North Queensland Metals Limited (ASX:NQM)
Brisbane, April 28, 2009 AEST (ABN Newswire) - A continuing strong gold market helped North Queensland Metals Limited (ASX:NQM) to a A$2.2 million pre-tax profit for the quarter despite production constraints. An option has been secured over the Dotswood project to give the Company the potential to open a second gold mine, targeted for 2010.
Pajingo Gold Mine (NQM 60% and operator) Operations
Gold production (100%) for the quarter was 11,676 ounces at a cash cost of A$725 per ounce, compared with the previous December 2008 record quarter of 16,287 ounces at a cash cost of A$634 per ounce.
NQM's average gold price received for the quarter was higher at A$1211 per ounce (A$1164 previous quarter) for a margin of A$486 per ounce (A$530 previous quarter).
As previously reported, Pajingo was affected by extreme wet weather and temporary operational difficulties in the mine.
Reduced costs: One pleasing aspect was the overall cost reduction from A$10.3M in the December 2008 quarter to A$8.5M in the March 2009 quarter, a reduction of 18% and evidence of the benefits of the move to owner mining. This is expected to translate to lower unit costs at normal production levels.
Zero Lost Time Injuries: The operation has now completed a period of 15 months without a Lost Time Injury. This is particularly commendable as the Company develops its own culture of safe working.
------------------------------------------------ 9 Months Quarter Quarter ending ending ending 31 Mar 31 Dec 31 Mar 2009 2008* 2009*------------------------------------------------Development(m) 2595 839 848Mine Production(t) 211,402 66,863 66,266Mine Grade(g/t) 6.3 7.2 6.2Mill Production(dry t) 209,687 76,571 63,672Mill Grade (t) 6.5 7.0 6.0Recovery(%) 95.1 94.9 95.7Gold Produced oz) 41,616 16,287 11,658Average Gold SalePrice AUD/oz 1,124 1,164 1,211Cash Cost AUD/oz 668 634 725Silver Produced (oz) 54,706 19,242 16,282Average Silver SalePrice AUD/oz A$16.56 A$15.60 A$18.82------------------------------------------------Table 1 Pajingo performance data*NQM's equity is 60% of listed production
Aside from the wet weather issues, the processing plant performed well, and during limited trials demonstrated a capacity for increased tonnages.
Throughput was raised to 50 tonnes per hour to test the capacity of the plant to accept additional feed from new sources, utilising the full capacity of the single ball mill. The tests confirmed the capability to maintain the fine grind, however, minor modifications would be needed to ensure stability at the peak rate. Additional feed sources are currently being negotiated.
Exploration
An exploration drilling program consisting of approximately 10,000 metres combined RC and diamond core commenced at the end of March 2009, and will extend until approximately September 2009.
The program will consist initially of 21 holes comprising 5970 metres with the additional 4030 metres being planned as follow-up or infill drilling.
Seven holes will target the Janet G prospect where surface sampling and previous drilling have defined a zone of gold anomalism approximately 200 metres in length. A coincident resistivity and chargeability high has been interpreted to define the Janet G vein at depth and this interpretation will be tested by two deeper holes.
Three holes are designed to test for strike and dip extensions to the Anne mineralisation. Production in previous years from Anne totalled 314,000 tonnes for 91,000 ounces gold at an average grade of 9 g/t Au.
Nine holes across three targets are aimed at testing geophysical anomalies not previously identified, all of which exhibit high resistivity features.
An extension to the mineralisation at Janet B will be tested with one drill hole. Presently no drilling extends beyond about 20 metres east of the current line of development. The designed hole is favourably for gold in soil analysis. Elizabeth Bluff has been previously mined by prospectors for gold, and Geo Peko drilled two successful holes in the 1980's.
A large quartz vein prospect on the Palmer River named Bush Pig has been extensively surface sampled. Results are pending and will determine whether the prospect proceeds to drilling or not.
New Projects
During the quarter NQM concluded negotiations for an option agreement to purchase the Dotswood Gold Project located 60km south-west of Townsville.
The project has a history of gold production, previous owners having extracted oxide ore and some higher grade underground ore in 1986-1987 and 2000-2004.
This is an advanced project and NQM plans to undertake confirmatory drilling, including angle drilling, in the six-month option period with the expectation of completing a scoping study to decide whether to proceed with the purchase of the project.
Subject to a subsequent Feasibility Study, commencement of mining is targeted for late 2010. Dotswood provides NQM with the opportunity to develop a second gold mine to add to production from the currently operating Pajingo mine (NQM 60%).
NQM will pay A$220,000 to the vendor during the six-month option period, and, if satisfied with the outcome of exploration, will purchase 100% of the project for an additional:
- A$1,900,000 in cash
- 1 million NQM shares and
- 1% royalty for life of mine
Corporate
During the quarter, the Company received income of A$8.8M, cost of sales was A$5.7M and pre-tax profit was A$2.2M (unaudited).
