High grade Reefton gold 'great start'

03:14, Apr 23 2012

South Island mining company OceanaGold says it has made a "great start" in initial drilling of the Blackwater high grade gold project in the Reefton goldfield.

If all goes well, a mine feasibility study could start next year for an underground mine, with earlier indications that the mine could restart in "a few years".

Initial drilling hit the high grade quartz reef about 650 metres "down plunge" or 391 vertical metres below previously mined workings at the historic Blackwater mine. That mean the reef appeared to show "good depth continuity with remarkable consistency in both grade and width".

The first drill hole hit 1 metre of the reef with 23.3 grams of gold per tonne of ore. That was in line with historic mining records that reported widths of up to 2.5 metres, with grades ranging from 1.7g/t of gold to more than 100g/t.

Past scoping studies based on historic mining grades and widths indicated that a narrow vein, high grade underground mine could produce about 50,000 ounces of gold a year at less than US$600 an ounce production cost. That compares with an international price of US$1641.40 an ounce yesterday, implying gross revenues of about US$82m.

OGC chief executive Mick Wilkes said that hitting the high grade reef 652 metres down from the previously mined workings was "a significant achievement and a great start to the Blackwater programme".

"We plan to drill additional holes to test the continuity at depth and are hopeful this will lead to the decision to undertake a feasibility study in 2013," he said.

An earlier drill hole, sunk in 1996, hit the reef at about 270 below the level of the old workings and reported a similar interval of 0.5 metre width at 24g/t.

Late last year OGC put in conservative targets for 2012 of 230,000-250,000 ounces of gold at a cash cost of US$900 (NZ$1196) to US$980 an ounce.

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