PERTH (miningweekly.com) – ASX-listed Southern Gold is considering the development a larger project at its Cannon gold mine, in Western Australia, after project partner Metals X spent some A$4.5-million on an adjacent smaller project.

Southern Gold told shareholders that the Georges Reward acquisition had placed the Cannon project into perspective, given that Georges Reward had a Joint Ore Reserves Committee- (Jorc-) compliant resource of 375 000 t, grading 1.89 g/t gold for 22 800 oz of gold, compared with the Cannon Jorc resource of 753 000 t, grading 3.75 g/t gold for 90 900 oz of gold.

“The Cannon gold project has approximately four times the amount of contained gold ounces at twice the gold grade, which puts the consideration of A$4.5-million for Georges Reward into sharp context,” said Southern Gold MD Simon Mitchell.

“Not only does this illustrate the compelling investment proposition that is Southern Gold at the moment, it also highlights the true value of the Cannon project that will be unlocked by a much larger 'big pit' scenario running for several years, at a relatively high operating margin.”

Earlier this month, Southern Gold flagged the possibility of an expanded Stage 1 pit, which would see both the Cannon and Georges Reward deposits exploited in a single pit, using common infrastructure.

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

While the commercial and operating details of the proposed larger openpit scenario were still being refined with partner Metals X, the previously approved Stage 1 openpit remained on track to ensure near-term cash flow.

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

While it was anticipated that the Stage 1 pit would be superseded by the new larger pit development plan, Southern Gold noted that there was much that could be done that was common to both options going forward, with the company saying it was committed to maintaining momentum on the current mine construction plan.

Near-term activity at the mine would focus on the establishment of site infrastructure and the start of top soil removal in August. Mining of the Cannon deposit would follow shortly after.

“We are yet to agree the final commercial form of a joint development of the Cannon and Georges Reward deposits with Metals X, but I can see the potential for significant synergies to be unlocked by both of us,” Mitchell said on Wednesday.

“The potential for the Cannon mine to be exploited in a 'big pit' scenario is a material development for Southern Gold as it enables good commercial outcomes to drive the mine development design, which will extract much more gold on a high-margin openpit basis.”