Exploration Licence (EL) 2663 Kanmantoo is located on the eastern flank of the Adelaide Hills, and exists as two separate blocks forming a belt up to 10 km wide and approximately 75 km long that covers an area dominated by outcropping and...
Exploration Licence (EL) 2663 Kanmantoo is located on the eastern flank of the Adelaide Hills, and exists as two separate blocks forming a belt up to 10 km wide and approximately 75 km long that covers an area dominated by outcropping and subcropping metasedimentary rocks of the Cambrian Kanmantoo Group. During the period January 1998 to June 2000, new field work done on the licence, now being operated by Pima Mining NL for its subsidiary Kelaray Pty Ltd, consisted of shallow auger drilling of 3324 vertical holes to reach fresh bedrock, and collecting bottom-hole samples from them for geochemical analysis. Several prospective geochemical anomalies were identified. Owing to a lack of funds for mineral exploration, and a decision by the Board of Pima Mining to use available funds for the development of a magnesium metal - yielding ore mining and refining project, that company's sole relevant activity over the period June 2000 to February 2004 was confined to supporting Cooperative Research Centre for Landscape Evolution and Mineral Exploration (CRC LEME) scientists to undertake a geochemistry and mineralogy study of saline acid sulphate soil seepages present within the licence area. This project's final report, which was released in June 2002, for an orientation study examining geochemical dispersion at the Mount Torrens prospect within regolith materials including gossans, saprolite, pedogenic materials associated with acid sulphate soils containing sulphuric horizons and sulphidic materials, and Fe- and Al-rich gel-like precipitates in saline seeps, found that concentrations of As, Ba, Bi, Cd, Cu, P, Pb, Sn, T1 and Zn are greatest in those acid sulfate soils proximal to the mineralised zone. Therefore it was concluded that acid sulphate soils and their associated pedogenic materials are a valid geochemical sampling medium for mineral exploration. Hillgrove Resources farmed into EL 2663 early in 2004, because the subject licence ground surrounds a number of exploration tenements held entirely by Hillgrove that cover the old Kanmantoo copper-gold mine, a vein and replacement style deposit. During the mid 1960s, Mines Exploration Pty Ltd conducted exploration which led to it develop an open cut mine at Kanmantoo that was worked in minority partnership with Broken Hill South Ltd until 1976, when the high relative value of the Australian dollar, the Seventies' oil crisis and collapsing copper prices forced abrupt closure of the mine, only 2/3rds of the way through its planned life. Recent appraisal work conducted by Hillgrove on the Kanmantoo deposit, involving around 9000 m of reverse circulation (RC) drilling and 1200 m of diamond drilling, had suggested that a remaining resource of significant size (estimated as 18.37 Mt at 1.1% Cu and 0.2-0.4 g/t Au) may be present there, part of which appeared to extend into EL 2663. Accordingly, the new exploration operator's field work began by performing rock chip, soil and channel sampling, followed by RC drilling, at the Emily Star prospect, which is located immediately to the south-southwest of the Kanmantoo mine open pit. Initial results were very encouraging, with RC drill intersections of strong chalcopyrite - dominated sulphide mineralisation suggesting that Emily Star has the economic potential to become a mineable satellite to the main orebody at Kanmantoo. A detailed review of records of past work, followed by geological mapping and rock chip sampling, had earlier confirmed that a series of copper-gold mineralised trends strike south from the Kanmantoo mine and Emily Star areas for a distance of more than 3.6 km. Some of the better surface sample assay results included 18.29% Cu, 14.6 g/t Au, 14.98% Zn and 8 oz/t Ag (not all in the same rock). A number of zones over 200 m in strike length were found where all of the samples collected assayed between 3% and 8% Cu, besides containing >0.5 g/t Au. At Emily Star, at least four mineralised copper-gold trends were identified, varying in width from 5 m to 40 m and extending for over 300 m in strike length. Further drilling was programmed to define the ends of the mineralisation in the plan sense and drill out the resource to a 40 m x 40 m pattern above 150 m vertical depth, a density considered adequate to gain “Indicated” status. Across the whole tenement during 2004, a total of 1536 soil samples, 623 rock chip samples, 658 channel samples (38 traverses), 31 RC drillholes with a total penetration of 4273 m, and 2 diamond drillholes (79.48 m NQ2 cored, excluding pre-collars) were completed, which included base metal exploration work done on more distant regional prospects to the north-east. This level of new exploration expenditure was enough to earn Hillgrove Resources the agreed 90% interest in the holding, with Kelaray (now owned by Argonaut Resources) in the immediate future being carried for its residual 10% interest until such time as a decision to re-start mining at Kanmantoo might be made. Activities carried out by Hillgrove Resources during licence year 2005 on the subject renewed EL 3277 