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Pacific Niugini Finds Even Higher Grade Gold, Mining At Nicolsons

Pacific Niugini (ASX:PNR) has encountered bonanza gold grades of up to 239 grams per tonne while progressing ore development at its 80% owned Nicolsons Mine near Halls Creek, Western Australia.

While these are hosted in narrow quartz veins, the overall face grades are also high, providing potential for overall grades to be higher than estimated in its resource model.

Refurbishment of the processing plant is nearing completion and the company remains on track to start gold production in August 2015.

The project provides an immediate four year production plan with high grades and planned annual production of 25,000 to 30,000 gold ounces.

In the immediate Nicolsons Mine area there are numerous resource development and exploration opportunities, which host existing JORC Resources.

Paul Cmrlec, managing director said:

"The board is very pleased to see the bonanza gold grades encountered in ore development to date.

"The majority of gold appears to be hosted within quartz veins which are easily visually recognizable, and easy to follow with development.

"This ore system is incredibly rich in grade and is very shallowly tested at the present time. We believe it holds great potential to expand considerably both at depth and along strike."

Pacific Niugini is raising up to $3.3 million through a 1 for 4 rights issue priced at $0.05 to assist in the expansion of the project.

Underground Development

The decline access has now progressed through the unexpected zone of partial oxidation which slowed development rates in the first 40 vertical meters of development (approximately 300 metres of lateral development), and is currently only 25 metres from the next level access and is in fresh rock with significantly improved development conditions.

The first ore drive at the 2220 level accessed the ore zone as expected at the southern end of the main ore shoot.

While drilling and the ore reserve estimates had indicated that the ore would be relatively weak at that position, development has instead encountered narrow, but very high-grade mineralisation superior to the current resource model.

Uncut face gold grades developed to date include:

2220 North Drive
- 3.1 metres at 42.1g/t, including 0.3 metres at 239g/t;
- 3.5 metres at 12.1g/t, including 0.4 metres at 23.8g/t and 0.4 metres at 172 g/t; and
- 0.3 metres at 682g/t.

2220 South Drive

- 3.8 metres at 6.47g/t, including 0.3 metres at 36g/t;
- 3.9 metres at 7.23g/t, including 0.35 metres at 27.1 g/t; and
- 0.23 metres at 76.2g/t.

Drilling indicated that thicker, high-grade mineralisation is expected in the continuation of the north drive over the next 150 metres of development.

In addition to the main ore zone, the decline has intersected previously un-identified quartz zones in two positions.

One vein intersected is approximately 30 metres from the portal entrance, striking sub parallel to the main ore zone, returning grades of 0.5 metres at 40g/t.

The second vein was intersected approximately 40 metres before the 2220 level access drive, approximately perpendicular to the main ore zone and returning grades of 0.33 metres at 5.95 g/t.

Due to the orientation of this vein relative to existing drilling, it has not been encountered in the exploration phase, and may represent an additional ore source for the mine. The company intends to further develop this vein when mine scheduling permits.

Processing Plant

Processing plant refurbishment is nearing completion.

The final major task is the installation of new mill bearings and the re-commissioning of the mill circuit.

The crushing circuit has been fully re-installed and tested and is ready for operation, along with the gravity recovery circuit and gold room.

In addition, the permanent power station has also been installed and commissioned, and is ready for commencement of operations.

Pacific Niugini intends to commence commissioning upon completion of the final refurbishment tasks in the coming weeks and expects first gold production in August 2015.

Analysis

Pacific Niugini's discovery of very high gold grades in narrow quartz veins could result in higher than originally estimated grades for ore development.

With overall face grades being also very high, the overall grades encountered in ore development are likely to considerably higher than those in the resource model.

This could have flow on to potentially higher production at lower cost.

Higher grades at the same mill throughput will result in more gold ounces produced for the same cost, or higher production at a lower cost per ounce delivered.

In addition, as the majority of the gold is recovered in the gravity circuit, there should not be an overall effect on the mill throughput resulting from high grades being fed.

Notably, there is potential to expand development areas both at depth and along strike.

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