North Kao is deeply weathered which is good since we’re really only interested in the oxide and transition ounces at this point. Extracting the sulfide material will likely only be done if and when the oxide material has been depleted.
[box type=”info” align=”aligncenter” ]Disclaimer: This is an editorial review of a public press release and not an endorsement. It may include opinions or points of view that may not be shared by the companies mentioned in the release. The editorial comments are highlighted so as to be easily separated from the release text and portions of the release not affecting this review may be deleted. [/box]
VANCOUVER, BRITISH COLUMBIA–(Marketwired – March 13, 2014) – True Gold Mining Inc. (TSX VENTURE:TGM) (“True Gold” or the “Company”) is pleased to announce an initial Inferred resource estimate for North Kao at the Karma Gold Project (the “Karma Project”) in Burkina Faso, West Africa. The North Kao deposit represents the contiguous northern extension of the Kao deposit- the largest of five deposits within the Karma Mine Plan1.
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We’ve talked about True Gold and their Karma Project a few times before. They’re pretty regular with news and seem to pop-up on our radar more often than other companies. This most recent release is an update to the company’s resource estimates and will give us an opportunity to revisit some of the project economics, estimation methods and deposit characteristics.
The Karma Project is located in Burkina Faso, West Africa. We’ve included a location map below.
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“In our view, Karma is one of the premium development-stage, shovel-ready projects globally due to its low-cost production attributes, strong growth profile, metallurgy and jurisdiction,” stated Mark O’Dea, Executive Chairman of True Gold. “We have already built the foundation to become a leading mid-tier gold producer, including the receipt of key mining permits and a strong treasury to fund development, with North Kao clearly demonstrating the potential to boost our production profile.”
North Kao Highlights:
North Kao Resource: Total In-pit Inferred Mineral Resource (oxide, transition and sulphide) of 1,662,000 ounces gold (Au), contained within 47.8 million tonnes (Mt) at an average grade of 1.08 grams/tonne gold (g/t Au).North Kao Leachable Material (included in total resource): Total In-pit Inferred Mineral Resource of 423,000 ounces of leachable gold (oxide and transition) contained within 16.4 Mt at an average grade of 0.80 g/t Au. This complements the current Probable Mineral Reserves at the adjacent Kao Deposit, which hosts 340,000 ounces Au contained within 10.9 Mt at 0.96 g/t Au.Metallurgy: 137 bottle roll tests indicate excellent metallurgical recoveries averaging 96% and 92% respectively for the oxidized and transition material. Feasibility metallurgical results for the adjacent Kao deposit established that bottle roll test results are highly indicative of the ultimate column test work results.Deep Leachable Horizon: The combination of an exceptionally deep (~120 m) weathering profile, along with the shallow dip (~30 degrees), and near surface nature of mineralization makes North Kao amenable to open pit mining with additional potential mineralization down dip.Confirms Organic Growth: North Kao extends the Kao deposit more than 1.6 km to the north, demonstrating the exceptional continuity of this mineralized system and exemplifies both Karma’s leachable resource growth potential and its potential for a systematic approach to production expansion.
“The discovery of high-quality, near-surface oxide material that could potentially add to our current open pit mineral reserves is a key part of our growth strategy,” stated Dwayne Melrose, President and CEO, True Gold. “The simple and flexible mine plan at Karma, as laid out in our Feasibility Study, is specifically designed to integrate opportunities such as North Kao, as new potential mining centres emerge across the Karma Project. In addition to our success at North Kao, discoveries at four other target areas have the potential to meaningfully add to our current resource base through further drilling.”
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Normally we leave the news releases largely intact for our reviews, but I think maybe it’s time to start trimming the fat a little. Management quotes generally don’t really help us or teach us anything. So from now on we’ll start ignoring or deleting these unless they offer us some information not available in the remainder of the news. Similarly we’ll be ignoring release highlights. Highlights might be helpful for anyone skimming the news, but in our case we’ll be going through the full release and deciding for ourselves what the highlights are.
Let’s continue.
The company has now collected enough data from the North Kao zone in order to declare an Inferred Resource for that area. While an Inferred Resource represents the lowest level of confidence in the data, there is enough information for the Qualified Person to declare a Resource. In order to upgrade this area from a Inferred Resource to an “Indicated Resource”, the company will need to gather additional data that increases their confidence level in the estimate. This is generally accomplished through infill drilling: A drill program designed to fill the gaps between existing holes and form a more complete picture of the deposit.
