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Blackham Resources Targets Late 2015 Restart For Matilda Gold Project

Blackham Resources (ASX:BLK) continues to advance its 4.4 million ounce Matilda Gold Project in Western Australia towards production with operations expected to restart in late 2015.

Discussions are ongoing with a number of potential funders that have expressed an interest in financing Matilda Gold Project through feasibility and into production.

Initial start-up capital to re-commission the project is estimated at $24.6 million while all-in sustaining cash costs are expected to be between A$1,000 and A$1,100 per ounce.

The project is projected to be cash flow positive within five months of development decision.

The Matilda Project consist of a number of open pit and underground deposits within 20 kilometres of the company's existing 1.3 million tonne per annum gold plant.

These have JORC 2012 resources of 42 million tonnes at 3.3 grams per tonne for 4.4 million ounces of contained gold.

Under the first stage development, Blackham seeks to unlock free milling production of 100,000 ounces of gold per annum.

Increased confidence in resources

In conjunction with exploration and extension drilling of known resources, Blackham has improved confidence in the conversion of current resources to reserves.

Currently, 72% of the resources contained in open pit designs and optimisations are in the Measured and Indicated category of resource confidence.

This level of resource definition will allow for quick conversion of resources once the engineering parameters are finalised for the Pre-Feasibility study (NYSE:PFS).

At least 17Mt at 3.8g/t, or 2 million ounces of gold, are in the Indicated Resource category.

Metallurgy

After securing the WGP plant in March 2014, pre-feasibility metallurgical test work has been applied to optimise its milling capability.

Blackham's planned processing route will be crush, grind, gravity then CIL.

The free milling ore is to be initially processed through both Mill 1 and Mill 2 for an average throughput of 1.3Mtpa.

Studies indicate that metallurgical recoveries from the Matilda Mine will be in the order of 92%.

Galaxy metallurgical test work indicates very good average gravity and leach recoveries of 98%.

Limited further test work will be required for Williamson due to over 660,000 tonnes of ore having historically been processed through the Mill 1 circuit. This will assist in narrowing down and minimising the final PFS test work.

Mining Engineering and Associated Studies

Mining engineering work is moving into prefeasibility with initial designs completed on the main open pit mining centre at Matilda.

Since acquiring the WGP Plant and infrastructure there has been significant interest in the project from contractors, fleet hire companies, equipment suppliers and service providers which allows the company to assess all possible options for operating the site to achieve the lowest possible capital and operating cost structure.

Geotechnical reviews have been ongoing as the team has been obtaining input from past studies and assessments from consultants that were involved with the initial mining at Matilda and Williamson.

Hydrological work will also leverage off past work with extensive studies completed at Williamson plus Matilda being previously assessed as part of an application for a ground water licence.

Mining and processing reconciliations for both Matilda and Williamson are being analysed to ensure all available performance data is taken into account during the prefeasibility study.

With initial designs completed, geotechnical and hydrological assessments can now be undertaken to ensure engineering confidence is at a pre-feasibility level.

Mining Inventory

The current mining inventory contains 4.9Mt, or 454,000 ounces of contained gold to be processed over 3 years 10 months, or an average annual production of 1.3Mt and 119,000 ounces of gold.

Mining studies to date have focused on the Galaxy, Golden Age, Matilda, Williamson and Calvert deposits, all of which have been previously mined and processed through the WGP plant.

Resources of a further 37Mt at 3.3g/t for 3.9 million ounces of contained gold, 46% of which is at na Indicated level, are sitting outside the Mineral Inventory.

Blackham is continuing to review its mining and processing studies with a view to bring further resources into the mine life prior to completion of the Feasibility.

All-in sustaining cash operating costs are expected to be in the order of A$1,000 to A$1,100 per ounce.

The mining contractor rates were last confirmed 18 months ago and these rates are expected to have come off significantly in that period due to cheaper equipment, salary and diesel costs.

Blackham will obtain revised mining contractor quotes prior to completion of the Pre-Feasibility Study over the project.

Care and Maintenance

The care and maintenance team on site has been implementing a number of improvement programs and will be instrumental in investigating and facilitating assessments to ensure accuracy of costings and timelines for refurbishment.

Plant and Infrastructure Refurbishment

Running in parallel to the metallurgy studies is the preparation work for the refurbishment of the free milling circuit.

The initial mothballing of the refractory circuit means there is a significant reduction in plant to refurbish and maintain which has a material effect in reducing the initial cost structure of the processing facility.

In addition to refurbishment, it is currently envisaged a gravity circuit will also be included in the process to assist in increasing recoveries and further reduce operating costs.

There has been considerable interest from engineering companies and associated entities able to assist with refurbishment reflecting the excess capacity in the market.

Initial start-up capital to re-commission the Matilda Gold Project is estimated at $24.6 million.

These funds are planned to be spent in the four months following development decision. The project is expected to be cash flow positive within five months of development decision.

The initial capital includes $15.7 million for refurbishment of the plant, tailings dam extensions and power station refurbishment.

The refurbishment of the plant assumes an engineering, procurement, construction and management contractor is appointed to manage this process.

Blackham has also had initial discussions with power contractors interested in owning the power station and selling the project power over the fence.

Mining and working capital of $8.9 million is also needed to commission the project.

Approvals

The Department of Environment and Regulation has transferred the Environmental Protection Act 1986 licence to Matilda Operations Pty Ltd, a 100% owned subsidiary of Blackham Resources Limited.

The licence primarily allows for the processing of ore, mine de-watering extraction and discharge plus other activities required for the operation of the site.

The Department of Water has transferred all the licences required for extraction of water for use in processing of ore and dewatering for mining purposes to the company.

Including current notices of intent to mine over Matilda and Williamson, there are only limited approvals required to commence operations.

Analysis

Blackham Resources is continuing its focus on developing the Matilda Gold Project and is holding discussions with a number of potential funders to finance it through feasibility and into production.

Operations at the 4.4 million ounce project could be restarted in late 2015 and the project could be cash flow positive within five months of the development decision.

Initial Capex is estimated at $24.6 million while all-in sustaining cash costs are A$1,000 to A$1,100 per ounce.

Blackham is lightly capitalised at $6.6 million.

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