JOHANNESBURG (miningweekly.com) – East-African focused Chalice Gold on Monday reported that an independent scoping study into its Koko gold deposit, in Eritrea, has found that the deposit had the potential to underpin a highly profitable gold mining operation.

The gold explorer said in a statement that it would now proceed with a full feasibility study, which was likely to be completed by mid-2010, based on a forecasted annual production of 110 000 oz, at a cash cost of $424/oz, over a six-year life.

The scoping study estimated that the Koka project would have capital costs of $97,8-million.

“The scoping study shows that Koka has the potential to be a lucrative project, and that it is based on a much lower gold price than is currently the case,” said Chalice executive chairperson, Tim Goyder.

“The cash costs will be low by world standards and the mining will be relatively straightforward, making Koka an extremely attractive project.”

Goyder noted that there was also significant potential to increase the size of the project by drilling the numerous exploration targets the company had at Zara.

The project is 80% owned by Chalice and 20% owned by Dragon Mining, while the Eritrean government was entitled to a 10% free carried interest. In addition, the Eritrean government had the right to purchase up to a further 30% in the project on financial terms to be agreed, and which was payable to the joint venture in consideration of diluting their respective interests.

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