LONDON (Alliance News) - Highland Gold Mining Ltd Thursday said it potentially has over 2.5 million ounces of gold to pursue at its Kekura project in the Chukotka region of Russia after updating the mineral resource and ore reserve estimate for the asset.
Importantly, the updated estimates published Thursday are JORC compliant, meaning it will be recognised by institutions around the world, and replaces the former estimates covering Kekura which were only compliant with Russian standards - although Highland said the new estimates corroborate the previous estimates.
The latest estimate suggests Highland has a total of 2.57 million ounces of gold to potentially extract at Kekura - but the company does not have any of those ounces classified as measured resources, which are resources thought to have a good chance of being produced.
Therefore, the indicated resource at Kekura stands at 7.4 million tonnes of ore graded at 8.64% gold to hold 2.06 million ounces whilst the inferred resource stands at 3.3 million tonnes of ore graded at 4.8% gold to contain 510,000 ounces.
That updated resource is based on a database of 671 drill holes that have been historically drilled on the project, totalling 114,681 metres worth of overall drilling. The data also incorporated Highland's own work on the field in 2013 and 2014.
The ore reserve has also been updated, but yet again Highland has not managed to get any of the ore classed as proven reserves, the highest classification that proves the ore can be developed and processed, meaning all of the current ore reserves are classed as probable reserves.
Those probable reserves within the open pit stands at 4.3 million tonnes of ore graded at 10.94% gold to contain a potential 1.5 million ounces of gold whilst the underground holds 541,000 tonnes of ore graded at 9.04% gold to contain 160,000 ounces of gold.
That makes the total ore reserve 4.8 million tonnes of ore graded at 10.73% to contain a potential 1.7 million ounces of gold.
The updated estimates will be key to Highland progressing the pre-feasibility study for Kekura, which will focus on developing an open pit and underground operation that could last for around eight years.
Highland said the maximum amount of ore that could be processed from both the open pit and underground element of the operation would be 830,000 tonnes of ore per year with the expectation it can extract around 85% of the gold lying inside that ore.
That would produce around 209,000 ounces of gold per year.
The capital cost of the project is currently estimated to be around USD188.0 million, and Highland said this was "significantly lower" than previous estimates.
That means the project would have a payback period of three years and a post-tax internal rate of return of 38%.
Highland is still drilling Kekura and is carrying out a 25,000 metre programme on the eastern flank of the deposit which should be completed in the third quarter of this year. Hopefully, that will lead to another update to the mineral resources and ore reserves at Kekura, when it hopes to convert some of its existing resources and reserves into higher categories.
The license area also hosts several gold mineralised prospects in the immediate vicinity of the Kekura deposit, which are subject to further exploration and provide additional upside potential for the Kekura operation.
"The company has initiated processing plant design work and is undertaking additional studies with the objective of advancing the results of the pre-feasibility study to a feasibility stage level," said Highland.
Highland Gold shares were down 1.6% to 94.50 pence per share on Thursday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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