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01
April 08 - Avocet upgrades resource at Penjom mine, Malaysia
The Penjom Gold Mine is located
in the State of Pahang in the centre of Peninsular
Malaysia and is Malaysia's largest gold producer.
Penjom commenced production in December 1996.
The mine was developed by Avocet Gold Limited,
a wholly owned subsidiary of Avocet Mining PLC,
with the support of the Pahang State Development
Corporation.
The Penjom deposit was developed
from grass roots exploration by the Company in
the early 1990s. The mine commenced production
using conventional gravity and carbon-in-leach
(CIL) process technology for the recovery of gold.
However, these systems became ineffective as the
ore mined at Penjom became increasingly carbonaceous
and process recovery rates fell below 50 per cent
two years after operations commenced. Penjom successfully
solved this problem by developing unique processing
systems which include complex gravity circuits
and resin-in-leach (RIL) technology. Although
this intellectual property has not been patented,
the Company believes it has potential positive
uses in other highly carbonaceous gold projects
globally.
In April
2007 Penjom produced its one millionth ounce of
gold, an important milestone for the mine, considering
the project's original feasibility study indicated
life of mine gold production of 223,000 ounces.
Over the last five years, Penjom has successfully
increased its resources and reserves on an annual
basis. This trend is expected to continue.
The first
half of the year was a challenging one due to
high stripping and lower mined tonnes and grades
than in the previous year. At the start of the
year, the Kalampong East pit was near the end
of its existing design life. The bottom of the
pit was small and becoming congested with the
high number of small contractor trucks operating
within its narrow width. Prior to this, in November
2005, the Company announced a significant increase
in Penjom's life of mine plan to over half a million
ounces, which resulted in the design of a much
larger pit to allow the additional ounces to be
mined. Significant waste stripping was required
especially in the first half of the year and this,
together with congestion at the bottom of the
pit, meant that ore mined in the first six months
was less than half of the amount mined in the
previous year. Over the same period, the grade
of ore mined was also 30 per cent lower. Recoveries
in the first half of the year were slightly ahead
of the previous year. The second half saw a significant
improvement in mined tonnes and grade, although
lower mill grades continued to reflect the reduced
grades mined earlier in the year.
During
the second half of the year, Penjom successfully
stepped up both mine and mill production in order
to offset the impact of lower feed grades to the
mill, and ore mined and milled exceeded the corresponding
period in the previous year. Development was advanced
to access ore below the east and west wall cutbacks.
The grade of ore mined exceeded the previous year;
however, high grade ore from the pit was highly
carbonaceous and required blending with low grade
material to control carbon levels through the
mill. A key factor in the second half improvement
was Penjom's decision to move to an owner operated
haulage fleet. The contractor fleet, comprising
180 trucks of 13 tonne payload, was gradually
reduced to 30 trucks on site at the year end,
and replaced with 28 new Company owned Renault
Kerax units, each with a nominal payload of 30
tonnes. The Kerax trucks are faster, more fuel
efficient and lower in terms of unit costs per
tonne moved in addition to which the reduced traffic
congestion allows the mine to be more productive.
Plant recovery in the second half was maintained
at over 90 per cent despite lower head grades
and a higher proportion of carbonaceous ore.
For the year as a whole, gold
production of 95,966 ounces was 18 per cent below
last year. Total tonnes mined at 18.1 million
were 7 per cent below last year, and ore mined
was 30 per cent lower, with mining taking place
deeper in the pit. Mill throughput was in line
with the previous year and recovery at 92 per
cent was higher. However, mill feed grade averaged
5.67 g/t which was 20 per cent lower and accounted
for the drop in production when compared with
the previous year. Total operating costs were
affected by increases in consumable prices, especially
diesel, reagents and grinding media. Higher gold
prices together with a full year since the Malaysian
government increased royalty rates in January
2006 also meant that royalty payments were higher.
Combined with lower gold production, these factors
resulted in cash costs for the year increasing
from US$242/oz last year to US$351/oz. Efforts
to reduce unit costs resulted in an improving
cost trend through the year and the average cost
in the second half year was US$328/oz compared
to US$370/oz in the first half. This reflects
operating efficiencies in both mine and mill,
notably the phasing out of the high cost contractor
haulage fleet.
During 2007 Penjom will undertake
a major expansion of its pit and associated infrastructure
as part of its long term strategy to allow the
economic exploitation of additional, but lower
grade, reserves. An updated resource for Penjom
was announced in October 2006, highlighting a
15 per cent increase in resources net of depletion.
A review of options for an optimal pit design
led to the further announcement in December of
an increase of 132,900 ounces or 24 per cent to
the life of mine forecast. The revised Proved
and Probable Reserve at Penjom is 3.99 million
tonnes grading 3.78 g/t Au (484,100 ounces of
gold). The latest open pit design includes 0.84
million tonnes containing 135,600 ounces of gold
(5.05 g/t Au average grade) of Inferred Resources,
making a total life of mine forecast of 4.82 million
tonnes grading 4.00 g/t Au containing 619,700
ounces of gold. The open pit reserve has expanded
in the Manik-Janik area south of the main Kalampong
pit, which will result in the merging of the Kalampong
and Manik pits and therefore necessitate the diversion
of the Jaleh Creek within the Penjom mining leases.
Penjom is in the process of obtaining the necessary
permits. There is room for the reserve to expand
further, especially at depth and to the north
of Kalampong. Nevertheless, the underlying resource
requires further definition drilling. This work
will commence shortly and form the basis of next
year's resource and reserve expansion efforts.
The new life of mine plan is lower grade than
that reported last year, mainly reflecting additional
low grades to the south. However, some stockpiling
will allow the mine to prioritise the higher grade
ore from the pit to the mill. Future mining will
continue to select higher grades for processing,
whilst retaining the low grade mineralisation
for processing at a later date. Exploration, including
deep drilling, continues at Penjom to the north,
south and at depth of the main pit, where the
orebody remains open, with a view to establishing
extensions to the orebody and bringing further
resources into the open pit mine plan or, alternatively,
into a future underground mine development.
The resource at Penjom is now
approximately one million ounces. As well as extending
the mine life by over 100,000 ounces, the changes
in pit design will improve annual production,
by avoiding congestion and by making more mining
areas available to allow consistent mill feed
grade and tonnes. Production this year should
be maintained at an annual rate of approximately
100,000 ounces per annum, despite anticipated
lower grades, and cash costs will reduce owing
to operating efficiencies. Work on the expansion
is well under way and together with orders for
capital items relating to the mining fleet and
plant expansion, Penjom will spend approximately
US$20 million in capital investment this year.
The major items in the mine are 17 additional
Kerax trucks, nine CAT 65 tonne excavators, two
CAT 972 loaders, a CAT D10 dozer, two CAT D7 dozers
and a Tamrock Pantera 1500 blast hole drill rig.
An additional, larger mill required for the mill
expansion has been purchased and is on site. Engineering
for the tailings dam expansion is also complete.
Foundation preparation commenced in July and buttress
construction is expected to commence in August.
The expansion of the pit means that the waste-to-ore
stripping ratio over the next few years will exceed
the life of mine ratio of 22.5 and the costs associated
with this excess stripping will be deferred and
released when the stripping ratio falls below
22.5. Production for the first half of this current
year was 43,964 ounces at an estimated cash cost
of US$320/oz compared to the corresponding period
in the previous year of 50,759 ounces at US$370/oz.
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