Galahad Gold plc ("Galahad")
PEBBLE PROJECT UPDATE
The new discovery
On 22nd September 2005, Galahad announced that a significant new copper/gold porphyry system had been discovered at the Pebble deposit in Alaska by Northern Dynasty Minerals ("NDM") in which Galahad has a stake of 24.2% (20.9% fully diluted).
The NDM graphic reproduced below shows clearly the previous drilling and the new higher grade mineralisation discovered in the Eastern zone:
At NDM's price of $C5.03 per share on the 13th October 2005, NDM has a market capitalisation of $C365m ($US309m). Galahad's major investment in NDM makes this new discovery of great importance to shareholders.
Preliminary Assessment
On 2 November 2004, NDM released details of a Preliminary Assessment of Pebble lead authored by an independent qualified person, Derek Barratt P.Eng, and co-authored by NDM's in-house qualified person, Peter Beaudoin, P.Eng. The key features are set out below:
- Pebble's estimated Inferred Mineral Resource was 2.74bn tonnes, containing 26.5m oz gold and 16.5bn lbs copper.
- Three production rate scenarios:
1. 100,000 tonnes per day (tpd),
2. 200,000 tpd, and
3. a phased expansion from 100,000 tpd to 200,000 tpd.
- At 200,000 tpd, the project would produce an annual average of 470 million pounds of copper, 674,000 ounces of gold, 2.5 million ounces of silver and 15 million pounds of molybdenum during the first 10 years of a 31 year mine life.
- At US$0.95/lb copper, US$395/oz gold, US$5.00/oz silver and US$5.00/lb molybdenum, the Pebble project:
- could generate an Internal Rate of Return (IRR) of between 15.3% and 20.3%
- at these prices, had a Net Present Value(NPV) discounted at 5%, of between US$1.047 billion and US$2.091 billion (assuming pre-tax, 100% equity financing).
- At the then current metals prices of US$1.25/lb copper, US$415/oz gold, US$7.00/oz silver and US$15/lb molybdenum, the IRR would increase to between 33.0% and 40.8% and the NPV, discounted at 5%, to between $3.511 billion and $5.972 billion (assuming pre-tax, 100% equity financing).
- The capital cost estimates ranged from US$1bn for a 100,000 tpd mine rising to US$1.5bn for a 200,000 tpd facility.
Since the estimates of IRR and NPV announced on 2 November 2004, there have been substantial improvements in two key elements of value - resources and metals prices.
Resources
On 4 March 2005, NDM announced that independent mining consultants, Roscoe Postle, had issued a new resource estimate with a cut-off grade of 0.30% CuEQ. The increase in contained metal within the resources shown in their report compared with those estimated in the Preliminary Assessment of November 2004 are set out below:
|
Independent Resource Estimate 4 March 2005 by Roscoe Postle |
Preliminary Assessment 3 November 2004 |
Increase % | |||
|
Inferred Resources |
Measured & Indicated Resources |
Total |
Inferred Resources | ||
|
Gold (oz) |
10.8m |
31.3m |
42.1m |
26.5m |
58 |
|
Copper (lbs) |
5.8bn |
18.8bn |
24.6bn |
16.5bn |
49 |
|
Moly (lbs) |
361m |
993m |
1.354bn |
900m |
50 |
As these figures show, the resources announced in March 2005 were in total about 50% higher than the previous figures in November 2004. Also, during the period between the production of the two reports, approximately three-quarters of the resources were upgraded to Measured and Indicated status.
Neither of these two estimates take account of the new porphyry discovery announced by NDM on 21 September 2005 in the Eastern Zone.
Metal prices
The movement in metal prices, in US$, is set out below:-
|
Prices used for Preliminary Assessment (NPV $1-2bn) |
Prices at the time of the Preliminary Assessment (NPV $3.5-6bn) |
Current Prices (as at 13 October 2005) | |
|
Gold (oz) |
$395 |
$415 |
$471 |
|
Copper (lb) |
$0.95 |
$1.25 |
$1.84 |
|
Moly (lb) |
$5 |
$15 |
$34 |
There is, of course, no guarantee that metal prices will hold at today's levels. Many mining experts believe that they will fall sharply. There is also a body of opinion that we are in a commodity super-cycle and that as a result prices will continue to rise.
Grade
To put the new discovery in perspective, NDM reported that the average grade at a cut-off of 0.30% in the Preliminary Assessment was 0.55% CuEQ including a higher grade volume of ore subsequently confirmed by Roscoe Postle to be 0.88% CuEQ with a cut off of 0.70%. The new core hole 5327 drilled in the Eastern Zone has an average grade of 1.45% CuEQ.
Further Developments
The Pebble deposit is subject to Environmental Permitting approval and work is currently progressing towards the completion of a Feasibility Study by the end of this year.
Please refer to the NDM announcements dated 2 November 2004, 4 March 2005 and 21 September 2005 for detailed information on drilling results, assumptions used for the economic evaluation of the deposit and the Cautionary and Forward Looking Information Comments. Full details of all announcements relating to the Pebble deposit can be obtained from the NDM website at www.northerndynastyminerals.com.
Enquiries to:
GALAHAD GOLD PLC
Ian Watson/Angelos Damaskos Tel: +44 20 7408 2002
PARKGREEN COMMUNICATIONS
Simon Robinson/Cathy Malins Tel: +44 20 7493 3713
DRESDNER KLEINWORT WASSERSTEIN
Chris Treneman Tel: +44 20 7623 8000
_______________________________________________________
Cathy Malins
Account Manager
Parkgreen Communications
1st Floor, Ireland House, 150 New Bond Street, London, W1S 2AQ
t: +44 20 7493 3713 f: +44 20 7491 3936 m: +44 7876 796 629
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