Gold Mines of Sardinia Limited
A.C.N. 009 234 851
Gold Mines of Sardinia LimitedA.C.N. 009 234 851
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30 April 2001 Manager - Companies Dear Sir/Madam QUARTERLY REPORT FOR THE PERIOD ENDED 31 MARCH 2001 The Directors submit their quarterly report for the period ended 31 March 2001. Yours faithfully GOLD MINES OF SARDINIA LIMITED
REPORT FOR THREE MONTHS TO 31 MARCH 2001 HIGHLIGHTS EXPLORATION
FURTEI MINE
OSILO TRIAL MINE
CORPORATE
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OPERATIONS FURTEI MINE (Sardinia Gold Mining SpA) Production Gold production from oxide ore sources continued during the March quarter 2001, albeit at a reduced rate reflecting decreasing feed grades as higher grade oxide ore sources are gradually depleted (some two years later than originally predicted). The lower feed grade is on-budget as the project moves through the changeover phase from oxide to sulphide ore treatment. TABLE 1 - PRODUCTION STATISTICS
Significant stocks of oxide ore on the ROM (run-of-mine) pile at the start of the quarter have allowed mining to be concentrated on stripping waste from the sulphide pits in preparation for start-up of the sulphide treatment plant. This waste stripping was aided by continued operation of the local company contracted to supply fill-material for a major road-building project on the island, an arrangement which also results in a reduction of the overall material movement cost to SGM. A total of 297,015 tonnes (t) of material was mined (Table 1), of which 27,690t were CIL (carbon-in-leach) ore delivered to the plant at an average grade of 2.27 grams per tonne (g/t). A further 13,010t were placed on the dump leach pad at an average grade of 0.83g/t. In addition some 7410t of sulphide ore were stockpiled on the ROM stockpile at a grade of 4.56g/t. Gold production was 3926.2 ounces (oz), with 94% from the CIL treatment plant and the balance from the dump leach operation. Construction of the sulphide treatment plant was near completion at the end of the quarter and the project remained on schedule for a start to commissioning early in April. GOLD SALES The average realised gold price for the three months to 31 March 2001 was US$263 an ounce (December 2000 quarter, US$278/oz), compared with the average spot price of US$262 for the same period. Production for the quarter thus ran at a cash operating deficit, averaging US$48/oz (December 2000 quarter, US$106/oz surplus). Sales of gold into hedging instruments amounted to 372oz at an average US$280/oz (December 2000 quarter, 4956oz at an average US$280/oz) and sales into the spot market totalled 4031oz at an average US$262oz (December 2000 quarter, 1796oz at an average US$ 272/oz). All silver sales were delivered into the spot price on the day of delivery. TABLE 2 - GOLD SALES
Hedging No hedging contracts were in place.
KEY PERFORMANCE HIGHLIGHTS BULLION SALES (ounces)
MINE CASH OPERATING COSTS (US$/oz) (Per the Gold Institute Production Cost Standard)
EXPLORATION Furtei Diamond and RC (reverse circulation) drilling continued in the Furtei mine corridor to test for new mineralisation and to infill recently discovered shallow oxide mineralisation. A total of 819m of diamond drilling and 1816m of RC drilling was completed during the quarter. An RC drill hole was drilled into the centre of the Su Coru orebody to enable water flow rate testing as part of geotechnical studies in preparation for underground mining. The RC chip samples returned 43m @ 5.12g/t Au, further confirming the continuity of high grade mineralisation in the Su Coru orebody. New stratabound mineralisation was intersected in drill hole MAD 113, in the area of the Cima-Est and Sa Perrima Faults. An intersection of 18m @ 1.89g/t Au was cut from 163m depth and a 5m zone at 7.73g/t Au from 310m depth. The latter represents an unusual style of mineralisation not encountered before at Furtei. It is hosted in a breccia and is accompanied by the same geochemical signature of the stratabound mineralisation. There appears to be potential for higher grade gold mineralisation to be hosted in this lithological unit in this area. At S’Arruga, RC drilling extended the mineralisation to the north with low grade intercepts of 41m @ 1.29g/t Au, 34m @ 1.42g/t Au and 8m @ 3.36g/t Au. The orebody remains open to the north. Resource drilling for shallow oxide mineralisation continued at Coronas Arrubias and Sa Crescia. The oxides occur at 5-15m from surface and are masked at surface by a thin layer of barren andesite. Resource estimates are under way. Osilo Drill access to the Bunnari vein is now possible with the court decision overturning a regulatory veto on the previously obtained trial mining approvals for Bunnari. Diamond drilling of the high grade shoots was scheduled to begin early in the June quarter. REGIONAL EXPLORATION Monte Ollasteddu The new gold discovery at Monte Ollasteddu in the Eastern Paleozoics (announced last quarter) has returned very encouraging rock chip channel sample results within an extensive gold-in-soil anomaly. The gold is associated with stockwork quartz veining, pervasive silicification and arsenopyrite mineralisation related to the Carboniferous-age Hercynian deformation. The mineralisation is hosted in brittley deformed meta-rhyolites (Fig. 1). The gold-in-soil anomaly measures 3.5km long and up to 1km wide at 10 parts per billion (ppb) Au. Several +50ppb Au zones include one 2km long and 500m wide. Gold results from the soils are quite high, with up to a gram per tonne in the central part of the area. The soil anomaly is still open along strike to the east and west. It more than likely continues for another 4km to the east, under shallow Eocene sandstone cover, to the Baccu Locci group of old workings. These were previously mined for arsenic but return up to 12g/t Au from quartz veins (Fig. 2). Rock chip channel samples have been collected using hammer and chisel. The outcrops comprise less