Kanmantoo included: - an IP profiling survey along the Kanmantoo Mine Corridor (previously reported in the annual report for ML 5776); - a ground magnetics study along the Kanmantoo Mine Corridor and also at Wheal Maria (36 line kms); - soil sampling along the Kanmantoo Mine Corridor, south of the freeway at Aclare, over North Callington, and at Kanappa and Mount Rhine on the northern sub-block of the licence (total 2148 samples); - rock chip sampling along the Kanmantoo Mine Corridor, at South Hill, at Wheal Everly, at North Callington, at Dawesley, and at Kanappa and Mount Rhine on the northern sub-block (total 313 samples); - two lines of channel sampling at Mount Rhine (total 23 samples); and - RC and diamond drilling at Emily Star, RC drilling at Alex Wells and Wheal Maria, and drilling one diamond hole at Kanappa (total 33 RC holes for 3716 m, plus 4 diamond holes for 526 m). By way of background information, some of the more significant drilling results stemming from Hillgrove's recent work exploring the Kanmantoo mine prospect were as follows: KTRC127 - 39 m @ 1.38% Cu and 0.21 g/t Au from the O’Neil Zone; KTDD006 - 26 m @ 2.04% Cu and 0.22 g/t Au from the Main Zone; KTRC109 - 41 m @ 1.28% Cu and 0.33 g/t Au from the South-East Zone; KTRC138 - 18 m @ 2.02% Cu and 0.59 g/t Au from the Eastern Zone. For comparison, some of the more significant drilling results obtained at the Emily Star prospect, from holes located only 300 m away from the Kanmantoo mine pit, were as follows: KTRC008 - 27 m @ 3.94% Cu (including 14 m @ 6.77% Cu; KTRC023 - 14 m at 4.46% Cu, 10.96 g/t Ag and 0.14 g/t Au. The exploration results so far obtained by Hillgrove had indicated that there is plenty of scope for mapping out substantial copper and gold mineralisation within the Kanmantoo Mine Corridor. Results coming from elsewhere on the tenement, while sometimes comparable, were downgraded due to their distance from the Kanmantoo workings plus management's realisation of the fact that a large number of untested targets exist within 2 km of the mine. It was stated that future work would concentrate on completing close-spaced drilling at Emily Star, conducting drill tests of other targets within the mine corridor, and performing detailed studies of recently acquired low-level helicopter-borne magnetic data, along with target generation. The entire tenement had been flown during November 2005 through March 2006 with 10,100 line km of detailed aeromagnetic coverage along flight lines spaced 50 m apart. The main focus of Hillgrove's magnetic data acquisition and interpretation was to track the Kanmantoo mine stratigraphy to the north and south and identify possible dilational zones. Besides completing the above aerial geophysics, exploration work carried out on EL 3277 during the 2006 licence year comprised: - drilling 15 diamond cored holes at Emily Star and the O’Neil Zone, for a total of 1400.49 m; - drilling 76 RC holes at Emily Star, O’Neil Zone, Wheal Fortune and Stella, for a total of 7196 m; - collecting and assaying 379 soil samples from the Dawesley prospect located west and north-west of the Kanmantoo mine; - completion of a mining project pre-feasibility study by consultant Roche Mining; - completion of a new mineral resource calculation, to arrive at Indicated and Inferred reserves, which has boosted the global resource at Kanmantoo to 28 MT @ 0.9% Cu and 0.2 g/t Au. Initially, before it was mined in the 1970s, the deposit had a published reserve of 8.1 Mt @ 1.1% Cu; and - retaining various technical consultants who performed orebody metallurgical, structural and geochemical studies. The detailed infill (20 m x 20 m) drilling done at Emily Star successfully increased the known resource to 3.6 Mt at 0.9% Cu and 0.1 g/t Au. A previously un-recognised north-east structure that links a number of zones together within the Emily Star mineralisation was found immediately to the west of hole KTRC350; it appears to have exerted a significant control on the localisation of high grade copper mineralisation. Similar detailed drilling carried out at Wheal Fortune prospect enabled calculation of a resource there of 181,000 t @ 0.9% Cu and 0.2 g/t Au. A detailed study of the alteration and geochemical characteristics of the Kanmantoo copper deposit was commissioned by Hillgrove, aiming to identify an element suite that has a tight primary dispersion, to help in drill hole planning. This need was due to the fact that copper values in soil samples exhibit a fairly broad halo at Kanmantoo which, while excellent for initial detection on the regional scale, is not so useful in determining, for example, whether a drill hole has had a near miss to an ore zone. During the 2007 licence year, increased exploration activities on EL 3277 included: - drilling 4 diamond holes at Emily Star and Paringa prospects, for a total of 378 m; - drilling 12 groundwater-monitoring bores at Waste Dump, Wheal Fortune, Emily Star, Alex Wells and Homestead prospects, for a total of 874 m; - drilling 155 RC holes at Emily Star, Paringa, O’Neil, Wheal Fortune, Homestead and McFarlane prospects, for a total of 18,898 m; - collecting and assaying 2246 soil samples from Dawesley, Millbrae, Snake Gully, Bryce Creek, Mount Rhine, Wheal Ellen, Breadalbane and Homestead prospects; - collecting