Mr. Greg Clarkes reports
PNG GOLD CORPORATION CORPORATE UPDATE
PNG Gold Corp. has released its corporate objectives for 2013 and achievements since its new management took direct control over operations in the second quarter of 2012.
Management took over operations from a previously contracted third party in order to achieve greater direct control over its Normanby Island projects in Papua New Guinea. The transition is now complete, which has resulted in a substantially lower cost per metre drilled for the company's projects. The restructuring has also provided the company with the necessary infrastructure, relationships and flexibility to efficiently operate and assess the vast mining and exploration opportunities in Papua New Guinea, differentiating the company among its exploration peers.
Since the change in operational control in the second quarter of 2012, PNG Gold realized the following:
- Purchased four new diamond drills in order to retain corporate control
and reduce drilling costs by approximately half of last year's
contracted rate;
- Completed the 2012 drill program consisting of 9,668 metres in 40 holes
at the Imwauna and Kelas prospects, of which the majority were completed
in fourth quarter 2012;
- Developed the first detailed geological model on the Imwauna Main
structure;
- Restarted the entire operation including hiring of operations team at
the Alotau office and operations camp; ceased to utilize a third party's
operations office in Brisbane, Australia, in order to attain more direct
control of operations, minimize the use of consultants and
significantly reduce administrative costs at the company's Alotau office;
- Completed the construction and equipped a 100-plus-person modern camp
in third quarter 2012;
- Hired country manager Marc Plante, a qualified mining manager
experienced in logistics, for major projects around the world;
- Hired key structural geologist Dr. Guowei Zhang in order to begin
defining the structural controls to mineralization at the Imwauna and
Kelas prospects;
- Hired local community representatives to liason community projects,
including continuing medical, educational and clean water programs;
- Completed an environmental impact assessment and environmental
monitoring study;
- Anticipating final assay results from first shipments of the Imwauna
Main structure in the coming weeks.
The company's chief operating officer Lorne Warner stated: "Our achievements in 2012 have put us in a strong position to implement our future corporate objectives, and we look forward to taking further steps to fulfilling our corporate mission to become a sustainable gold exploration and development company focused on Papua New Guinea. The company is committed to aggressively exploring the Imwauna Main structure in order to define the geometry of several of the high-grade gold zones situated along the structure as outlined in the geological model. PNG Gold plans to be able to define the high-grade gold mineralization with the objective of undertaking a National Instrument 43-101 resource study. We will also complete systematic exploration in 2013, including diamond drilling of our other gold zones and prospects situated on our mineral claims."
Details of 2012 milestones
- The company purchased four new diamond drills, two of which have
capacity to drill 1,000 plus metres of HQ core, which were delivered
between third quarter 2012 and first quarter 2013. The objective of purchasing drills was to
retain corporate control and reduce drilling costs by approximately half
of last year's rate. Two of the drills are also capable of working
underground and on helicopter-assisted drilling programs.
- As part of PNG Gold's mandate to build necessary infrastructure, the
company has also purchased an additional D5 bulldozer and four all-terrain vehicles, in addition to upgrading the site access road for all-weather access, in order for drill work to continue through the heavy
rainy season.
- As part of the 2012 drill program, the Imwauna Main structure was
drilled to test the newly developed geological model, continuity and
depth extent of gold mineralization. Results for drilling at the Imwauna
prospect will be released on a timely basis. The company's 2012 drill
program consisted of 9,668 metres in 40 holes at the Imwauna and Kelas
prospect, of which the majority were completed in fourth quarter 2012. As part of
the 2012 drill program, the Kelas prospect was drill tested to better
define its structural orientation and potential relationship to the
Imwauna structure mineralization.
- The company completed the construction, equipped and staffed the 100-plus-person-capacity modern camp in third quarter 2012. The main road from the coastline to
camp is currently being upgraded to an all-weather status for tired
vehicles to use during the rainy season.
- The company restarted the entire operation including the hiring of the operations team at
the Alotau office and operations camp. The company ceased to utilize a third party's
operations office in Brisbane, Australia, in order to attain more direct
control of operations, minimize the use of consultants and
significantly reduce administrative costs at the company's Alotau office.
- The company hired Mr. Plante as country manager. Mr. Plante brings over
15 years of drilling industry experience, primarily as a project
manager and in logistics for major projects around the world, including
as logistics manager at Boart Longyear, and project manager at Foraco
Drilling. He has extensive management and supervisory experience in both
surface and underground drilling. Mr. Plante has completed underground
driller, surface driller, driller trainer and generic supervisor
training at the Norcat School of Mining.
