Spin-off gold company floating out of the gloom

The ascension of gold in these dire times has seen one of Australia's most impressive lead-zinc-copper miners place all its gold assets into a new company to then seek listing on the Australian Securities Exchange.

http://www.mineweb.com/mineweb/view/...

Author: Ross Louthean
Posted: Wednesday , 18 Feb 2009

PERTH -

At a time Australian investors are viewing mergers, acquisitions, delistings and receiverships as a way of life in the domestic resources sector, along comes a proposed gold float sponsored by one of the companies that has been an impressive mid-tier miner in recent years - Kagara Ltd (ASX: KZL).

The success of listing these advanced exploration assets dominated by their gold content could be the adrenalin a commodity price cyclone-hit Australian sharemarket has been craving but only because of the gold factor.

Kagara announced today that it plans to incorporate a new subsidiary, Mungana Goldmines Pty Ltd, which will acquire the rights to its gold assets in north Queensland, as a prelude to seeking listing.

Among assets, Mungana Goldmines will acquire the right to is an inferred resource of 1.6 million ounces of gold, 90,000 tonnes of copper and 14 million oz of silver within the Red Dome and Mungana porphyry gold deposits, located near Chillagoe.

Kagara shareholders who have seen the profitability of their high grade zinc-copper-silver miner impacted by low commodity prices, received another drenching in the past week with massive flooding hitting north Queensland at the same time Australia's southern State experienced the nation's worst ever bushfires.

The Queensland floods hit Kagara's mining operations, however, executive director Joe Treacy said today that both the Mount Garnet and Thalanga processing plants have sufficient stockpiled ore to carry them through until March.

Kagara pointed out today that Red Dome was a very profitable gold mine for Nuigini Mining between 1985-96, producing 1 M oz gold and 35,000t of contained copper from an open pit down to 350 metres. At the time the gold price ranged between $A450-$A550/oz. Today's gold price is in excess of $A1,500/oz ($US960/oz).

The gold ore body at Mungana, which has been defined over several years by Kagara, is currently being developed as an adjunct to the Mungana base metal operations. To date, more than $A90 M ($US57.6 M) has been spent on decline access and cross cut development to a depth of about 500m vertical.

Gold ore, currently being mined during cross cut development to access a zinc-copper-lead orebody, is being stockpiled on surface for future treatment by Mungana Goldmines. Ore stocks at the end of January stood at 33,000t grading 1.77 grams/tonne gold and these stocks will continue to build up as mining of the base metal deposit proceeds.

"Though detailed studies have not yet been carried out, it is tentatively planned to extract the 45 M tonnes Mungana gold deposit using sub level caving techniques, on a scale similar to Newcrest Mining's Ridgeway deposit in New South Wales," Kagara said.

Also being acquired by Mungana Goldmines is the newly discovered Victoria gold copper porphyry system, 3.5 km east of Mungana which has been intersected in several holes beneath the Victoria zinc-copper deposit. This has the potential to be a third major gold ore body within the Red Dome Mine Corridor.

"Kagara's emphasis has not been on exploring for gold in the Chillagoe area and with a dedicated focus on gold by Mungana Goldmines, more of these major gold-copper porphyry related systems ore likely to be discovered along the world class Red Dome Mine Corridor." The company said.

Kagara shareholders will be invited to participate in the Mungana IPO.