Name and Location
Cannon gold project, Australia.

Client
Southern Gold and joint venture (JV) partner Metal X.

Project Description
The prefeasibility study (PFS) completed on the project has demonstrated that development of the Cannon gold resource as a toll treatment operation, located south-east of Kalgoorlie, in Western Australia, will deliver positive economic returns with a low capital-cost structure.

The PFS outlines an openpit and underground development strategy.

The study demonstrates that the most effective way of extracting about 70% of the currently defined resource is through the development of an openpit and underground operation.

The interface between oxidised- and transition-zone weathered rocks and fresh rock occurs about 40 m below surface. The openpit design extends to a sufficient depth into the fresh rock to ensure that the underground portal is established in competent material.

Underground development is proposed to start through a portal and decline at a 1 in 7 gradient from the footwall of the Cannon openpit, with a series of flat crosscuts developed to access the ore zones.

Once each ore zone is intersected, strike drives will be established for standard Avoca-style stoping. The proposed stoping method is fully mechanised and offers increased productivity and reduced mining costs, compared with hand-held methods.

The base case underground mine schedule will start 12 months after mining in the openpit has started and will continue for 19 months. Including start-up site works and closure rehabilitation, the total mine life, based on the current study, is expected to be three years.

The PFS openpit and underground mine is designed to extract 484 000 t at a grade of 4.4g/t for 68 200 oz gold.

The Stage 1 openpit operation is expected to mine an estimated 152 000 t of ore at a fully diluted run-of-mine grade of 3.1 g/t gold, containing about 15 000 oz of gold, with 13 500 oz of gold recovered, at a C1 operating cost of A$1 053/oz.

Net Present Value/Internal Rate of Return
Not stated.

Value
Initial site works and infrastructure costs are estimated at A$1.7-million and the underground decline development cost is estimated at A$11.6-million. Decline expenses will be incurred during decline development, which will start in year two of the operation.

Duration
First gold pour is expected in December this year.

Latest Developments
Southern Gold and JV partner Metals X have agreed on a budget and mine schedule for the Stage 1 openpit operation at the Cannon gold mine.

Under a deal agreed upon in November last year, Metals X will provide A$895 000 to start production from Cannon, and will also act as project operator.

Ore from the Cannon mine will be processed at Metals X’s Jubilee mill, which forms part of its South Kalgoorlie operations.

The mine development has been fully permitted, and contractors could be mobilised after a mine contract is awarded for the eight-month mine schedule.

With the budget and timeframe of the Stage 1 operation approved by the JV parties, Metals X will proceed with the formal selection of a mining contractor. Mining is expected to start within the next four to six weeks, and first gold pour is expected by December.

The JV partners will distribute profits from the mine on a 50:50 basis.

With the Stage 1 openpit operation proceeding, Southern Gold has said that it will assess the next stage of underground operations.

The underground prefeasibility study has concluded that the operation is viable at current gold prices.

The study projects that the underground mine could start about 12 months after the start of openpit mining.

Southern Gold has said it will conduct additional studies, with the assistance of Metals X, on the potential development of the underground mine.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Southern Gold, tel +61 8 8368 8888, fax +61 8 8431 5619