TIDMKRS
RNS Number : 4669F
Keras Resources PLC
28 July 2016
Keras Resources plc / Index: AIM / Epic: KRS / Sector:
Mining
28 July 2016
Keras Resources plc ('Keras' or 'the Company')
Quarterly Report for the period end 30 June 2016
Keras Resources plc, the Australian gold mining company, is
pleased to provide an update on the Company's activities for the
quarter ended 30 June 2016. The grade being reported on is
provisional until final confirmation is received from the
Paddington Mill owned by Paddington Gold Pty Ltd, a subsidiary of
Norton Gold Fields ('Norton').
Overview:
-- Operations commenced in March 2016 with first ore milled in April 2016
-- First quarter provisional production from the small scale
open pits at Anomaly 22 and Accord:
o 63,346 tonnes mined and toll processed at a provisional grade
of 1.36 g/t Au for a total of 2,763 ounces Au
o Total operating cost per ounce (ex-Tribute) of A$1,407/oz and
total operating cost (Tribute incl.) of A$1,736/oz with an average
gold price received for the quarter of A$1,687/oz
o Lower than expected productivity in the small pits resulted in
higher operating costs
-- Re-evaluation of mining protocols and operating procedures,
including increasing excavator and trucking capacity, optimising
grade control drilling and re-negotiating contracts to
significantly reduce costs and increase margins
-- Mining has been completed at these two deposits and the
Company is now mobilising the new mining fleet to start the next
stage of development by mining at the higher grade Wycheproof
project
-- Wycheproof expected to benefit significantly from the
optimisation procedures implemented as well as being a profit share
rather than a royalty payment - positive cash flow anticipated
-- Detailed plans and costing with contractors for higher margin
and longer life undergrounds well advanced
-- Underground Prince of Wales Bulk Sample approval received
-- At the end of the quarter the Company had a cash balance of GBP0.75 million
Keras Managing Director Dave Reeves said, "Based on the first
quarter production figures we have introduced improved operational
procedures and efficiencies to reduce costs, increase margins and
maximise the value of the tribute lease areas under our control.
The move now into the higher-grade pits at Wycheproof and then
Lindsay's will, I believe, reflect positively in our next
production update. To ensure maximisation of these higher-grade
opportunities, and offset the start-up operational challenges
experienced, we have changed the grade control sampling procedures,
optimised the labour force, and up-sized the mining fleet.
Importantly the new open pit areas are subject to a profit share
tribute agreement rather than a royalty based agreement which
should significantly impact our percentage profit. Furthermore, the
majority of, if not all of the next quarter's production will be
batch processed through a third party mill which should reduce the
time associated with grade reconciliation and payment".
"Therefore, although we have had initial teething issues and
were disappointed by May and June's performance, we have learnt a
lot from mining these smaller pits. All the above initiatives
should see the new open pit operations producing positive cash flow
in the coming quarters. It is now a matter of cost control and
ensuring that our operations are maximising efficiencies as we
continue to implement the original strategy of building a gold
production business around the higher grade and higher margin,
longer life underground operations in the region."
Further details:
Following the commencement of production in late March, the
Company produced a provisional 23,609t @ 1.30g/t for 1,215 oz Au in
April. The following two months experienced operational issues,
which the Board believes have now been rectified with performance
expected to improve as these take effect, production moves to the
higher-grade pits and the agreements switch to profit share rather
than royalty.
In the quarter ending 30 June 2016 the Company mined and toll
processed 63,346 tonnes at a provisional grade of 1.36 g/t for a
total of 2,763 ounces Au. The grade being reported is provisional
until final confirmation is received from the Paddington Mill owned
by Paddington Gold Pty Ltd, a subsidiary of Norton. The final grade
data from the sampling and recoverable gold determination procedure
at Paddington Mill is currently behind schedule due to the sample
crusher being temporarily unavailable during the quarter. The
Company will provide final grades when they have received the
outstanding grade reconciliations, which are expected in the next 6
weeks.
Assuming the provisional grades above, the total operating cost
per ounce (ex-Tribute) was A$1,407/oz and the total operating cost
(Tribute incl.) was A$1,736/oz with an average gold price received
for the quarter of A$1,687/oz. To date, the grades of only 7,430
tonnes of the total 63,346 tonnes have been finalised. The Company
will update the market again as soon practicable once the final
grades are determined.
To maximise the current higher-grade targets the Company has
implemented multiple initiatives to ensure it can take advantage of
the shift to the higher-grade pits. These include a reverse
circulation drilling ('RC') grade control ('GC') programme that is
completed on the open pit prior to operations commencing instead of
a rolling GC programme using blast holes ahead of the mining face.
Although the use of blast holes for GS is considered industry
standard, the Company has implemented the RC programme to mitigate
the risk of grade issues going forward due to the delayed nature of
grade feedback from toll mills.
With regards to labour, Keras has taken the decision to optimise
the work force, and in particular contract all labour directly and
specifically for the job required. Previously the Company had used
multi-skilled operators for flexibility which came at a higher
cost. In addition all labour will now be moved to on-site
accommodation to increase the available operating time and again,
reduce costs.
Additionally, the mining fleet has been resized to increase
productivity and reduce labour costs. The 65 tonne excavator has
been replaced with a 120 tonne excavator and the two wheel drive
rigid trucks have been replaced with six wheel drive articulated
trucks, which can operate in the wet. The increased productivity
associated with using a bigger excavator will be supplemented by a
pit design, which now moves from the 1m benches at the Anomaly 22
and Accord pits to 3m benches at the Wycheproof pit.
In addition to the productivity and cost saving processes
implemented by the Company, mining has also moved into the
higher-grade Wycheproof project and importantly the Tribute
Agreement is a profit share rather than a royalty payment. The
terms of the Norton royalty effectively resulted in 22% lower gold
price and if had been mined as a profit share instead it would have
resulted in a small profit. In addition to the positive changes to
the Tribute economics, the majority, if not all the mined tonnes
will be batch processed at a nearby mill that should result in
timely grade reconciliations and accelerated payment terms. Final
negotiations on this are in progress and we will update the market
as soon as practicable once they are finalised.
Underground
The underground operations remain the long term future of the
Company. They will provide increased production at higher margins
when bought into production. Extensive design work and costing with
contractors has been completed in the quarter and when finalised,
results will be released to the market.
The Prince of Wales Bulk Sample permit has now been received
which allows the Company to target the shallow, higher-grade ore
that can be easily accessed form the existing decline.
Other Projects
The Company continues to evaluate additional gold projects in
Australia to build a larger, sustainable production base. Various
projects have been looked at and are at different levels of
investigation.
The mining licence for the Nayega manganese project in Togo is
still awaiting award and some positive discussions have been had in
the quarter with the Togolese Mines Department.
Corporate
During the quarter the Company completed an equity fund raising
of GBP1,250,000 before expenses.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
For further information please visit www.kerasplc.com, follow us
on Twitter @kerasplc or contact the following:
**ENDS**
Dave Reeves Keras Resources plc dave@kerasplc.com
Nominated Adviser
Gerry Beaney/David Hignell Northland Capital Partners Limited +44 (0) 20 3861 6625
Broker
Elliot Hance/Jonathon Belliss Beaufort Securities Limited +44 (0) 20 7382 8415
Financial PR
Elisabeth Cowell/ Frank Buhagiar St Brides Partners Limited +44 (0) 20 7236 1177
This information is provided by RNS
The company news service from the London Stock Exchange
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