than 20% of the area, with the best exposures in the steep slopes and cliffs, and the creeks of the deeply dissected plateau. The best results are tabulated below and shown with numerous other channel and rock chip samples in Figure 3. Most channel samples start or end in mineralisation, because of the poor or discontinuous exposure of outcrops. Channel No. Interval & Grade (g/t Au) First / Last Sample Assay (g/t Au) 100 75m @ 0.87 2.26 / 0.83 103-104 20m @ 2.63 13.31 / 1.58 108 23m @ 3.56 1.95 116 27m @ 4.69 8.08 120 16m @ 3.09 124 14m @ 2.66 1.24 / 1.19 Selective sampling of the individual quartz-sulphide veins returns quite high grades, generally in the 15 to 50g/t Au range. Although these have been usually taken from less than 1 metre width, they offer the added possibility of discrete bonanza-style veins within the larger bulk tonnage stockwork vein and disseminated sulphide target. A further seven fresh sulphide samples submitted for 24-hour cyanide leach returned an average of 90% gold recovery. This supports results from the initial batch which returned 86.5% gold recovery. A Research Permit application has been lodged and is expected to be granted later this year. This will enable RC and diamond drilling to be performed to fully evaluate the prospect. Systematic ridge and spur soil sampling on wide-spaced lines 1km apart is continuing elsewhere in the Eastern Paleozoic belt. Highly anomalous results have been taken from an area 6km to the west of Monte Ollasteddu. Best results from these samples include 639, 602, 556, 97, 93 and 78 ppb Au. Infill soil sampling and mapping is planned (Fig. 1). The gold-arsenic-silver mineralisation at Monte Ollasteddu is related to a tungsten (W)-bismuth (Bi)-antimony (Sb)-arsenic (As) magmatic system formed by crustal scale melting following the Hercynian deformation. This orogenic and subsequent metallogenic event is responsible for similar styles of deposits in Spain, France and Slovakia that total more than 18 M oz of gold in past production and current reserves. A number of other historic As, W, Sb and molybdenum (Mo) mines and prospects associated with major structures and Hercynian aged granites occur over the eastern half of Sardinia. These have been under-explored for gold in the past and represent very attractive targets. Cuglieri Epithermal Field Mapping and soil geochemistry carried out on the recently discovered low sulphidation quartz vein at Pedra Loabbio has been extended to more than 1km strike. The vein is exposed at sub-sinter level and contains up to 35 parts per million (ppm) silver, high arsenic and barium. Soil geochemistry has returned a maximum of 154ppb Au close to the vein. An arsenic anomaly more than 1km wide extends for 1.5km and is open along strike to the north and south. The latter indicates potential for multiple parallel veins, or potential for bulk tonnage mineralisation to be hosted in the silicified breccias adjacent to the vein. A Research Permit application is in place and is expected to be granted later this year. Additional mapping, sampling and geophysics are planned to firm up drill targets at Pedra Loabbio, Scano Montiferro and further to the north in the Romana area. OSILO PROJECT Sardinia Gold Mining has been cleared to undertake its drilling and trial-mining programs at Osilo in the north of the island. The Osilo gold field consists of numerous quartz veins amenable to underground mining and conventional CIL treatment. Current resources are sufficient for planning of a five-year project that could produce up to 50,000oz a year, and SGM believes significant potential exists for extending this planned project life. The regional appeals tribunal (TAR) overruled a local agency of the Italian Government that had revoked approvals for the drilling and trial-mining programs previously given by the Sardinian Government. The TAR said the original approvals by the regional government had struck a proper balance between industry and employment on one hand, and safeguarding the environment on the other. The TAR confirmed the regional government’s assessment that the underground trial mining program would not substantially modify the land. The appeal was heard during February and the TAR decision became available in early April. The decision means the previously postponed drilling and trial-mining programs can proceed, and SGM is currently engaging all stakeholders in discussions to integrate any remaining issues. The objective of both work programs is to provide detailed technical data for completion of a bankable feasibility study evaluating the development of the Osilo project.
Baseline environmental data was gathered during the quarter for use in preparation of a wide-ranging Environmental Impact Study (EIS). The EIS is a major element in the Sardinian permitting process and it will address the benefits and impacts of developing full-scale mining and processing infrastructure at Osilo. The study will be lodged with the Sardinian Government in the second half of 2001. CORPORATE GMS sold one million Navan shares on 13 March 2001 for £980,000 (about A$2.8 million). The company retains an 8.1 per cent stake in Navan, valued at 31 March at about £5.25 million (A$14.7 million). GMS acquired a 10 per cent shareholding in Navan Mining in 2000 at an effective price of 54 pence a share. Navan has announced the discovery of what appears to be a potentially large, high-grade gold discovery at Krumovgrad in Bulgaria. GMS has no current intention of selling further Navan shares. * * * * * Mr Jeff Rayner, Chief Geologist for Sardinia Gold Mining SpA, has been responsible for the preparation of the geological sections of this report. Mr Rayner is a corporate member of the AusIMM and has more than five years’ experience in the estimation, assessment and evaluation of mineral resources and ore reserves which is relevant to the style of mineralisation under consideration.
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