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 using 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
Mine operations have started at the Cannon gold mine, in Western Australia.

Project partner Metals X has been contracted to conduct all mining, haulage and processing activities associated with the development of the Cannon mine and operations have now begun at the Stage 1 openpit mine, which will result in about 152 000 t of ore mined, at an average diluted grade of 3.1 g/t gold, containing about15 000 oz of gold, with 13 500 oz of gold recovered.

Mining will take place over the next four to five months. Ore from the Cannon mine will be processed at Metal X’s Jubilee mill facility, about 35 km away. The ore will be batch processed.

Meanwhile, Southern Gold has said discussions with Metals X regarding the commercial arrangements for a larger pit development at Cannon are continuing.

The two companies previously flagged the possibility of an expanded Stage 1 pit, which will result in the Cannon and Georges Reward deposits being exploited in a single pit using common infrastructure.

It is estimated that this ‘big pit’ scenario will extend the mine life of Stage 1 from the current nine-month operation to several years and could make Stage 2 underground options more viable.

The possibility of the underground operation is subject to further extension of the deposit, which will require drilling below the current limits of the resource.

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