LionOre pours first gold from Thunderbox (November 19, 2002)

After nine months of construction and development, LionOre Mining International (LIM-T) has poured the first gold dor bar at the Thunderbox gold project in the North Eastern Goldfields of Western Australia.

Weighing in at 11.7 kg, the bar was produced from oxide ore run through the processing circuit during an 18-day commissioning period. The plant is currently running at about 85% of its capacity, which is rated at 2.5 million tonnes per year. Production is expected to reach full steam in two weeks.

Ore production at the mine is ahead of schedule, and over the past few months about 200,000 tonnes (about a month’s production) has been stockpiled.

Running at a rate of 2.5 million tonnes per year, Thunderbox is expected to produce 220,000 oz. of gold at a cash cost of US$110 per oz. during its first year. Thereafter annual throughput slips to 2 million tonnes as mining encounters sulphide ore. Annual production is pegged at 150,000 oz. at US$157 apiece. In all about 800,000 oz. of gold are to be produced over an 8-year mine life. Capital costs ring in at A$65 million.

About half of Thunderbox’s production has been hedged at US$293 per oz. through Macquarie Bank. That’s US$35 per oz. better than assumed in the bankable feasibility study.

Reserves tally to 10.9 million tonnes averaging 2.43 grams gold, based on a gold price of US$254 per oz. and a cutoff grade of 0.7 gram for oxidized material and 1.1 grams for primary material.

LionOre owns 60% of the Wildara joint venture, which holds Thunderbox. Australia’s Dalrymple Resources has the remaining 40% stake of the joint venture.

About 6 km to the north, near its Waterloo nickel-platinum-group-metals deposit, the joint venture has cut a new zone of nickel mineralization. Dubbed Amorac (formerly electromagnetic anomaly MC9), the nickel sulphide deposit is situated about 300 metres southeast of Waterloo.

Earlier this summer, two holes collared on MC9 returned up to 6 metres (from 172 metres below surface) averaging 3% nickel and 1.48 metres (from 209.6 m) of 1.12% nickel.

The latest round of diamond and reverse-circulation drilling was completed on 40-b-40-metre spacings and has defined a 250-metre-long zone of nickel mineralization, running at depths between 90 and 180 metres.

The zone comprises massive and stringer nickel sulphides and is structurally controlled and hosted by sheared, siliceous sediments with minor associated ultramafic lenses. The mineralization runs up to 6% nickel over widths of up to 6 metres.

Highlights from RC drilling include:

• Hole 574 — 4 metres (from 180 m) grading 3.3% nickel, and 0.08% copper, including 1 metre of 6.11% nickel and 0.12% copper;
• Hole 592 — 2 metres (from 115 m) averaging 3.26% nickel and 0.1% copper; and
• Hole 615 — 2 metres (from 74 m) of 2.97% nickel and 0.1% copper.

Total platinum group element (PGE) values generally run less than 0.5 gram per tonne. Some PGE assay results are still pending.

Selected results from diamond drill include:

• Hole 603 — 0.65 metre (from 107.6 m) of 2.89% nickel and 0.05% copper;
• Hole 607 — 1.14 metres (from 179.9 m) grading 2.62% nickel;
• Hole 619 – 6.32 metres (from 202.7 m) averaging 3.54% nickel and 0.08% copper, including 2.7 metres running 6.6% nickel and 0.1% copper

Assay results for PGEs are pending.

The zone remains open along strike to the north and south coincident with an electromagnetic anomaly. LionOre believes that Amorac is not directly associated with the Waterloo deposit.

Drilling continues.

South of Amorac further surface electromagnetic surveying has turned up another eight conductors, brining the total of number of targets in the area to 21. Of the five targets tested so far, three have returned nickel mineralization, including Waterloo and Amorac.

LionOre plans more surveying and preliminary drilling before yearend. A scoping study at Waterloo is expected to wrap up early next year.

LionOre’s shares were trading a nickel higher at $4.25 in midday action in Toronto on Nov. 19.