Citigold Corporation gold production up 110% on previous Quarter

North-east Queensland gold producer Citigold Corporation Ltd (ASX: CTO) said results to 31 December 2009 included QoQ production at the company’s flagship Charters Towers project leaping 110 per cent to 5563 ounces.

This represented the highest quarterly and half yearly production.

“A new management team was in place at Charters Towers from October, with a clear objective to drive gold production growth,” Citigold said.

At 5,563 ounces, production was above the indicated production level in the December update and a 110% increase on the previous Quarter. With two strong quarters growth this is the best half year.

The Company amended its production estimate for the Quarter.  This resulted from a mining area producing a relatively small tonnage compared to the original predicated geological model.

A very high grade intersection had biased the ounces in a way that had not occurred before.

Citigold said subsequent development of the ore body along strike to the west of this area is producing new ounces that may eventually come close to the ‘lost’ ounces over the last Quarter.  The company aims to open up the reef so there can be ultiple stoping panels, helping to improve the reliability of production estimates.

Underground gold production at Charter Towers is still limited by the rate at which the high-grade areas can be defined for the mine plan.  This development scheduling is still behind but the rate is improving and management is focused on optimising the premining work so that development and gold output can progress faster.

A$103.5 million-capped Citgold, an ASX/S&P 300 Index constituent, added that its quarter and half-yearly production were company records, delivering an average ounce cost of A$481 at a sale price of A$1225.

“The profitability and efficiency of the operations has trended upward since commencement of production, with revenue rising to almost $7 million per quarter in December 2009, representing an increase of more than 800 per cent in three years.”

Average ore feed gold recovery was quoted at 98 per cent.

Citigold said the Warrior area within Charters Towers had an inferred resource of 4.4 million tonnes at 14 g/t, slated to deliver 1.9 million ounces.

Given the company’s Charters Towers success, Citigold added that it intends to reactivate the nearby City Central decline, with the City reef thought to contain some 4.7 million ounces.

“The area represents a large part of the overall gold deposit,” the company said.

Management highlighted that revenue was substantially up since 2007, with cash costs stable, albeit production missing target.

“Although production is lower than expected, gold production is continuing to trend up,” the company said.

“As gold production materially increases, Citigold expects economies of scale to lower costs further.

Citigold drilled 28 bore holes, covering 5600 metres in the December quarter.

The company also obtained a 300 sq km exploration permit adjacent to current operations.

“Citigold has extensive prospective exploration holdings at Charters Towers, outside the drilled 10 million ounce gold deposit,” the company said.

In October 2009, Citigold took a 46 per cent stake in Australia-based gold and base metals explorer Gateway Mining Ltd (ASX: GML) via the issue of 16.2 million shares.

To 31 December 2009, the company had quarterly outgoings of A$2.2 million, but issued securities to the value of A$4.2 million for a net cash position of A$951,000.

The Directors intend to personally take up their full 2010 Share Purchase Plan (SPP) entitlement.

Citigold said it currently carries no debt and is progressing towards a positive cash flow.

The number of shareholders in Citigold continued to grow throughout 2009, with the current number of shareholders exceeding 11,000.

The company acknowledged that 2009 was not a strong year for the CTO share price. "The management team will continue to work hard to advance the project and add value for shareholders and look forward to an improved 2010."