Intrepid continues to expand Tumpangpitu

Vancouver – For the third time in a little over a year Australia-based Intrepid Mines (IAU-T, IAU-A) has added hundreds of millions of inferred tonnes at the Tujuh Bukit gold-copper project in Indonesia.

The resource increases have come from the Tumpangpitu sulphide target, which sits under a sizable oxide resource, while the whole 116-sq.-km project sits in the southeast corner of the island of Java.

With the latest update Tumpangpitu is estimated to contain 1.7 billion inferred tonnes grading 0.41% copper and 0.46 gram gold per tonne for 15 billion lbs. copper and 25 million oz. gold based on a 0.2% copper cut-off. The update adds over 70% to the 990-million-tonne resource released in May and is more than three times the 500-million-tonne resource released last September.

The footprint of the resource has increased correspondingly, from roughly 1.4-km diameter with the first resource to a 2.4-km by 1.4-km area with the second and now spans about 3.4-km by 2.8-km with a vertical depth of 1.1 km.

The resource is now based on 41 drill holes each over 700 metres long for roughly 36,600 metres of drilling. Five other holes did not hit the porphyry body. Previous resource estimates were based on 26 and 13 holes respectively.

Meanwhile, sitting above the porphyry resource is a 130-million-tonne inferred gold-silver oxide resource grading 0.55 gram gold and 18 grams silver per tonne for 2.4 million oz. gold and 80 million oz. silver. An April preliminary economic assessment on a potential heap leach, open pit operation for the oxide portion set a net present value of US$180 million with a 10% discount, an internal rate of return of 31% using US$1,050 per oz. gold, and a nine-year mine life producing 143,000 oz. per year at US$376 per oz. gold.

According to a June technical report, the overall mineralizing system broadly comprises a deep, magnetic tonalite intrusion that has intruded into an older and more extensive feldspar-hornblende diorite stock. The shallow epithermal section is dominated by intense hydrothermally altered andesitic lithic volcanic breccias, diatreme breccias, hydrothermal breccias and diorite, while deeper potions are characterized by alteration and vein assemblages characteristic of porphyry systems.

Both the oxide and sulphide deposits, however, are located in designated protected forest land, which restricts some activities and bans open pit mining.  Intrepid, along with its local joint venture partner, are applying to reclassify or rezone the land, but it is unclear how long the process will take, or if it will ever be successful.

Despite the risk the company continues to rapidly advance the project and will soon have 11 drill rigs on site conducting both infill and exploration drilling, with one capable of drilling down almost 2 km. The company is also advancing its Candrian porphyry target roughly 2 km east of Tumpangpitu and its Gunung Manis epithermal target 4 km east. The Gunung camp and drill rig were damaged by fires set by artisanal miners in June, but exploration has since resumed.

Since pre-2009 Indonesian mining laws did not allow foreign ownership of mining tenements, Intrepid does not actually hold a direct interest in the Tujuh Bukit project. Instead, it has an 80% ‘economic interest’ in the project through several contracts, with local joint venture partner PT Indo Multi Niaga holding the rights. Intrepid is working to establish direct ownership now that the laws have changed, but it will need government approval, including possibly from the regency head of Banyuwangi as well as the Ministry of Mines and the investment board. Intrepid has noted that the regency head (or Bupati) has also requested consultations about a future divestment of a minority stake in the project for the benefit of the local community.

Vale (ADR-N) came close to optioning 60% of the sulphide portion of the project in 2009 for a US$40-million spending commitment, but the deal eventually fell through. At the time the project did not have an established sulphide resource.

Intrepid’s share price climbed 20¢ to $1.51 with 1.3 million shares traded on the latest resource update. The company hit a brief 52-week share price high of $2.45 in April and a low of 84¢ in October.

The company had almost $160 million in cash on hand at the end of September. Intrepid sold off its Paulsen mine in Australia for A$40-milllion last year and its Casposo Mine in Argentina for US$22-million in 2009 as it continued to increase its focus on Tujuh Bukit. The company also raised $144 million in December 2010 after issuing roughly 81 million shares in two separate financings, and now has about 522 million shares issued.