Kingsgate – Molybdenum, Bismuth, Silica New South Wales, Australia

Located 20km east of Glen Innes, the Kingsgate Mine was the second largest producer of molybdenum in Australia in its time.  Much of the ore was mined from high grade quartz pipes between the 1880's and 1920's.  No modern exploration had been undertaken prior to Auzex acquiring the project. Detailed exploration commenced in late 2004.

• Feasibility study was completed Dec 2008.
• Site is well serviced with road, power and water infrastructure.
• Export through Port of Brisbane – approx 4 hours by sealed road.
• The project is free of native title issues and enjoys a very supportive local community.
• Feasibility study¹ based on a minimum 5 year life of mine and other assumptions indicates:
  • Start up capital includes the process plant at $69.1million;
  • Construction period of 12 to 14 months; and
  • Mo price end of Aug approx US$18/lb

Kingsgate Project details here

¹ There has been insufficient exploration undertaken to define a Mineral Resource and it is uncertain if further exploration will result in a Mineral Resource

*Note: Financial modelling has been updated from previous models with AUD:USD exchange rate of 0.85

Key Points

• Trial Mining was successfully completed in December 2006 with results forming part of a Scoping Study released in mid 2007.
• Drilling of the quartz pipe which was the subject of trial mining revealed an average grade of 0.34% Mo and 0.64% Bi.  The amount and grade of bismuth was unexpected and adds significant value to the project.
• The Scoping Study for development of the project (based on an annual processing rate of 250,000tpa at an average grade of 0.23% Mo and 0.23% Bi) was completed in June 2007 and assumed production of separate Mo and Bi concentrates for sale only.
• Best results from the resource drilling program include 5m at 1.35% Mo and 0.69% Bi from 42m and 7m at 0.70% Mo and 0.52% Bi from 43m.  Drilling was successful in identifying individual mineralised zones (quartz pipes) with the results revealing a much larger scale of mineralisation than had been modelled.
• A feasibility study for development of the project was completed in December 2008, based on downstream processing of high purity silica, ammonium molybdate (or molybdenum trioxide), and bismuth metal or fusible Bi-Pb alloy.
• Kingsgate can be classified as Permian – Carboniferous granite hosted molybdenum-bismuth quartz pipe deposit.  The Kingsgate granite has a fine grained (“aplite”) contact phase which has been eroded from the eastern margin of the granite pluton exposing the pipes along a 4km x 1km zone.  The contact phase dips shallowly to the east on the eastern side of the intrusive and is flat on the western side of the project area.
• Exploration work completed by Auzex between October 2004 and October 2008 includes:
• Detailed geological mapping of the Project area.
• Surface rock chip sampling (n= 258).
• Grid based soil sampling (n= 4095).
• Ground radiometric surveys.
• Gradient array resistivity geophysical surveys.
• 3D modelling of the Mo-Bi pipes and aplite carapace.
• 12 diamond drill holes (totalling 541.1m) and 318 reverse circulation (RC) drill holes (totalling 14,490m).
• Petrological studies.
• Trial mining and bulk sampling program.
• Survey of mullock dumps, tailings and alluvial deposits.
• Aerial photography and development of a Digital Elevation Model (DEM).
• Airborne radiometric – magnetic survey.

Geology

Exploration

Trial Mining

Trial mining of the Wolfram pipe (one of 109 known pipes) in the central Kingsgate area where high grade mineralisation was intersected in drilling and highlighted by chargeability and resistivity highs was completed in December 2006.  The aim of the exercise was to provide a better understanding of the distribution of mineralisation in 3D and provide a bulk sample of mineralisation (approximately 800kg) for metallurgical testwork and process design.  Trial mining provided Auzex with the added advantage of exposing a large area for geological mapping as well as valuable information on mining costs.

Scoping Study

A scoping study for development of the project based on production of separate molybdenum and bismuth concentrates was completed in June 2007.  Auzex co-ordinated the services of twelve separate consulting groups, as well as in-house involvement to provide key inputs for the study.  Much of the work was inter-dependant with process design being the critical path.  The trial mining program proved invaluable for understanding mining design and cost inputs.

Feasibility Study

A feasibility study to determine the viability of the Kingsgate Project commenced in September 2007 and was completed in late 2008.  The scope of the Project was increased to include the production of high purity silica as well as value-added molybdenum and bismuth products.

The Kingsgate Molybdenum-Silica-Bismuth (Mo-SiO₂-Bi) Project feasibility study demonstrated this project is economic and financially very robust.  Despite metal prices falling dramatically over the second half of 2008, the study indicated the Project remains highly attractive for development in the current market, with a relatively low initial capital cost, high operating margin, and short payback period.

Production

• Mining will be a combination of open-cut and underground operations, although it is assumed that only open-cut mining from a number of separate pits will be undertaken during the first five years of operations.  Production is planned at a rate of 250,000 tonnes per year, with an assumed average overall grade of 0.18% Mo and 0.16% Bi.
• The processing of Kingsgate’s unique mineralisation aims to optimise the project providing value-added products to end-users in diverse markets with the production of:
  • Ammonium molybdate at a rate of 800 tonnes per year for chemical and fertiliser markets within Australia and offshore.
  • 99.9% High purity silica at a rate of 100,000 tonnes per year for the thin film transistor and liquid crystal display sector of the electronics industry.
  • Bismuth at an annual rate of 260 tonnes per year as a high purity metal for the pharmaceutical and cosmetic industry.
  • Based upon this study, the Company is actively seeking investment from interested parties to participate in the Kingsgate Project, and may involve mining companies, product end-users or private equity. The unique suite of metals produced at Kingsgate is considered a positive for raising development capital.
  • The preferred option for the Company is the injection of development capital for project equity, and a contribution to development and operational management.  Subject to a suitable outcome regarding financing of the project, the approvals path (culminating in the grant of a Mining Lease and the right to commence operations), could commence immediately and is estimated to take six to twelve months.

Future

The cost of establishing a JORC compliant resource at Kingsgate will most likely be prohibitively expensive, due to the nature of the mineralisation. However, the Company is confident that its assumptions and estimates regarding the extent and potential of the mineralisation will prove to be conservative. 

Competent Person Statement

The information in this report that relates to Exploration Results is based on information compiled by John Lawton who is a Member of The Australasian Institute of Mining and Metallurgy. He is a full-time employee of the Company and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. John Lawton consents to the inclusion in the report of the matters based on his information in the form and context in which it appears