AXG - Antipodes Gold [formerly GEL - Glass Earth]

[elZorro]

It's near the end of July, and Glass Earth set a target for placer production of about 84 to 100oz/week by the end of the month. After the newer placer sites get up and running, the target is 144oz/week (7500oz/year). I dug up an old email from Simon Henderson, which I've already posted.

February 2012: In alluvial production we quote grade in grains per cubic metre, not grams per tonne. (A grain is roughly 1/15 of a gram, and there are about 2.5 tonnes of gravel wash in one cubic metre).

We'd regard a grade of 3 grains/m3 as an acceptable cutoff point for profitable mining (high volume throughput, no crushing, gravity separation and so on all mean that far lower grades than that needed in a hardrock environment can be profitable), but of course can run into far more than this on richer leads - in fact we will have on occasion run into 3"g/t" ground..

Given the small size of these deposits and the difficulty and expense required to define an official resource (plus the sensitivity our JV partner has required us to have towards reporting grades in Otago, based on keeping results confidential to each landowner) it makes more sense to have a solid estimate of projected ounces per week production, and then the total net revenue we are achieving - net profit from alluvials measures for us what these deposits are worth in terms of what they add to our company. We're actually going through a significant (and exciting) overhaul of alluvials, I can't tell you more than that today but we are looking forward to some real progress, and profit, this year. Our placer mining is shaping up as a very useful and unique side to how we operate - it began as a survival tool but is starting to look like a true opportunity for self-funding meaningful hardrock exploration. So when laid alongside our current projects and land package it's very compelling.

Here is where the maths gets interesting (but not hard!). 3 grains/m3 is roughly the same as 0.2grams/m3. Each GRU processes 50 m3 per hour when it's online. Since it takes almost exactly 3 hours for each GRU to produce an ounce of fine gold flakes at the minimum cutoff grade, then the approximate running costs for a GRU is about US$300 per hour (we've also been told the cost of each ounce is US$900). The cutoff grade will change if the price of gold goes up or down, but it is low compared to other mining methods.

$300 needs to cover the wages of about 3-5 staff per GRU/hr, any downtime costs, maintenance, fuel. All GRUs need to contribute to the monthly settlement payments for Bob Kilgour, and at each site the landowners will have a small percentage (unknown, left out of my calcs).

But assuming GEL didn't drag the GRUs out there for anything less than the minimum cutoff, then running GRU#1 for 24/7 hours, and the others for about 60 to 70 hrs/week, will recover the gold they are talking about. There would be an annual profit of about US$2.6 mill at 100oz/week, at the lowest grade.

However, if Drybread sites offer 0.4grams/m3 of gold, the annual net profit from just the sites and gear they have going now, would be US$8.6 million. That's enough for everything that they normally do in a year, all paid for.

To put this into perspective, each excavator scoop of 1 m3 needs to be fed to a GRU at about once a minute. The dry weight would be about 2 tonne, 2.5 tonnes wet. At the minimum grade, 3 grains of gold (0.2 grams), needs to be present. A single .177 lead slug pellet weighs about 9 grains, or 0.6 grams, so that small weight of gold per m3 is three times the cutoff value.

Note: gold is about 70% more dense than lead, so Glass Earth are hoping to see no less than 1/3 of the weight of a slug gun pellet (in gold) in each scoop, and 1/5 of the volume of the pellet.