Shares in Shanta Gold (LON:SHG) surged 14% this morning after the mining company said that the “exceptional” results from the first two drill targets at its Chunya project raised its expectations of successfully delineating an increased resource.
The initial drill results from the current Phase III RC (reverse circulation) drill programme at the Chunya project in Tanzania, which is continuing on the other prospects and a number of new targets, highlighted the presence of potentially economic gold mineralisation along the extensions of the five known ore zones and several new targets.
The results from the western extent of Luika included intersections of 6 metres grading 3.42 g/t (grammes per tonne) of gold, 5 metres grading 15.14 g/t gold and 4 metres at 15.89 g/t gold.
The best intersections from the Luika South target included 4 metres grading 8.73 g/t gold, 3 metres grading 11.61 g/t gold, 3 metres grading 6.74 g/t gold and 2 metres grading 2.78 g/t gold.
Shanta said that the results from the initial boreholes confirmed the mineralised strike at depth for a further 150 metres along the western extension of Luika, and along the new Luika South target along a strike length of 500 metres. They have also doubled the potential strike at Chunya from 3 km (kilometres) to 6 km, necessitating an extensively revised drilling programme and budget increase.
The programme was designed to extend known gold resources, test new targets for potentially economic mineralisation and define easily accessible near surface resource ounces. It will now be a priority to delineate potential new resources sufficiently for rescheduling and redesign of the open pit operations scheduled at Luika and Bauhinia Creek.
The current resource stands at 642,716 oz (ounces) of gold.
The drilling results have motivated Shanta’s board to proceed with the detailed design an construction of the New Luika gold mine.
The mine's detailed design will incorporate the updated resource models.
Shanta said that revised open pit designs and a stronger grade ounce mine production plan will positively impact the early projected project cash flow, resulting in a shorter capital payback period and significantly improved NPV (net present value).
“The drilling results are exceptional, raising our expectations of successfully delineating an increased resource on the project and further validating our decision to go ahead with the recently completed definitive feasibility study.
“We expect a significant improvement in the NPV and capital payback period of the project,” said Chairman of Shanta Gold Walton Imrie.
First gold production is expected in Q4 2011 within nine months of starting mining at site.
Fairfax called the results a “very pleasant surprise” for the team, adding that further drilling and ongoing work at the site could provide further support and upgrade to the JORC resource in time.
“It is difficult to make a guess on how much this might add to the JORC gold resource but the extensions appear to add significant mineralised potential to the ‘New Luika Gold Mine’ at Chunya,” said the broker.