Feasibility studies or pre-feasibility studies are generally required in order to upgrade a Resource to a Reserve and since this particular part of the Karma Project wasn’t included in the company’s initial feasibility study, it cannot be included in the Reserves.
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North Kao In-Pit Inferred Mineral Resource:
| Cut-off Grade (g/t Au) | Zone | Tonnes | Grade (g/t Au) | Ounces |
| 0.20 | Oxide | 14,212,000 | 0.79 | 360,000 |
| 0.22 | Transition | 2,200,000 | 0.89 | 63,000 |
| Subtotal | Leachable | 16,412,000 | 0.80 | 423,000 |
| 0.50 | Sulphide | 31,396,000 | 1.23 | 1,239,000 |
| TOTAL | 47,808,000 | 1.08 | 1,662,000 | |
| The Mineral Resource estimate is quoted at the same cut-off grades and economic parameters for the constrained pit optimization were used in the Karma Feasibility Study: 0.20 grams per tonne (“g/t”) gold (“Au”) for Oxide, 0.22 g/t Au for Transition and 0.5 g/t Au for Sulphide, and a gold price of US$1,300/oz (refer to NI 43-101 technical report “Updated Resource Estimate and Feasibility Study on the Karma Gold Project, Burkina Faso, West Africa”, dated December 17, 2013 and filed on SEDAR on January 27, 2014) |
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As we’ve discussed before, oxide minerals include iron oxides like hematite (Fe2O3) and are often the result of the weathering (i.e. rusting) of sulfide minerals like pyrite (FeS2). The weathering of these sulfides effectively liberates the small gold particles trapped within them, making them more available during extraction. Essentially this means that the gold can be extracted using a low-cost heap-leach process. The transition zone is deeper and less weathered. The sulfide zone is not weathered at all. Extracting gold from the deeper sulfide material will be more costly which is why they have a higher cut-off of 0.5 g/t for that material.
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True Gold will initiate a Preliminary Economic Assessment on the new North Kao resource to evaluate the potential economic impacts of an increased production profile and/or the potential to extend the mine life laid out in the Karma Feasibility Study. The overall Karma project area remains largely under-explored and True Gold will continue to pursue the near term goal of adding reserves and resources of near surface leachable material.
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It looks like the company intends to add North Kao to its reserves. Once the Resource is upgraded to Indicated from Inferred, performing a PEA (Preliminary Economic Assessment) on North Kao and publishing an updated feasibility study should allow the company to include it as part of its Probable Reserves. Remember that the difference between a resource and a reserve is whether or not economic extraction can be justified.
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Metallurgy
Results from 137 bottle roll tests on sample rejects from the North Kao drilling, crushed to a P85 of 75 um, mirror the Karma feasibility results for the Kao deposit, with average oxide and transition recoveries of 96% and 92%, respectively. Metallurgical test work in the Karma feasibility study showed a strong correlation between column leach and bottle roll tests, such that the column tests yielded comparable results to bottle rolls between 75 um and 1.7 mm. North Kao is expected to perform in a metallurgically similar manner to the Kao deposit, due to its identical geological setting and enhanced weathering profile.
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The “bottle roll” and “column leach” are small scale lab tests designed to simulate gold extraction from different processes. In a column leach test the cyanide solution is dripped through a column of crushed ore material similar to how heap-leaching takes place. In a bottle roll test the material is agitated to (potentially) increase the gold extraction levels. True Gold is telling us that the bottle roll results were the same for North Kao as they were for the Karma feasbility study area and that they expect metallurgy to be the same overall. It will be cheaper for the company to use a larger crush size and standard heap leach.
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Mineralization
The North Kao deposit is predominantly intrusive-hosted and consists of a stacked sequence of structurally-controlled tabular bodies, defined by pervasive quartz-sericite-pyrite (QSP) alteration, breccia and locally distributed stockwork, shear and extension QSP veins. Gold is closely associated with each of these features, with the breccia and QSP veins carrying the highest grades. Sediment-hosted mineralization is more vein-dominated and localized at intrusive contacts, either with the main granodiorite intrusion, or related felsic dykes.
Mineralized zones are up to 86 metres thick and exhibit extraordinary lateral continuity over 1.6 km along strike and more than 1.0 km down-dip. In comparison to the Kao deposit, the zones at North Kao tend to be slightly narrower and higher grade, such that the grade thickness profiles of each deposit are nearly indistinguishable.
The weathering profile is extensive at the North Kao deposit, gradually deepening from approximately 60 to 120 metres from south to north, which results in almost twice the leachable resource ounces per horizontal metre of strike length when compared to the Kao deposit.
