GOLDSTAR RESOURCES NL (ASX: GDR)
ASX RELEASE
19 MARCH 2008
Open Briefing®. Goldstar Resources. Fast Tracking Tubal Cain
Record of interview:
corporatefile.com.au
Goldstar
Resources NL last week announced a revised and expanded exploration and
development strategy encompassing both the Eureka
and nearby Tubal Cain deposits at its Walhalla Gold Project in Victoria. Can you
briefly explain the main aspects of the revised and expanded strategy?
Managing Director Andrew King
What’s
happened in the last few months is that we’ve seen a number of
significant positives coming together for us at both Eureka and Tubal Cain. The delivery of the
report by the independent geologist, SRK Consulting, with its statement
regarding the ability to drill out dyke bulge style deposits, coupled with the
recent success we’ve had with the drilling in the upper levels of Tubal
Cain and the positive feedback we’ve received about our preferred
long-term plant location, has provided us with the impetus to look at an expanded
development approach.
In simple
terms, we are now looking at the ability to deliver our first production hub
fed by initially two mines delivering +100,000 ounces of gold production per
annum, potentially three years ahead of our original strategy – rather
than developing a small-scale start-up operation at Eureka followed by Tubal Cain several years
later. The focal point of this expanded strategy is a proposed new location for
the processing facility at a site we’ve called Southern Crown, near Tubal
Cain. We see this as forming a key southern production hub within our broader
lease area, treating ore initially from Eureka
and Tubal Cain, but also potentially processing ore from other dyke bulge
deposits in the area.
corporatefile.com.au
You’ve
stated that the findings of the Eureka Feasibility Study support an expanded
Tubal Cain strategy. Can you explain why Tubal Cain has assumed greater
importance? What is its relative potential compared with Eureka?
Managing Director Andrew King
We’ve
always viewed Tubal Cain as a potential company-maker for Goldstar. Previously,
our focus was to delineate an area that could deliver a bulk sample out of
Tubal Cain because this was seen as the only way of achieving a set of figures
that would justify debt and equity funding of the project. The SRK Report, with
its statement regarding the ability to drill out these dyke bulge style
deposits to enable estimation of Indicated Resources, was a key driver in a
re-think about the quickest way of bringing Tubal Cain into production, and
hence enable a major uplift in our production profile.
I think a
good way of comparing Eureka
with Tubal Cain is to look at the historical production from each deposit. Eureka produced 3,000
ounces at 16 grams (1/2 ounce) per tonne and, by comparison, Tubal Cain
produced around 30,000 ounces at 31 grams (1 ounce) to the tonne. We see these
relative historical production levels reflected in the work we’ve done to
date at each deposit, where Tubal Cain has already delivered a much higher tonnage
per vertical metre than Eureka,
and we are starting to see an increase in the number of visible gold hits in
Tubal Cain.
We’ve
always been very cautious about expecting visible gold hits to be reflected in
high-grade assays, however the recent intercept of 4.7 metres at 9.1 grams per
tonne did not just comprise one large hit with a few outliers. It included 1.05
metres at 29.6 grams per tonne and 0.3 metres at 14.6 grams per tonne, which
clearly demonstrates the potential for broader zones of higher grade
mineralization as opposed to spotty, narrow higher grade zones.
corporatefile.com.au
Goldstar
announced an initial JORC Mineral Resource at Eureka Deposit of 153,000 tonnes at
10g/t containing 48,000 ounces of gold. Can you explain the significance of the
ability to achieve JORC Resources by drilling alone? What are the implications
across your ground holdings?
Managing Director Andrew King
As
I’ve mentioned, the approach until now has been that we needed to
undertake a bulk sample to deliver the level of confidence in these dyke
bulges. As you can see from Eureka,
these bulk samples cover only a relatively small proportion of the overall
resource and are both time and capital intensive. The ability to drill these
deposits out therefore represents a major step forward. We see it as enabling a
significant cost and time reduction in the delineation of resources for dyke
bulge style mineralization. Considering the time involved in conducting the Eureka bulk sampling
exercise last year, you can appreciate the importance of this breakthrough.
Having said
that, the bulk sampling has been a crucial part of our “Proof of
Concept” approach. It has demonstrated that increasing sampling density
delivers a potential uplift in grade and a corresponding increase in confidence
level of the mineralization. Furthermore it has provided the necessary
correlation between bulk sampling results and diamond drilling which has
underpinned SRK’s report on the ability to deliver JORC resources.
