African Gold Group Inc TSXV:AGG announced a revised preliminary economic assessment for Zone 1 of its Kobada Gold Project in Mali. The PEA estimates an internal rate of return of 90.57% and a net present value of US$216.9 million, based on US$1,100 per gold ounce and a discount rate of 5%. The report projects average annual production to be 126,000 ounces for the first five years, costing US$470.90 per ounce. Gold production for year 6 is estimated to be 112,200 ounces.
The report proposes an open-pit, bulk-mining model, using a gravity recovery process plant. The PEA is based on a resource estimate of 1.093 million tonnes inferred grading 0.48 g/t with a 0.1 g/t cut-off. The resource does not include drilling undertaken since December 2010, which includes an enlarged Zone 1 and the newly discovered Foroko North Deposit and the Termite Zone. The PEA is currently being translated from French into English.
President/Director Mike Nikiforuk tells ResourceClips.com, “Zone 1 is not a static zone, it’s a zone that’s increasing in dimension as we go up and down along strike. That’s why our press release refers to a 1-million gold ounce threshold surpassed from 15% of strike. Zone 1 used to be 1.2 kilometres in strike length but it is now, with respect to the scoping study, 1.7 kilometres in strike length. That represents approximately 15% of the 12-kilometre-long anomalous trend. So there’s continuing exploration. We put out a press release on June 1 announcing southern step-out holes that are extending Zone 1 another 200 metres south, and on April 7 we released assays from 27 holes to the north. These were not a regular pattern of 50-metre step-outs. We moved 400 metres north of the most northerly drilling on Zone 1.”
In this environment, with this price for gold, we want to move as aggressively as possible.—Mike Nikiforuk
He continues, “So there’s a big gap in between and we drilled a couple of lines that were staggered, then we moved another 700 metres north of that, and another 400 metres north of that, and we have intercepted significant mineralization up to two kilometres north of the most northern part of Zone 1. So it’s a dynamic and growing strike line.
“We absolutely want to go into production while continuing to explore,” Nikiforuk emphasizes. “In this environment, with this price for gold, we want to move as aggressively as possible. We have started on a feasibility study which we hope to complete within 12 months. We’ve had preliminary discussions with bankers, and this is an incredibly positive environment for us and others as well. We want to take advantage of it; so it’s not something we want to see protracted. That’s not in our best interests or our shareholders’ best interests.
“The preliminary economic assessment supports the notion that Kobada will be a very low-cost operation,” he explains. “Part of the reason, as our director Pierre Lalande points out, will be the opportunity to process material in a gravimetric plant. The rock here has morphed into a clay over the course of millions of years of a weathering process. The weathering profile extends as much as 150 metres vertical from surface. The average is around 100 metres vertical from surface.
“So to mine it we get the shovels, we put the material in a truck and take it to the plant,” he says. “The first step in the plant is to de-slime—we want to get rid of that clay. We’ve done metallurgical tests that show the gold in the slime is very, very minute relative to what remains after the de-sliming portion. Then the de-slimed portion goes to the gravity plant and gold is extracted. The tests we’ve done were incredibly successful. This was based on a 287-kilogram sample that was a composite of 127 samples taken from eight distinct holes during the 2009 drill program. SGS Lakefield analyzed it and found that when they de-slimed they removed 57% of the original mass. The 43% of the finds that were treated with gravity recovered 92% of the gold that was ultimately reported.”
Nikiforuk adds, “In the absence of an unsolicited takeover offer or some form of friendly transaction, African Gold Group must undertake every effort to put Kobada into production ourselves. One of the things we’re doing now is searching for a CEO whose experience would lend itself to this type of operation and opportunity. So we’re doing everything in our power to put it into production. Step 1 is to move it through feasibility as quickly as possible and that process will be complete by mid-next year.
“We have a second rig coming on site in January, and it will be dedicated to geotechnical drilling. The other rig will continue with exploration drilling.”
He concludes, “We are stating that our production would be in the magnitude of 125,00 ounces a year. If we achieve that, we will have significantly transformed the company into a positive cash-flow entity, as opposed to an exploration entity which is constantly looking for capital and depleting it through the exploration exercise. It’s a very dynamic time for us, and we certainly believe we’re up to it.”
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Michael A. J. Nikiforuk
416.644.8892 x 101
by Greg Klein