At 31 March, 2009, NQM had A$2.9M cash at bank and total assets of A$51M. Operating cashflow was A$2.8M, less expenditure on investments of A$1.1M for a net cashflow of A$1.7M.
The Company has no debt. The Board maintains a policy of self funding from the Pajingo mine cashflow, believing that this is a significant strength although accepting that the Mine production for the quarter was affected by a shortage of available stopes leading to reduced ore production, and dilution in the available stopes which lowered the head grade mined. The volume and grade of development ore from early access development in the Veracity orebody were less than expected due to the ore being narrower and lower grade than modelled.
The mine difficulties during the quarter highlighted shortcomings in the mine's scheduling and planning and associated shortage of technical staff which led to much of the quarter's production coming from lower confidence ore sources. The staff shortage has been overcome and mine planning is being addressed to ensure sustainable improvements in tonnes and grade of ore produced.
Two newer jumbo development drills were delivered in April to facilitate access to new higher grade areas. This will allow delineation drilling to be carried out well in advance of production.
At the same time, underground diamond drilling continues to identify additional ore around the fringes of the existing orebodies. Though of lower grade than new sources such as Zed and Sonia, these are and will continue to be an important contributory source of ore over the next 24 months.
Drilling from underground also confirmed the existence of mineralisation in the hangingwall of the Nancy orebody. Further drilling will be conducted to delineate a mineable orebody.
The exceptional wet conditions through January and February restricted the movement of ore to the process plant. This was further exacerbated by screening problems in the crushing circuit, which in turn restricted feed to the ball mill designed to intersect mineralisation approximately 50 metres to the east of the development.
One hole is testing a zone of mapped quartz veining and brecciation trending east-west, which also featured as a coincident resistivity/chargeability high.
1200 metres of drilling has been allocated for the Moonlight Prospect, which lies approximately 1km along strike to the south-east of currently defined Resources. A re-evaluation of previous drilling information and geology is complete. These two holes comprise the first step in an advanced exploration effort on this prospect during the next few quarters.
Herberton Project (NQM 100%) Progress was made towards obtaining mining leases and power connection on the Baal Gammon copper-tin-silver-indium project. All documentation has been completed for the granting of the mining leases. In light of the steadily rising copper price, options for Baal Gammon are being evaluated.
Drilling at the Brass Bottle prospect, west of Baal Gammon has been completed. Three diamond drill holes comprised a total of 602 metres. The drilling program successfully intersected copper mineralisation below the Brass Bottle Mine and the Consolidated Mine. However, the hole designed to test the copper soil anomaly adjacent to the Brass Bottle mine was unsuccessful.
Herberton exploration is focussed on the priority tin deposits within the tenements. Soil grids of geophysical anomalies are being completed to identify new potential high grade tin pipes.
Discussions have been held with parties considering a joint venture which would allow a partner to take equity in return for funding the tin exploration.
Herberton is also the base for NQM's far north gold exploration, covering the area north to the Palmer River and west to Georgetown.
Three new gold prospects exist within NQM's Herberton tenements: Zig Zag, Black Sparkle and Elizabeth Bluffs. Zig Zag, in EPM 14742, is a prominent magnetic anomaly which has a gold soil anomaly halo. Two drill holes are planned to test for an intrusive related gold system at depth. The two hole program will receive 50% Queensland Government funding as part of the Collaborative Drilling Initiative (CDI). Black Sparkle, south east of Irvinebank, is a gold antimony prospect based on a prominent quartz feature which has tested development or the acquisition of new assets may well require expenditure beyond its reserves and is keeping options open on future funding.
The Company continues to maintain a flexible approach to gold price hedging. Since the end of the March quarter the Company has closed out both April and May forward sales in anticipation of a rising gold price.
--------------------------------------------Maturity Gold Contract Value Amount oz Price AUD AUD--------------------------------------------30-Apr-09 1,080 A$1,114.24 A$1,203,37929-May-09 1,080 A$1,114.80 A$1,203,98430-Jun-09 1,080 A$1,115.16 A$1,204,372Totals 3,240 A$1,114.73 A$3,611,735--------------------------------------------Table 2 Gold Forward Sales
The Company's expenditure on exploration year to date was A$912k and for the quarter A$268k. This includes exploration in Herberton and NQM's share of Pajingo exploration.
In February 2009 NQM announced a net profit of A$6.4 million for the six months to 31 December 2008, and declared a maiden dividend of 1 cent per share unfranked.
Shareholders approved a Dividend Reinvestment Plan (DRP) during the quarter. Ordinary shares allocated under the DRP were priced at 24.719 cents per share for the dividend paid on 15th April 2009.
Contact
John D McKinstry
Chief Executive Officer
North Queensland Metals Limited
Tel: +61-1300-308-832
Fax: +61-7-3666-0510
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