Red Mountain Mining (ASX:RMX) has delivered what investors have been waiting for - high grade gold from drilling at the South West Breccia (SWB) of the company's Lobo Project within its Philippines based Batangas Gold Project.
RMX shares are expected to lift at the open. The latest results are set to increase the resource, and the economics of the project.
Diamond drilling intersected: (LB115) 5.35 metres at 8.18g/t gold from surface, including 1 metre at 18.5g/t gold.
The significance of hole LB115 is that it tested immediately below the recent Trench 27 intersection, which last month delivered: 19.4 metres at 8.24g/t gold, including 5.05 metres at 15.7g/t gold.
A deeper drill hole known as LB114 tested the southwest plunging depth extension to the SWB resource, delivering: 3.05 metres at 4.51g/t gold from a 69.6 metre downhole, including 1 metre at 9.5g/t gold.
The mineralisation was a brecciated quartz-barite-sulphide lode on the hangingwall side of the structure.
Adding to the continued potential of the SWB lode, mineralisation remains open at depth.
Jon Dugdale, managing director, commented "The recent deeper drill holes have allowed us to better understand the resource at depth and indicate that we may be able to deepen the proposed pit design for the DFS.
"LB115 is also significant in so much as it confirms the high grades intersected in Trench 27 and highlights the potential for a very low cost start to the gold project."
Today's drilling results followed on from other drilling success early in May, which included: 6.7 metres at 11.6 g/t gold; and 18 metres at 6.85 g/t gold, including 6 metres at 11.5g/t gold.
The SWB shoot hosts an Indicated and Inferred 194,000 tonnes at the high-grade of 7.2g/t gold for 45,000 ounces of gold.
Importantly this includes a high confidence Indicated Resource of 178,000 tonnes at 7.4g/t gold for 42,000 ounces. The Inferred Resource is 16,000 tonnes at 5.3g/t gold for 3,000 ounces.
Batangas scoping study
The RMX Scoping Study estimated a low $16.7 million pre-production capital cost and attractive IRR of 70%, with projected life of mine revenue of A$134 million for Batangas.
Today's results have the potential to add to the South West Breccia resources, and therefore improve the economics or mine life of the study.
Importantly - the study affirmed that Red Mining can move Batangas into production with achievable capex and attractive project metrics.
Payback forecast in 1.2 years
The revenue is estimated over the initial 4.5 year mine life on production of 90,000 ounces of gold while net cash flow is estimated at $40 million. Payback is expected in 1.2 years.
Average C3 are A$1050 per ounce while C1 cash costs are about A$769 per ounce.
The study is entirely based on a simple open pit mining and carbon in leach processing of existing, high grade resources, of which 90% of the resources to be mined are in the Indicated category.
The continued drilling success by RMX at the Batangas project is extending the resource of the South West Breccia.
The upcoming catalysts will be the new JORC 2012 resource upgrade which will include the latest results.
An increase to the high-grade resource will deliver a boost to the already impressive metrics, which include low pre-production capital costs and an attractive IRR of 70%.
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