There are a
number of other dyke bulges on our lease and I think it’s fair to say
that our exploration team is having a very close look at what opportunities are
out there in front of us. I should be careful to point out that not all the
historical deposits or all the zones of potential mineralization are dyke
bulges, however let’s just say we’ll be looking at ways to use the
information we’ve gleaned to date to further value add the exploration
upside to Goldstar.
corporatefile.com.au
What were
the major findings of the Eureka Feasibility Study? Is Eureka economically viable? How will you
apply the knowledge gained from the Feasibility Study to other deposits or
targets within the Walhalla Gold Project?
Managing Director Andrew King
Firstly,
dealing with the Eureka Feasibility Study, the resource realistically accounts
for less than 12% spatially of the overall Geological Model. In fact, the
Indicated portion only encompasses the Reefs E3/E3A and E5, with very little
drilling density in the remaining reefs around the Western Adit. As a result,
we consider the results to date to be relatively conservative and encouraging.
What has
been demonstrated in the bulk sampling program is that increasing sampling
density, which can be by bulk sampling or drilling, tends to lead to an
increase in grade. In simple terms the more holes you drill, the higher
probability you have of achieving higher grade intercepts – which is what
you’d expect in a coarse but finely disseminated gold environment such as
Walhalla. The good thing about deposits like Eureka and Tubal Cain is that it appears
there is a lesser tendency for the higher grade results to be extremely high,
thus reducing the need to apply a harsh top-cut. Of course, we do get excited
when we get a high-grade outlier.
Eureka has always been seen as a
“Proof of Concept” with the paybacks on the plant and other capital
not necessarily being exclusively funded by Eureka. After all, the plant is expected to
have a 10 year plus life which is far in excess of what Eureka was ever expected to deliver. The
capital cost as detailed for the mine was also based on going to at least 550
metres depth, while the current resource only extends to 350 metres. Based on
the work we have done to date, we believe that there is a significant
probability that further drilling, as defined in the SRK report, will lead to
continued conversion of the Geological Model into Indicated and
Inferred
status – which can then potentially be further converted into mineable
tonnes.
It goes
without saying that the information we have gained from Eureka will be used as the basis for a
Feasibility Study on a combined Eureka/Tubal Cain production scenario. The
processing plant already has front-end capacity of 400,000tpa. This was a
conscious decision, based on our belief that we would find additional tonnages
to feed the plant, for instance at Tubal Cain, and we did not wish to be
capacity constrained up front. The balance of the processing facility has been
designed on a modular basis with additional modules being added or potentially
subtracted depending on tonnage available at each of our production hubs
– bearing in mind, of course, that we are not talking about a
multi-million tonne per annum operation at this stage.
corporatefile.com.au
Can you
outline the revised exploration and development timetables at both Tubal Cain
and Eureka?
Managing Director Andrew King
As
we’ve outlined in the announcement last week, we have an aggressive
exploration program now underway at Tubal Cain. Our total geological team and
four drill rigs will be focused on delivering an Inferred Resource during the
June quarter of 2008. With four drill rigs then committed to a 25 metre by 25
metre infill program on the top 300 metres, we are targeting an Indicated
Resource in that zone by the end of calendar 2008.
In parallel
with this, we will be running a Tubal Cain/Eureka Feasibility Study and
Permitting program with the aim of being in a position to commence operational development
in early 2009.
corporatefile.com.au
Can you
summarise how the revised and expanded exploration and development strategy at
the Walhalla Gold Project will lead to greater value creation for Goldstar
shareholders? What possible project size and scope do you envisage at
Walhalla in the future?
Managing Director Andrew King
Just to
recap on what we’ve covered. The ability to deliver Tubal Cain up to
three years earlier feeding a production hub positioned in its long-term
location from the start, we would consider as a major step forward. As
we’ve indicated, we would like to think that Tubal Cain is a multiple of
the size of Eureka
with significantly thicker reefs. The ability to potentially couple Eureka and
Tubal Cain together opens up the opportunity to deliver plus 100,000 ounce per
annum production for Goldstar and set us on the path towards being a mid-tier
producer.
We are very
focused on delivering this in the shortest possible time, however there will
always be some factors outside of our control that will impact final timelines.
As I’ve said on several occasions previously, our focus has been to
deliver sustainable gold production from the Walhalla Field. We would rather
take a measured approach to achieve the maximum possible return to shareholders
at an acceptable risk profile. Particularly in the current high operating cost
environment in the resource sector, our Board is of the view that we need to
spend shareholders’ funds wisely and ensure that we have thoroughly
prepared the groundwork before committing to production. Our view is that the
best way to add value to the Company in the short term is to drill out Tubal
Cain to deliver JORC compliant resources as the basis for a much larger
integrated development of the two deposits. That should lift us into the ranks
of the mid-tier producers.
corporatefile.com.au
Thank you,
Andrew.
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