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Pacific Niugini Hits 34g/T Gold In First Hole At Nicolsons Gold Mine

Sep. 16, 2014 9:17 PM ET
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Pacific Niugini's (ASX:PNR) first diamond drill hole at the Nicolsons Gold Mine near Halls Creek, Western Australia, has intersected 3.0 metres at 20.43g/t from 106 metres, including 1.6 metres at 34g/t gold.

The company is looking to re-commence mining and ore processing at the high-grade Nicolsons Project. With these resultsPacific Niugini's shares should firm today.

Current drilling has 3 objectives:

- Resource expansion in the highly prospective northern resource area;
- Confirmation of resource grades and widths in immediate mining focus areas, including the twinning of existing RC drill hole results; and
- Provision of additional mining information, including geotechnical data collection to aid with re-commencement planning and mining cost evaluation.

The first result confirms the ore body interpretation with assays revealing grades double the existing resource block model predicted grade in the location of the hole.

The high grade intercept further highlights the potential to improve grade estimates from historic reverse circulation drilling in the known ore system.

Nicolsons has a Resource of 260,000 ounces grading 5.6 grams per tonne gold and offers near term production potential through an existing 120,000 tonne per annum processing plant.

"This is a pleasing result from our first hole, and it has confirmed our view that some of the RC drilling may be downgrading the ore system, and that a mine plan well above the global resource grade may be possible," managing director Paul Cmrlec said.

"These are the first of many results to come and we remain confident of restarting the operation. Nearly all the plant and equipment is in place and a simple mine restart is envisaged."

To date, seven holes have been completed of the initial 11 hole program with assays returned for a portion of the first hole NRCD14005.

The company has continued to advance budgets and works schedules for the recommencement of the operation, and is contemplating an operation processing 100,000 to 150,000 tonnes per annum at a grade of 6g/t to 8g/t for production of 20,000 to 30,000 ounces of gold per annum.

Operations will initially be focussed on the known higher-grade portions of the resource that are believed to be capable of producing at better grades than the global resource.

Current Work

Pacific Niugini is progressing with required activities to re-commence mining and ore processing.

The first hole, NRCD14005, was designed to infill the resource between a high and a dubiously lower grade reverse circulation drilling intercept.

Assay returns have confirmed continuity of the higher grade mineralisation with grades significantly above that in the reverse circulation drilling.

The company is also waiting on feedback from Western Australia's Department of Mines and Petroleum regarding its Mining Proposal for re-commencement of the operations that was submitted during the first week of August 2014.

This is currently being assessed by external agencies.

The mining and development proposal includes refurbishment of the existing processing plant at nameplate capacity of 120,000 tonnes per annum and mining of the Nicolsons ore body, which hosts 214,000 ounces at 5.9g/t gold, by underground methods.

Nicolsons Gold Mine

The Nicolsons gold mine is located 35 kilometres southwest of Halls Creek and the Golden Crown Project in the Kimberly Region of Western Australia.

Historic Nicolsons open pit mining produced 93,000 tonnes at 7.7g/t gold

In addition to the resource of 260,000 ounces of gold, the existing processing plant offers the potential for near-term gold production.

The area has been sporadically explored over the years with minimal drill testing of targets outside of the existing resources despite prospecting highlighting its potential.

Pacific Niugini is currently increasing its ownership in Nicolsons and the Golden Crown projects to 80% from 49%.

The company's focus is on developing the mine and reinstating the processing plant as quickly as possible in order to generate strong cash flows.

Cmrlec told Proactive Investors the company fully intends to develop the mine on existing resources, and to continue extending mining stocks at depth once in operation.

A high grade shoot within the resource has consistently showing higher grades than average resource grade.

Main resources lie on granted Mining Leases while additional exploration leases provide substantial project upside with excellent opportunity for delineation of additional resources.

An independent geological review has estimated an Exploration Target of 4 million to 7 million tonnes at between 5.2g/t to 5.4g/t gold.

There are also numerous third party projects for assessment as the acquired plant is the only processing option in the region.

Analysis

The intersection of intercept of 3 metres at 20.43g/t gold including 1.6 metres at 34g/t gold from a portion of the first hole NRCD14005 has confirmed Pacific Niugini's view that previous reverse circulation drilling may be downgrading the ore system.

This is double the existing resource block model predicted grade at the location and could result in a mine plan well above the global resource grade.

With strong grades in the deepest holes drilled to date, there is potential for this resource to continue at depth.

This provides potential to extend mining stocks at depth even after the mine is restarted.

Share price kickers include:

- Results from the other holes in the drilling program;
- Costings for re-commencement of operations and ongoing production in the next month;
- Progress on restarting the Nicolsons Gold Mine; and
- Securing approval for the Mining Proposal.

With a market cap of circa $21 million and $2.59 million in cash as at 30 June 2014, the company is significantly undervalued.

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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