Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

New Talisman Gold Mines Samples 1.5oz/T Gold In New Zealand

New Talisman Gold Mines (ASX:NTL) has established the basis for processing ore from its Talisman gold mine in New Zealand with sampling of stockpiles revealing an average grade of 1.5 ounces (42.52 grams) of gold per tonne.

This will set the foundation for commercial terms on processing the first ore from the mine.

About 50 tonnes of stockpiled ore is currently located at Newmont Mining's (NYSE:NEM) facility at Waihi for processing.

Talisman is located on the Coromandel Peninsula and had previously produced 1 million ounces of gold and 3 million ounces of silver.

"We are pleased with the sampling results showing very high grades in what was a remnant stockpile from historical mining," executive director Matthew Hill said.

"We look forward in the very near future to finalising the treatment of the first ore from the Talisman mine since our company has held the permit.

"All revenues from the contained gold will be invested back into the mine development as we push toward production."

Talisman Mine

NTL had last month received Authority to Enter and Operate from the New Zealand Department of Conservation, a major step on the road from explorer to producer.

It is working closely with the Department and other government agencies to finalise the regulatory aspects of its bulk sampling project plan.

This seeks to develop and refurbish the drives and extract about 600 tonnes of ore per month at an assumed head grade of 10 grams per tonne gold.

Total capex is estimated at A$1.7 million, which fully funds the project for 18 months including corporate overheads.

This should produce approximately 6 kilograms of gold per month once at a steady state of production is achieved and provides a cash surplus of A$1.3 million at the end of 18 months based on a gold price of US$1200 having paid for all of the infrastructure and development for the full mine.

The bulk sampling project carries all of the infrastructure and mine upgrades for the fuller mine development and has potential to increase reserves given the Mystery vein, which was discovered by Cypress in late 80's, is only modelled up to the bore holes carrying grades of 50g/t gold.

Bulk sampling is expected to establish very early on if this vein continues and if so will lead to an increase in Reserves rather than Resources.

A Pre-Feasibility Study completed in April 2013 for full underground mining at Talisman had confirmed an initial Phase One life of mine of 5 years to generate NZ$68.2 million in revenues for a cash surplus of NZ$23.4 million.

Start-up capital was estimated at NZ$5.4 million.

The mine previously produced 1 million ounces of gold, 3 million ounces of silver, and has a current JORC Resource of 205,000 ounces of gold from two separate mines, Talisman and Crown.

The Talisman permit area has the potential to host between 0.55 million to 2 million ounces of gold and between 1.5 million to 6 million ounces of silver.

Chairman James McKee has also noted previously that the high grades contained in the Talisman stockpiles to mix and match ore grades and production rates to the price of gold in the market and still generate an attractive rate of return.

Analysis

That sampling of stockpiled ore has returned average grades of 1.5 ounces per tonne is pleasing for New Talisman Gold Minesas it sets the foundation for processing ore from the Talisman Mine.

The grade also provides for additional capital to be applied to the bulk sampling project.

Capex for the bulk sampling project is estimated at $1.7 million and is expected to provide a cash surplus of $1.3 million at the end of 18 months.

Notably, this will also carry all the infrastructure and mine upgrades for the fuller mine development and could further increase reserves.

Milestones ahead include:

- Lodgement of health and safety plan, 13 October 2014;
- Finalisation of long term toll treatment agreement;
- Second and third batch of pad ore sent for processing;
- Upgrading hardstand area and road upgrades; and
- Initial mine refurbishment beginning in December/January

Proactive Investors continues to assign an EV of $11.96 million on current resource ounces, or around A$0.021 per share, given that we believe that NTL remains under-valued at a market cap of circa $6 million.

Further upside will be garnered from an increase in gold resources and reserves, and any increases in the gold price in New Zealand dollars, which is currently over NZD$1530 an ounce.

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.