and assaying 64 rock chip samples from Breadalbane, Tinpot Road, Paringa West, Wheal Fortune, Mullewa, Millbrae, Snake Gully and Beevor Hill prospects; - conducting a Definitive Feasibility Study for re-starting mining at Kanmantoo (which at year end was in the final stages of completion); - performing a new resource calculation, which has boosted the global resource at Kanmantoo to 31.844 Mt @ 0.9% Cu, 0.2 g/t Au and 2.8 g/t Ag; and - continuing with orebody structural and geochemistry studies. Pending positive outcomes to the Definitive Feasibility Study and the Mining Lease Proposal for the Kanmantoo mine, several prospects within EL 3277 were expected to become incorporated into a new mining lease or leases. These include Emily Star, O’Neil Zone, Paringa and Wheal Fortune. Newly estimated resources for three of these prospects were as follows: - Emily Star - 3.43 Mt @ 1% Cu, 0.1 g/t Au and 4.1 g/t Ag; - O’Neil Zone (which partially lies within EL 3277) - 4.676 Mt @ 0.91% Cu, 0.36 g/t Au and 5.23 g/t Ag; - Wheal Fortune - 260,000 tonnes @ 0.8% Cu, 0.17 g/t Au and 8.9 g/t Ag. Whilst ongoing exploration will continue to be conducted within the Kanmantoo mine corridor, where remnant high grade mineralisation still remains open along strike and down dip in many areas, it was intended that there be a shift in focus towards investigating the numerous base metal prospects outside the corridor, in an attempt to identify potential satellite ore deposits that could be mined and fed into the processing mill at Kanmantoo. Of particular interest were the magnetic anomalies generated by the 2006 helimag survey that occur in the same stratigraphic position as the Kanmantoo and Wheal Ellen mines. During the 2008 licence year, exploration carried out on EL 3277 included: - drilling of 72 trial grade control RC holes at Emily Star during May, for a total of 1559 m; - drilling 23 exploration or resource definition RC holes at Wheal Fortune, Green Zone South, Emily Star and McFarlane prospects, for a total of 1896 m; - collecting and assaying 124 soil samples from the Tin Pot Hill prospect, which is located immediately north of the Wheal Ellen prospect. No significant base metal values were returned; - completion of a Definitive Feasibility Study; - completion in February 2008 of a JORC-compliant resource calculation update for Kanmantoo, which was based on a drilling database comprising data from 909 holes totalling 129,200 m. The new estimate for the global mineral resource was 32.137 Mt @ 0.9% Cu, 0.2 g/t Au and 3.2 g/t Ag. The mineralisation then identified in the Kanmantoo Mine Corridor extends for approximately 3 km of strike, is some 800 m wide and persists to a depth of 800 m. Its limits remain open in all directions; - commencement of a new resource calculation (to be reported in the 2009 annual licence report); and - submission to PIRSA during October 2007 of a formal mining lease proposal for re-development of the Kanmantoo mine, which was approved and led to the granting on 14/10/2008 of a 436 ha mining lease, ML 6324, covering the Kanmantoo deposit and wholly including the Emily Star, O’Neil Zone, Paringa and Wheal Fortune orebody extensions. This lease takes in part of EL 3277 as well as all of ML 5776 and EL 3298. On 18/12/2007, Hillgrove announced to the media and to the Australian Stock Exchange that the Definitive Feasibility Study of the Kanmantoo Copper-Gold Project in South Australia, conducted by Lycopodium Engineering Pty Ltd in conjunction with Enesar Consulting, Snowden Mining Industry Consultants, and Coffey Mining and Resource Evaluations, had been completed, and that it confirmed Kanmantoo as an attractive 2 Mtpa new mine development with an estimated net cash flow after tax of $167 million (base case) from the currently defined resource. Based on the current design for open pit optimisation, Kanmantoo would comprise two open pits having an initial mine life of six and a half years. The ultimate larger pit would be 1.2 km long and 600 m wide on the surface, and 270 m deep. Mining would employ conventional open pit drill, blast, load and truck haul. The proposed mined ore treatment route is to use a conventional copper and gold flotation plant producing concentrates for sale to custom smelters. The DFS envisaged the following unit operations: - single stage crushing; - closed circuit grinding in a SAG milling circuit; - rougher flotation and regrind before cleaning; and - concentrate dewatering and filtration. Metallurgical test work showed that recoveries of copper from the ore will range from 63% in the oxide resource to 95% in the primary ore. Gold recoveries should range from 39% in the oxide to 78% in the primary ore, although further studies will be directed to this. The amount of concentrate produced will vary, depending on the grade of ore being mined, from 56,000 to 76,000 dry tonnes p.a. It will be high quality, with moderate copper grades around 25%, plus low levels of impurities. It is important to note that approximately 90% of the mining inventory is sulphide ore with modelled average recoveries of 95% copper, 60% gold and 69% silver. On 19/3/2008, Hillgrove acquired the 10% interest in EL 3277 held since late in 2004 by Kelaray, and thereby gained full ownership of the Kanmantoo Copper Project.