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The company is telling us that the North Kao is deeply weathered which is good since we’re really only interested in the oxide and transition ounces at this point. Extracting the sulfide material will likely only be done if and when the oxide material has been depleted.
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Resource Model
The resource model is based on 161 new drill holes (43 core holes, 118 reverse circulation holes) drilled on a regular grid spacing of 100 x 100 metres. The intrusive-hosted mineralization occurs within seven stacked tabular zones that were modeled using the vein modeling tool in Leapfrog Geo software. Mineralized intervals were selected using a nominal cut-off of 0.2 g/t Au on samples for inclusion, as well as, for the grade for the full composited interval. Three of the seven zones exhibit good continuity across the entire strike length of the deposit within the intrusive rocks. The other four zones are more locally developed.
Sediment-hosted mineralized domains are more irregular in shape and distribution and were therefore modeled using a Leapfrog interpolation on indicators representing mineralized (1) and unmineralized (0) material, using a threshold of 0.2 g/t Au. These zones account for less than 5% of the modeled mineralization.
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The company has drilled a grid of holes at 100 meter spacings using both reverse circulation (RC) and drill core drilling. RC drilling is fast and cheap, but drill core drilling provides better geological data.
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The mineralized zones all have a broadly consistent shallow dip at approximately 10 degrees to the east, but selected intervals show vertical offset that are clearly fault-controlled in some areas, but may also reflect local undulations in the mineralized bodies in other areas. Two major faults are included in the model with vertical offsets of up to 70 metres. The largest offset is on a northwest trending fault that is parallel to the high grade northwest trending structure in the main Kao deposit, and hosts one of the best intercepts to date (KAO13DD-233: 1.5 g/t Au over 90 metres, see news release dated January 21, 2014).
Estimation Methods
Sample assays were composited to 2 metre intervals within the mineralization wireframes. Mineralized domains were capped at 5 or 8 g/t Au, depending on the grade profile of each individual zone. Four of the zones did not require capping, and a total of 6 out of 2,037 samples were capped, amounting to a metal reduction of approximately 4%.
Grades were interpolated into a 5 x 5 x 5 metre block model using ID3 weighting in three passes. The first pass used a search radius of 50 x 50 x 10 metres, a minimum of 3 samples and maximum of 12, with a maximum of 2 samples per drill hole. The second pass used a search radius of 50 x 50 x 10 metres, a minimum of 2 samples and maximum of 12, with a maximum of 2 samples per drill hole. The third pass used a search radius of 200 x 200 x 40 metres, a minimum of 1 sample and maximum of 12, with no constraint on the number of samples per drill hole.
Validations were done using comparisons with ID2 and nearest-neighbour models, visual and statistical comparisons between block grades and composite grades, and swath plots. Block grades show an acceptable degree of smoothing compared to the composites, with approximately 15% lower average grade.
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Resource modelling typically involves the separation of the deposit into discreet blocks and and estimating the grade of the blocks from available data. You can learn more in our article about resource modelling and its limitations.
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Due to the wide spacing of the drill holes, all blocks are classified as Inferred.
Mineral Resources are reported within an optimized pit shell that was optimized using the following parameters: Au: $1,557/oz, Refining: $4.60/oz, Royalty: 4%, oxide recovery: 90%, transition recovery: 80%, sulphide recovery: 85%, oxide mining: $1.61/tonne mined, transition mining: $1.94/tonne mined, sulphide mining: $2.05/tonne mined, oxide/transition process: $7.25/tonne milled, sulphide process: $19/tonne milled, G&A: $1.35/tonne milled, pit slopes: 50 degrees.
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In the table above they mention that they have used a gold price of $1,300 USD/Oz in determining the mineral resource estimate which is the same they used for their reserves in the feasibility study. But in the above paragraph they state that a price of $1,557 USD/Oz was used. Why? Essentially, the feasibility study helped establish a cut-off grade which was in part based on a $1,300 gold price and is reportedly used for this resource estimate. However, size and the shape of the open pit modelled around this resource used a price of $1,557. It is strange that they didn’t use a consistent price, but since resource estimation does not directly involve determining economic feasibility it’s not worth arguing at this point.
Open pit designs are fluid things and can change through the life of a mine as companies adjust to metal prices, costs, reserves and the physical limitations of the pit size and shape.
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About True Gold
True Gold Mining Inc. is where gold comes to life. We are committed to growing a successful gold exploration, development and production company, by focusing on projects with low costs, low technical risks and solid economics. The Company’s board, management and technical teams have proven track records in gold exploration, development, operations and production worldwide.
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