Southern Gold has started mine operations at Cannon gold resource, 30km east of Kalgoorlie, Western Australia.
Metals X has been contracted by Southern Gold to conduct all mining, haulage and processing activities associated with the development of the Cannon mine, with profit to be shared on a 50%:50% basis.
Stage 1 Open Pit
Operations have begun on the previously described Stage 1 Open Pit which will see approximately 152kt of ore mined at an average fully diluted grade of 3.1g/t Au.
Mining will take place over the next 4-5 months and ore from Cannon processed through Metals X Jubilee mill facility, approximately 35km to the southwest. Ore will be batch processed with expected Stage 1 recovery of 13.5koz of gold at an AISC of A$1084/oz with an implied cash margin of ~A$400/oz assuming this cost base.
With the completion of the rail crossing, pre-strip and site access and with the commencement of mining operations the project schedule has been updated with several additional boxes now ticked.
The preferred haul route along miscellaneous license L25/48 is progressing well. The license was granted recently and haul road construction will commence once a Native Vegetation Clearing Permit is granted, expected sometime in the next few months. Mining of the deposit will progress normally while this preferred haul route is established with alternative route L25/43 available in the interim.
Potential "Big Pit" Scenario
It is anticipated that the current Stage 1 Open Pit will be superseded by a new larger pit development plan but Southern Gold is committed to maintaining momentum on the current Cannon Mine construction phase and the completion of the Stage 1 Open Pit to ensure near term cash flow.
Discussions between Southern Gold and Metals X on the commercial arrangements around the larger pit development are continuing.
The possibility of an underground development after open pit operations under the "Big Pit" Scenario is subject to further extension of the deposit by drilling below the current limits of the JORC Resource as the Cannon deposit remains open at depth. However, the width and grade of several previously reported deeper intersections are of excellent tenor the extension of which constitutes an obvious drill target likely to be drilled at the conclusion of Stage 1 Open Pit.
Exploration – Drilling Commences at Arsenal
In addition to the commencement of mining at the Cannon Gold Resource, Southern Gold is also pleased to advise the start of an 800m reverse circulation drilling programme at Arsenal, one of several satellite drill targets.
Previous drilling at Arsenal revealed alteration that was similar to that seen at the Cannon project but this early programme was restricted to a single drill hole. The current drilling programme is designed to follow up on that early positive indication and hopefully identify additional mineralisation outside the Cannon Gold Resource. Results from this round of drilling are expected in the next few weeks.