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Kentor Gold Delivers Potential For Increased Gold Production, Lower Cash Costs At Murchison

Kentor Gold (ASX: KGL) could potentially generate additional cash flow and lower operating costs from large tonnages of low grade material identified at its Murchison Gold Project which could be used as feed for the Burnakura carbon in leach (NASDAQ:CIL) gold plant.

Kentor identified the low grade material adjacent to high grade resources that are being targeted as potential ore for the plant via heap leaching.

The addition of a heap leaching circuit to the Murchison gold project will increase the annual gold production, which in turn will reduce the cash costs for the site.

Construction of the heap leach operation is targeted for later in 2012 with first production of gold from the heap leach currently expected in mid-2013.

Preliminary pit designs have now been created to assess the mineable potential of the large Alliance (New Alliance) and Authaal resources, which were not included in the Stage 1 mining schedule focused on feeding Kentor's existing CIL plant, currently being commissioned.

Historical drilling at Alliance included 586 reverse circulation and diamond holes, and at Authaal it included 405 reverse circulation and diamond holes which former the basis for the current resource estimate.

Kentor has this year drilled a further 52 reverse circulation and six diamond holes at Alliance and is planning further validation drilling at Authaal to upgrade the resource.

Exploration potential also exists to the north of Authaal and south of Alliance.

Mining at Lewis and Reward

Mining at both the Lewis and Reward pits is well advanced with the Reward pit anticipated to be completed this week.

In the process of mining high grade ore from these two pits, substantial stockpiles of low grade ore are being established. This low grade material has been tested in the metallurgical test work program.

Heap Leach column and coarse bottle roll test work has been completed at Ammtec's Perth laboratory on samples from the NOA, Lewis, Reward, Authaal and Alliance pits.

The results showed that most ore would benefit from being crushed to minus 12.7 millimetres with the exception of Alliance that is achieving good recoveries at a much coarser minus 50 millimetres.

More tests are planned to analyse the variability within the resource but these initial results offer the potential for direct tipping of the ore.

Test work is also suggesting that Lewis and Reward ore could benefit from further crushing and this will be optimised as part of the current test work program.

Recoveries predicted for the various pits for both oxide and transitional ore types ranged from 44% through to 91% gold recovery. The primary ore tested gives poor recoveries as expected.

Importantly, samples from deposits where the bulk of the low grade resources are contained are achieving recoveries of 60% or better.

Heap leach operation

The designed heap leach pad is expected to be able to accommodate around 2 million tonnes of ore.

The planned production rate when crushing and agglomerating ore is being targeted at 150 tonnes per hour and the annual material anticipated to be stacked is 450,000 to 500,000 tonnes per annum.

The crushing circuit is expected to have sufficient additional capacity to meet the anticipated future requirements for the phase 3 expansion of the Burnakura CIL plant, doubling its capacity to 500,000 tonnes per annum.

The capital cost to complete the heap leach project is estimated to be $7.5 million, with processing costs estimated at about $11.27 per tonne of ore treated.

All of the test work to date is indicating that the oxide gold resources and some of the transitional gold resources are performing well, achieving good percolation and recoveries.

Importantly, Kentor is able to leverage off established administrative and maintenance support, power station, gold room and camp to help keep operating costs low.

With the existing heap leach plant requiring only refurbishment and installation Kentor will be able to keep the capital cost contained.

Next steps

Environmental surveys are underway and Kentor is expecting to begin the permitting process next month.

Further drilling for metallurgical-geotechnical test work and to further define additional heap leach resources will continue in parallel with the permitting process.

Resource updates for a number of the pits at the Murchison Gold project are currently underway following completion of a 20,000 metres drilling program.

Pit optimisation and design work will then be completed to come up with a revised mining schedule for the operation, which is expected to be completed in October.

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