Name and Location
Cannon gold project, Australia.

Client
Southern Gold.

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.

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
Following the board’s decision, Southern Gold aims to start mining operations in the first half of 2014.

Latest Developments
Southern Gold has been able to further refine operating costs and optimise several parameters on the Cannon project, including alternative haulage routes. The results of this work have significantly strengthened project economics.

The key outcome of these changes is reduced operating costs, from A$1 051/oz to A$964/oz. Based on the current mine plan and the reduction in cost inputs, there is also a significant impact on the free surplus cash flow, increasing from A$8.02-million to an estimated A$12.4-million.

Meanwhile, project permitting remains on track, with the project management plan and abstraction licence recently approved and the Cannon project’s mining proposal in the final stages of preparation.

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