Sutton seeks funds for Tanzanian gold project

Three inauspicious factors — an 18-year low in the price of gold, the bombing of the U.S. embassy in Tanzania and the ongoing conflict in war-torn Democratic Republic of Congo — contributed to the recent erosion in the share price of Sutton Resources (STT-T). The issue was recently trading as low as $3.50.

The dip could not have occurred at a worse time, as the Vancouver-based junior is attempting to raise sufficient funds to develop the Bulyanhulu gold project in northwestern Tanzania.

A positive bankable feasibility study prepared by Kilborn Engineering Pacific estimates a price tag of US$211 million, which is in addition to the approximately US$63 million incurred to the end of August 1998.

The study envisions a 2,500-tonne-per day underground mine, with ramp and shaft access, capable of producing 300,000 oz. gold per year via a multi-stage milling circuit. Total cash costs are expected to average US$163 per oz. over a mine life of 11.3 years.

The feasibility study is based on a diluted proven and probable reserve in the Reef 1 deposit of 10 million tonnes grading 11.65 grams gold per tonne, equivalent to 3.75 million contained ounces. Gold recoveries are projected at 92.5%.

Reef 1 contains an additional inferred resource of 5.9 million tonnes grading 13 grams, or 2.47 million oz., which could extend the mine life to 18 years.

Reef 1 is the main mineralized zone, a steeply dipping tabular body that averages 4.4 metres wide and extends along strike for 1,400 metres and vertically for 1,100 metres. Mineralization is hosted in a sheared, quartz-rich, graphitic and argillaceous unit, sandwiched between two volcanic units. The Reef 1 deposit remains open along strike and at depth.

Running parallel to Reef 1 is the Reef 2 zone, 500 metres to the north. Reef 2 consists of a series of en echelon vein structures in sheared, intermediate volcanics. Sutton has drill-tested a 1,200-metre-long area of Reef 2 with 56 diamond drill holes to a maximum depth of 400 metres.

This work has led to a resource estimate of 597,000 contained ounces — more than double the previous estimate of 267,000 oz. Reef 2 is now estimated by Giroux Consultants to contain an indicated and inferred resource of 1.6 million tonnes grading 11.63 grams.

The resource estimate is the cumulative tonnage from eight sub-parallel veins, which range in attributed size from 11,000 to 550,000 tonnes. The average true width of the veins is just over 2 metres.

The Reef 2 sheared zone has been traced by geophysical surveys over a strike length of 8 km. Further drilling along this structure is planned. Diamond drilling along strike on the Reef 1 structure is also in progress.

Sutton holds a 100% interest in the Bulyanhulu project, with the Tanzanian government retaining a 15% carried interest in the after-tax profits of the project.