years. Work carried out by CODES (University of Tasmania) on shale hosted gold deposits has shown that syngenetic and diagenetic pyrite contain low levels of gold which are incorporated in the mineral as the crystals grow. Analysis of pyrite occurring within the gold deposits, or in close proximity to them, contain gold which has been enriched during growth phases of the crystals due to the introduction of hydrothermal fluids. The presence of the enriched margins of the pyrite crystals is regarded as an indicator for the presence of gold mineralisation. the gold content of the pyrrhotite showed a low level of gold in comparison with that of the pyrite in shales at higher stratigraphic levels. The implication is that the conversion of pyrite to pyrrhotite involves a temperature, and possibly pressure, increase that releases gold from the pyrite, which is then transported to a trap site in a location in a favourable temperature and pressure regime, which allows the gold to be deposited as free gold as well as on the rims of diagenetic and hydrothermal pyrite in the trap location. The location of the trap site is similar to the source rocks, being a shaledominant sequence containing blackshale. It may be stratigraphically above, below or along strike of the pyrrhotite rich shales. The target of exploration by Drummond will be black shale hosted gold mineralisation under shallow cover. The initial exploration effort will consist of reviewing past exploration activity, reinterpretation of airborne magnetic and gravity data and regional geology followed by drilling. Terms of the agreement are for Drummond to meet a minimum expenditure of $500,000 on the Bendigo Region by 30 th September 2011, after which Drummond has the right to withdraw from the agreement. Drummond then has the right to earn 51% interest in the Bendigo Region by spending a further $5 million within three years. Drummond can then earn a further 19% interest, taking its interest to 70%, by spending a further $3 million in the following two years. The discovery of pyrrhotite in shales at Bendigo, in a drillhole intersecting the deepest part of the known stratigraphy in the mine area, together with the analysis of

4 Drummond Basin Yandan Diamond core drilling has commenced to test for extensions to mineralisation at Yandan East Hill based on a new interpretation of the geology. The holes are outside the East Hill mineral resource and are testing conceptual targets and extensions where no previous drilling has been undertaken. Yandan East Hill is located 40 kilometres west of Mt Coolon, or 250 kilometres west of Mackay, within the Drummond Basin in northern Queensland. Drummond Gold is earning a 51% interest in the Yandan Project through exploration expenditure of $3 million over a period of three years in a joint venture with Straits Resources. Gold mineralisation at East Hill was thought to be limited at depth by a northwest dipping listric fault, below which occurs unmineralised basement sediments. Recent interpretation of magnetic data by Drummond indicates the host andesite unit continues for considerable depth. The previously interpreted listric portion of the faults appears to be a flexure with the fault continuing at depth. The drilling is designed to test for extensions that may significantly increase the potential of the East Hill area based on the new interpretation. Approximately 1,000m of diamond core will be completed in four holes. The target is broad zones of mineralisation that host higher grade gold such as that intersected in earlier drilling, for example, 283m at 2.8g/t Au from 88m, including 18.28m at 7.5g/t Au, and 5.9g/t Au (YAN022) and 164m at 1.9g/t Au from 181m including 0.9m at 99.4g/t Au and 3m at 20.9g/t Au (EHRCD003). Drummond is also pleased to announce the company has been awarded $133,000 in government funding to drill test the Billabong Prospect, located 2 kilometres south from East Hill. The funding is part of the Queensland Government s Collaborative Drilling Initiative (CDI) program, designed to support the generation and testing of high quality exploration targets in greenfield and underexplored areas of Queensland. Billabong was recognised through the new interpretation of geophysical data covering the Yandan tenements. The target demonstrates structural and lithological similarities to the East Hill mineralisation in an area of alluvial cover where no exploration has previously been conducted. The target is Yandan East Hill style large tonnage gold and silver mineralisation. The new geophysical interpretation has also defined further targets of significant potential such as the IllamahtaOrchid Hill trend to the south of the Yandan. This trend covers 6 kilometres of andesitic lithology within similar stratigraphy to the Yandan Mine host rocks. Linears of low magnetic intensity are interpreted to potentially be related to alteration produced by the influx of hydrothermal fluids. Gold mineralisation has already been delineated at Illamahta over a strike extent of 350m. Geochemical indicators associated with epithermalstyle mineralisation have been recognised in the Orchid Hill area, to the east of Illamahta. Drilling will be undertaken to test the targets once access is possible after the recent wet season inundation. Corporate Activities During the Quarter the Company announced its Exploration Strategy for 2011

