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Northwest Resources' John Merity Maps Out Gold Antimony Production From Blue Spec And Golden Spec

Northwest Resources (ASX: NWR) is on track to successfully unlock the value of Blue Spec and Golden Spec deposits, developing one of the highest grade underground gold mines in Australia.

John Merity, managing director of Northwest, told attendees at the One2One Forum in Sydney last night that the company's success stems from its approach, combining the two deposits into one operation.

The presentation on the night can be ACCESSED HERE.

Northwest has identified a new processing strategy which avoids past metallurgy issues and can produce a high value gold-antimony concentrate end product.

Antimony can contribute an estimated additional 10-15% of gold revenue as a credit driving low operating costs.

Fielding questions at One2One, Merity also discussed funding options for the project and upcoming milestones that investors can expect in 2012.

Production from Blue Spec-Golden Spec is targeted to begin by mid-2013.

Question from John Phillips, chief operating officer of Proactive Investors

With the high gold grades at Blue Spec and Golden Spec, how do Northwest succeed where previous operators have failed?

John Merity

The key difference from the approach that's been taken in the past and the approach we're taking really comes down to scale and the product. Operating Blue Spec and Golden Spec together gives us the scale, throughput of around 250,000 tonnes per year, but most importantly we don't need now to separate the gold and antimony and therefore run into the low recovery problems that previous operators did. By leaving it all in a concentrate and getting a high pay for the gold in concentrate with the cost benefits of cheaper operating and capital costs that will really deliver the margins for this project and ensure the success of it.

Question from John Phillips, chief operating officer of Proactive Investors

You did draw a comparison to Paulsens (owned by Northern Star Resources; ASX: NST) as well, I just wanted to see if you could expand on that a little more, just geology wise.

John Merity

We're comparing here high grade, narrow vein orebodies. Paulsens compared to Daisy Milano, Dore's Wilbur deposit and our deposit is not as steeply dipping, they'll get more tonnes per vertical metre, but again the quality and the margins that can be delivered from a high grade narrow vein orebody that's managed properly are quite significant, and there's no reason to believe why we couldn't achieve the same C1 margins and overall operating cost margins that someone like Paulsens deliver, someone like Northern Star delivers.

Question from the audience

The high grade that you've got there, does that have any free gold component, is there any opportunity for a gravity concentrate at the beginning?

John Merity

Absolutely, our metallurgical test work is working through that at the moment, but there are really two reasons why we would look at a gravity circuit at the front end. First of all, it's to ensure that the flotation circuit operates as efficiently as possible, we don't want large free gold falling to the bottom of the float tanks and then reducing our overall recoveries, but importantly I think we can probably generate 30% to 40% free gold into a gravity circuit, it should be a fairly clean gravity concentrate which should allow us to directly smelt that. Again, it's a cash flow management issue,. Down at the Costerfield Mine, which is an antimony gold mine, they in fact extract gravity gold at the front end, but then pop it back into the antimony concentrate for sale because the payment term for gold is so good. So we will certainly investigate that.

Question from the audience

What sort of costs do you expect?

John Merity

In terms of capital costs of the project we'll get a better handle on those once we finish our metallurgical testwork, that'll give us the process flow design we need and we can design a plant around that, but look a flotation plant is a simple plant, the equipment for it is off the shelf equipment, but we'll get a better feel for above ground capital costs as soon as that metallurgical testwork is done.

Question from the audience

What about funding?

John Merity

We're not going to go down a bank finance route in terms of full project financing, it will be done by way of offtake finance from the smelters, it will be done by way of equity and we'll also look at opportunities to bring forward the revenue from our share of gold production out of the Camel Creek joint venture too. So a mix of the three.

Question from John Phillips, chief operating officer of Proactive Investors

What milestones in 2012 should investors keep an eye out for?

John Merity

The heavy lifting in terms of deep diamond drilling at Blue Spec and Golden Spec is done, so the milestones for us are really getting out our metallurgical test work results, that'll do three things for us, it will confirm for us the level of gold and antimony that will be poured into concentrate, and as I mentioned in the slides we expect 90% plus reporting to concentrate there, it will identify any impurity levels or penalty elements that we need to discuss with the smelters, but based on work done in the past and a bit of work we've already done, we don't expect to have any penalty elements. The metallurgical test work really is the key point here, to demonstrate that we can produce a flotation concentrate and that we can sell it. The mining study results which will confirm the physicals that I've alluded to in the slides, that will come out at about the same time, really after that we're just running very quickly to finish off engineering design, finish off environmental permitting and push for a decision to mine by the end of the year.

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