Millennium Minerals (ASX: MOY) is looking forward to more years of gold production from its Nullagine Gold Project in Western Australia's Pilbara region after upgrading resources by 44% to 1,913,000 ounces.
The overall project grade has also increased by 6% to 1.26 grams per tonne gold.
Further growth is likely given that several existing deposits could yield additional resources while a number of new prospects will be drilled soon.
In addition, the company is preparing a new Project Ore Reserve for release this quarter.
Resources from the All Nations, Golden Gate (ABCD Reef), Condor, Crow, G Reef, Beatons Creek, Camel Creek Joint Venture (CC JV) and Au81 deposits were updated with new data gathered from about 19,900 metres of reverse circulation drilling during 2013, and in part during 2011.
No updates were made for the remaining deposits as the company believes that there would be no material differences to previous estimates from the new data
The upgrade in Resource tonnage by 36% to 47.13 million tonnes is due to the inclusion of the new drilling data while the grade increase of 6% is due to the substantial tonnage of moderate grade ounces in the Beatons Creek estimate that was partly offset by lower grades at the Crow, Condor and CC JV deposits.
Components of the upgrade are:
- An initial Beatons Creek estimate of 421,000 ounces, where Novo Resources (CNSX:NVO) has the option to earn 70% in the gold rights;
- An initial JORC Resource of 47,900 ounces for the Au81 deposit that is located just 2 kilometres from the gold processing facility;
- An updated resource to 52,500 ounces (net to Millenium) for the equal Camel Creek joint venture with Northwest Resources (ASX: NWR);
- A 33% increase to 88,000 ounces for the All Nations deposit;
- The Golden Gate deposit with a 38% increase to 95,000 ounces;
- A 67% increase in the Condor Resource to 20,000 ounces of gold;
- A 88% increase in Crow Resource to 10,500 ounces; and
- The G Reef deposit receiving a 210% increase to 6,200 ounces including a 76% increase in grade to 3.7g/t gold.
Millennium also added the ratio of ounces reporting to the Measured and Indicated Resources categories is still 62% despite the substantial additional amount of Inferred Resources at Beatons.
It noted that Condor and Au81 offered the best potential to further increase resources.
A key objective of the new estimates was to produce revised inputs for inclusion in new pit optimisation studies, and subsequently new Ore Reserve estimates for most of these deposits. These studies will be concluded during this quarter and will be reported once complete.
The All Nations, CC JV Golden Gate (NASDAQ:ABCD), Condor, Crow, G Reef and Au81 deposits are hosted within broadly east‐northeast trending, northwest dipping sequence of rhythmically interlayered sandstones, siltstones and shales of the Mosquito Creek Formation.
Gold mineralisation is associated with a complex array of sub parallel, tabular quartz‐carbonate veins and veinlets dipping between 60 degrees and vertical. The veins are variably discordant to the stratigraphy.
The Golden Eagle deposit remains the largest at the Project, representing 42% of the total resource.
Millennium had produced 19,549 ounces doré bullion from the Nullagine project during the September 2013 quarter and has provided guidance of between 23,000 ounces and 25,000 ounces for the December quarter.
Gold sales revenue for the period was $25.4 million, which benefited from the company's hedging at $1,570 per ounce, compared to the average spot price received of $1,472 per ounce.
Its hedge book is valued at $11.45 million as at 30 September 2013, based on remaining 73,775 ounces being hedged at an average price of A$1,631 per ounce.
In addition, the sustaining cash cost for the quarter was $1,040 per ounce (includes site cash costs, royalties, corporate expenses and site sustaining capital), 5% below budget of $1,094 per ounce for the quarter.
The company has made good progress towards starting ore extraction and milling from the higher grade Golden Gate site in the current quarter.
Mining operations commenced at the "D" Reef and "ABC" Reef pits and the upper ore zones have been opened up with the first pass grade control drilling completed.
Outstanding activities include completing the haul road sections, awarding the ore transport contract and finalising the supporting infrastructure at this project area.
Ore extraction and haulage to the Golden Eagle site is forecast to commence in November 2013, and campaign treatment of the higher grade ore is planned for the November‐December 2013 period.
With Resources at its profitable Nullagine Gold Project now nudging the 2 million ounce mark, Millennium Minerals is well placed to continue producing gold and generating cash flow well into the future.
Mine life based on the previous estimates is 8 years.
Returns will also be aided by the company's hedge book, which continues to provide it with an enhanced sale price in the current gold priced environment over the next year.
Shares in the company are likely to trade higher today, however on our estimates this is still not likely to account for the under-valuation based on profitability.
Looking ahead, catalysts include the updated Ore Reserve and further exploration work.
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