5 which outlined the Company s strategy of focusing on high quality opportunities. The recent update released on 17 March highlighted the additions of the Mount Cannindah Porphyry Copper and Gold Joint Venture (Mount Cannindah) near Rockhampton, Queensland and the Bendigo Region sediment hosted gold joint venture, Bendigo Region, Victoria that have strengthened and diversified the Company s exploration portfolio. The announcement also detailed the exploration program for the year and the commencement of field operations. At the end of the March Quarter 2011, the Company had engaged on a full time and part time basis a total of 11 employees and 8 contractors compared with a total of 10 employees and no contactors engaged at March Company Position at the date of this report At the date of this report there are 235,688,642 fully paid ordinary shares and 20,000,000 unlisted options (at various exercise prices and exercise dates) on issue. Cash at the end of the Quarter is $4,689,566. Eduard Eshuys Executive Chairman 28 April 2011

6 Mount Cannindah Geology and Prospects

7 Mount Cannindah Section 3050N

8 Mount Cannindah Section 2975N

9 Bendigo Region project area and historic workings.

10 Yandan Prospect Location

11 Yandan East Hill Section E

12 Mt Coolon Resources 30 June 2010 Mine Location Resource Category Measured Indicated Inferred Total cutoff 000 t Au g/t Au oz 000 t Au g/t Au oz 000 t Au g/t Au oz 000 t Au g/t Au oz Au g/t Koala Hectorina Pit , ,300 None Underground Extension , , , Tailings , ,700 None Total , , ,200 Eugenia in whittle pit direct mill , , outside pit 3, ,500 3, , Total 4, ,200 4, , Glen Eva Underground below pit ,200 21, , , Total , ,600 4, ,100 5, ,000 (minor rounding errors) The data in this report that relates to Exploration Results, the accuracy and quality of data forming the basis of all resource estimates, and the interpretation of mineralisation at Eugenia, Koala and Glen Eva, are based on information compiled by Mr. Erik Norum who is a Member of The Australasian Institute of Geoscientists and who has sufficient experience 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 (the JORC Code ). Mr. Norum is a fulltime employee of Drummond Gold Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear. The data in this report that relates to Mineral Resources for the Eugenia, Glen Eva and Koala Deposit is based on information evaluated by Mr. Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience 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 (the JORC Code ). Mr. Tear is a fulltime employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear. Yandan Gold Resources 30 June 2010 Mine Location '000t Estimated Gold Resource and Category measured indicated inferred Total Au Au Au g/t '000oz '000t g/t '000oz '000t g/t '000oz '000t Au g/t '000oz cutoff Au g/t Yandan East Hill Open Pit 5, , East Hill Underground 3, , Total 8, , (minor rounding errors)

13 The data in this report that relates to Exploration Results, the accuracy and quality of data forming the basis of all resource estimate, and the interpretation of mineralisation at East Hill, is based on information compiled by Mr. Erik Norum who is a Member of The Australasian Institute of Geoscientists and who has sufficient experience 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 (the JORC Code ). Mr. Norum is a fulltime employee of Drummond Gold Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear. The data in this report that relates to Mineral Resources for the East Hill Deposit is based on information evaluated by Mr. Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience 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 (the JORC Code ). Mr. Tear is a fulltime employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear. Mount Cannindah Resources March 2008 Category Million Tonnes Cu % Au g/t Ag g/t Measured Inferred Total At 0.5% copper cut off. (minor rounding errors) Technical information relating directly to the Mount Cannindah resource estimate was compiled and/or supervised by Mr Andrew Border and Dr Andrew Richmond, both of whom are members of the Australian Institute of Mining and Metallurgy (AusIMM). Dr Richmond, a full time employee of Golder Associates Pty Ltd was responsible for the resource block model and estimation. Mr Border was a full time employee of Planet Metals Limited and was responsible for all other aspects of the mineral resource estimate. Both Mr Border and Dr Richmond have sufficient experience that is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which they have undertaken to qualify as Competent Persons as defined by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Border and Dr Richmond consent to the inclusion of this information in the form and context in which it appears in this report.

