Shore Gold pushes ahead with reduced 2009 budget

Vancouver – Canadian diamond explorer Shore Gold (SGF-T) is planning to spend $18 million in 2009 in a significantly reduced budget focused on preparing a prefeasibility study and reserve estimate for the Star diamond project as well as a resource estimate for the Orion South joint venture.

The company says the pared-down plans ensure it will remain financially stable through 2010, based on its current cash position and an agreement in principle for a credit facility against the company’s investment in asset-backed commercial paper. But the tightly constrained budget require Shore Gold necessitate “a considerable staff reduction” on site. The company will retain the core group of personnel needed to complete the desktop studies that are now the company’s main focus.

Star is Shore Gold’s most advanced project. It sits 60 km east of Prince Albert, in a burned portion of the Fort a la Corne forest in central Saskatchewan. In the summer Shore Gold announced a new resource for the Star kimberlites: 122.7 million measured and indicated tonnes grading 13.6 carats per hundred tonnes and 30.3 million inferred tonnes grading 13.1 carats. Together, the resources host 20.6 million carats. The resource estimate also designated a further 100 to 120 million tonnes of Star kimberlites as a “potential mineral deposit” carrying a similar grade.

Now Shore Gold wants to complete a prefeasibilty study and reserve estimate for the project in order to enable the company to deliver a full feasibility study on the project by the first quarter of 2010.

The Star kimberlite straddles two projects. Just over 60% of the resources sit within the Star project, which Shore Gold owns fully; the rest are part of the Star West project, of which Shore Gold holds 60% and Newmont Mining (NMC-T, NEM-N) the rest.

In November Shore Gold took its next big step towards a production decision at Star when it submitted a project proposal for a joint Star-Orion South diamond project to the environmental assessment branch of the Saskatchewan Ministry of the Environment. The proposal includes Shore’s Star project together with the Orion South kimberlite, which is part of the Shore-Newmont joint venture.

The submission proposes an open pit on the Star kimberlite and a potential second open pit at Orion South, with a common processing plant. The pit at Orion South depends on the results of underground bulk sampling and large diameter drilling, which are currently underway.

In recent months Shore Gold released results from the last two of five sets of underground bulk sampling from Orion South. The fourth sample produced 288.36 carats from 5,674 dry tonnes or 5.08 carats per hundred tonnes and including the largest stone yet recovered from the Orion cluster: a 45.95-carat stone, which is a fragment of a larger stone. Shore Gold was particularly pleased about the large stone because it came from the Pense kimberlite, which generally carries a lower grade than Early Joli Fou (EFJ) kimberlite, which is the main lithology at Orion South. Finding a large stone in the Pense rock confirms the prospect for coarser-grained sections of that lithology.

Shore Gold also processed the fifth sample from Orion South, which produced 330.54 carats from 2,809 dry tonnes. The EJF portion of the sample carried an average grade of 17.39 carats per hundred tonnes.

The primary goal of underground sampling at Orion South is to collect 5,000 carats from the EFJ kimberlite for valuation purposes. Large-diameter drilling is also underway at Orion South. The bulk sampling and drilling results together will inform a resource estimate for the project, which is Shore Gold’s second major goal for 2009.

The $18-million plan for 2009 is certainly a step back from what happened at the Fort a la Corne projects last year. In 2008 Shore Gold and Newmont together spent almost $87 million on the joint venture properties in 2008 while Shore Gold spent an addition $8 million on the Star property. Newmont has elected to not participate in the 2009 joint-venture budget beyond the completion of the Orion South large diameter drilling in late January, leaving Shore Gold to carry the full financial weight of the project.

As of Nov. 5 Shore Gold has roughly $21.4 million on hand in cash, cash equivalents, and short-term investments. On Nov. 24 the company closed a private placement comprising 16.67 million flow-through shares at 75¢ a piece for gross proceeds of $12.5 million.

In recent weeks Shore Gold’s share price has ranged from 25¢ to 60¢. The company has a 52-week trading range of 20¢ to $4.64 and has 183 million shares outstanding.