- The company also hired Dr. Zhang as vice-president, technical
services. Dr. Zhang brings over 30 years of international experience in
the mining industry and has been responsible for the development of
structural models at a series of gold mines in Canada.
- PNG Gold also hired two local representatives to be liaisons on
community projects, including its continuing medical, educational and
clean water programs.
Drilling program and rig deployment for 2013
Geological interpretation of the Imwauna Main structure and interpreted gold mineralization along the structure by using historic and recent drilling indicate that drilling needs to continue at 25-metre-by-25-metre intervals where high-grade gold mineralization is anticipated. PIMA studies of the recent drill core are helpful in determining the alteration assemblages associated with the gold mineralization and anticipated depth to which mineralization may extend. The company expects focus on two of five potential zones along the structure to determine the depth potential of gold mineralization, and provide sufficient data to develop a reliable resource estimate.
It is anticipated that rigs 3 and 4 will be assigned for the foreseeable future to Imwauna on a full-capacity basis. As a result, running rigs 3 and 4 should produce approximately 4,000 metres per month of drilling at Imwauna. Rigs 1 and 2 are lighter than rigs 3 and 4 and consequently can be flown and are built to operate underground. Until they are required for underground drilling on Imwauna, they are needed to fill a number of imperative functions. Primarily, rigs 1 and 2 will be used to explore untested known gold anomalies throughout the El 1091 Normanby and EL 1069 Sehulea projects. These drills will also allow for minimal drilling interruption at Imwauna in the case of equipment failure. In addition, rigs 1 and 2 provide the opportunity for a dedicated training program of national drillers without impacting the Imwauna output. The benefit of training national drillers is clear in terms of community and government relations but is expected to further reduce drilling costs in the future. Training is expected to add to core output in the short term as these rigs can be deployed in other areas, such as Sehulea, without affecting drill rates at Imwauna, allowing the company to meet its other licence commitments.
Financial update
The company expects to minimize capital expenditures in 2013 and manage its cash balance by scaling its drilling and administrative operations as circumstances dictate, in order to remain in a financially flexible position. Since filing the company's Sept. 30, 2012, financial statements, the company has drilled over 10,000 metres with purchased drill rigs and concluded a baseline environmental study.
The investments made to date in equipment and rigs have reduced cost per metre drilled to less than half of that previously paid to an Australian contractor last year. Based on the company's plan to drill approximately 4,000 metres per month, combined with the savings in drilling costs already achieved to date, the company expects further reductions in drill costs to fully achieve payback of its investment in drill rigs by the end of the second quarter in 2013.
Exploration and mining in Papua New Guinea
Papua New Guinea's reliance on gold is significant as measured in terms of the value of gold produced as a percentage of GDP. According to Papua New Guinea's Mineral Resource Authority (MRA), mining has been the most significant contributor to the country's economy since 1973. Mining products, primarily gold, are currently the country's top mining exports, according to the Australian Minister of Foreign Affairs (November, 2012). Papua New Guinea is a pre-eminent gold-producing region as evidenced by such publications as the U.S. Geological Survey's January, 2012, mineral commodity summaries which estimate that the country has more gold in the ground compared with Canada and current production approaching that of Mexico. Because of its importance, gold exploration and development are welcome and the government makes every effort to encourage active exploration companies.
Papua New Guinea offers a growing economy favourable to mining companies, with real GDP growth rate in 2012 expected to be approximately 8 per cent. In addition to a growing economy, the country was ranked by the Fraser Institute's annual survey of mining companies 2011-2012 as the third best jurisdiction in the world for policy and mineral potential in 2012, suggesting a sound political landscape for fostering the success of mining companies in the area.
About the Normanby Island project
EL 1091 Normanby -- Imwauna flagship project
The Normanby exploration licence -- EL 1091 -- is located on the north side of Normanby Island, approximately 80 kilometres northeast of Alotau, the provincial capital of Milne Bay province, eastern Papua New Guinea. The project consists of two main prospects, Imwauna and Kelas, along with numerous untested prospects. The flagship Imwauna gold deposit is a high-grade, near-surface, low-sulphidation, epithermal vein gold system. Gold mineralization ranges from 0.5 metre to six metres in the Imwauna Main structure. The Imwauna prospect remains open in the north and south at strike and at depth.
EL 1069 Sehulea
The Sehulea exploration licence -- EL 1069 -- is located northeast of Imwauna on Normanby Island and contains several low-sulphidation epithermal gold deposits which require additional drill testing. Previous results indicate the area contains extensive lower-grade gold mineralization over intercepts of up to 60 metres core length with grades ranging between one and two grams per tonne gold. Mineralization is associated with extensive silicification, disseminated and semi-massive pyrite, with a positive correlation between higher pyrite concentrations and gold.
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