14 Appendix 5B Mining exploration entity quarterly report Appendix 5B Rule 5.3 Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10. Name of entity Drummond Gold Limited ABN Quarter ended ( current quarter ) /03/2011 Consolidated statement of cash flows Cash flows related to operating activities 1.1 Receipts from product sales and related debtors Current quarter $A 000 Year to date (9 months) $A Payments for (a) exploration & evaluation (b) development (c) production (d) administration (485) (117) (1,973) (550) 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 12 (22) 1.7 Other (provide details if material) 5 Net Operating Cash Flows (531) (2,407) Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (17) (46) (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows (17) (46) 1.13 Total operating and investing cash flows (carried forward) (548) (2,453) + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 1

15 Appendix 5B Mining exploration entity quarterly report 1.13 Total operating and investing cash flows (brought forward) (548) (2,453) Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 6, Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) (22) (167) Net financing cash flows (22) 6,531 Net increase (decrease) in cash held (570) 4, Cash at beginning of quarter/year to date 5, Exchange rate adjustments to item Cash at end of quarter 4,689 4,689 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current quarter $A' Aggregate amount of payments to the parties included in item Aggregate amount of loans to the parties included in item Explanation necessary for an understanding of the transactions Consultancy Fees, Directors Fees, Salaries and Reimbursement of Expenses Non cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows Nil 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest Nil Financing facilities available Add notes as necessary for an understanding of the position. + See chapter 19 for defined terms. Appendix 5B Page 2 30/9/2001

16 Appendix 5B Mining exploration entity quarterly report Amount available $A 000 Amount used $A Loan facilities 3.2 Credit standby arrangements Estimated cash outflows for next quarter $A Exploration and evaluation 1, Development 4.3 Production 4.4 Administration 257 Total 1,613 Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Current quarter $A 000 Previous quarter $A Cash on hand and at bank 4,689 4, Deposits at call 5.3 Bank overdraft 5.4 Other (provide details) Total: cash at end of quarter (item 1.22) 4,689 4,689 Changes in interests in mining tenements 6.1 Interests in mining tenements relinquished, reduced or lapsed Tenement reference Nature of interest (note (2)) Nil Interest at beginning of quarter Interest at end of quarter 6.2 Interests in mining tenements acquired or increased Nil + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 3

17 Appendix 5B Mining exploration entity quarterly report Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. Total number Number quoted Issue price per security (see note 3) (cents) Amount paid up per security (see note 3) (cents) 7.1 Preference + securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions Ordinary securities 235,688, ,688, Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) Exercise Price Expiry date 5,000,000 Note 6 Note 6 5,000,000 Note 7 Note 7 5,000,000 Note 8 Note 8 5,000,000 Note 9 Note Issued during quarter 7.9 Exercised during quarter + See chapter 19 for defined terms. Appendix 5B Page 4 30/9/2001

18 Appendix 5B Mining exploration entity quarterly report 7.10 Expired during quarter 7.11 Debentures (totals only) 7.12 Unsecured notes (totals only) Compliance statement 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4). 2 This statement does give a true and fair view of the matters disclosed. Sign here:... Date: 28 / 04 /2011 (Company Secretary) Print name: Michael J Ilett Notes 1 The quarterly report provides a basis for informing the market how the entity s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2 The Nature of interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 5

19 Appendix 5B Mining exploration entity quarterly report 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with. 6 A total of 5,000,000 options are exercisable at $0.06 per share on or before on or before the earlier of 31 December 2011 or the expiration of three (3) months, or any longer period as may be determined by the Directors, after Mr. E. Eshuys ceases (as applicable) to be a Director of the Company. 7 A total of 5,000,000 options are exercisable at $0.09 per share on or before on or before the earlier of 31 December 2011 or the expiration of three (3) months, or any longer period as may be determined by the Directors, after Mr. E. Eshuys ceases (as applicable) to be a Director of the Company. 8 A total of 5,000,000 options are exercisable at $0.12 per share on or before on or before the earlier of 30 June 2012 or the expiration of three (3) months, or any longer period as may be determined by the Directors, after Mr. E. Eshuys ceases (as applicable) to be a Director of the Company. 9 A total of 5,000,000 options are exercisable at $0.15 per share on or before on or before the earlier of 30 June 2012 or the expiration of three (3) months, or any longer period as may be determined by the Directors, after Mr. E. Eshuys ceases (as applicable) to be a Director of the Company == == == == == + See chapter 19 for defined terms. Appendix 5B Page 6 30/9/2001