Bass Metals announces further boost to earnings for Fossey Mine

Polymetallic miner Bass Metals (ASX:BSM) has reported that mine development and mill refurbishment is on track for first concentrate sales in January 2011 at its Hellyer Mine Project, as well as a new production growth initiative underway.

There is a 25% increase in forecast earnings before interest and tax (EBIT) for Fossey Mine, within the Hellyer Mine Project, from $55M to $69M by incorporating current metal prices.

Increased production by mining of lower grade disseminated mineralisation, possibly with a pre-concentration circuit is being investigated to increase mill utilisation, lower unit costs and increase cash flow.

Mike Rosenstreich, managing director, said “this is a very positive outcome which further strengthens the robust project financials, particularly given that the underlying technical plan was updated for both adverse and beneficial changes since the Hellyer Operating Plan (HOP) was completed in March 2010.”

The Fossey decline is at approximately 850 metres. Current mine development activity is focussed on connecting the decline to the pilot drill hole for the first of two vertical ventilation shafts to enable the commencement of 212 metres of raise boring of the shaft.

Drilling of the pilot hole for the second ventilation shaft is planned to commence shortly. Water ingress into the decline remains high but is being managed by the recently upgraded mine dewatering system and connection to grid power.

In the second half of October the mine development activity will widen to include development of the first ore extraction level (465mRL) as well as continuation of the decline.

Bass expects first ore to be intersected by the development drives on the 465 level in mid November and stoping production to commence in late December.

The refurbishment of the Hellyer Mill is progressing well and is approximately 85% complete. Commissioning of some components of the Mill circuit has already commenced.

Commissioning the entire circuit will commence in November, initially with waste rock and then approximately 20,000 tonnes of Que River mineralised waste.

The HMP is forecast to generate EBIT of $25 to $35 million per year based on current metal prices and exchange rates. In the first two years alone, when Fossey is mined, the forecast EBIT is approximately $69 million.

“The strong earnings and cash generating potential of the HMP will provide the capital that Bass plans to employ to grow its business,” added Rosenstreich.

A further positive aspect is that the rise in co-product commodity prices has further reduced the benchmark C1 cost of production to US$0.12/lb payable zinc after credits, placing the HMP well into the lowest quartile of world production costs.

The production profile of the Hellyer operations is not “Mill” constrained. Bass has substantial growth potential through its existing infrastructure and resources, namely, an underutilised mill and extensive low-grade as well as high-grade Mineral Resources.

Bass has commenced work with Como Engineering to assess an exciting opportunity to increase metal production and cash-flow. The large 1.5 mtpa capacity of the Hellyer Mill provides Bass with the operational flexibility to process any additional amenable ore delivered to the Run of Mine (ROM) stockpile.

The company said it is therefore possible to achieve additional production growth from existing hard-rock resources by lowering the mine cut-off grade to include disseminated/lower grade ore types, either on a “stand-alone” or an incremental ore basis.

Bass believes this scenario could be further optimised with the inclusion of a pre-concentration module such as a Heavy Media Separation (HMS) plant which would up-grade the metal content of the feed grade into the flotation circuit of the plant, reducing processing costs.

This growth opportunity has potential near term application at Fossey where the total mineralised zone comprises 2.3 million tonnes at approximately 5% Pb + Zn of which 0.8 million tonnes is the high grade massive base metal sulphide lens (15% Pb + Zn) comprising the Ore Reserve.

The Hellyer Mineral Resource also has a significant stringer zone style mineralisation with typical grades of 0.3% Cu, 3% Pb, 5% Zn, 52 g/t Ag and 0.9 g/t Au, which could be viable without pre-concentration.

This material is could be amenable to preconcentration and has significant potential for major resource upgrades as it has not been targeted specifically for resource drilling.

Inclusion of lower grade material on either a “stand-alone” or incremental cost basis has the potential to add ore tonnes to the processing schedule resulting in better mill utilisation and an increase in metal production.

Inclusion of a pre-concentration module could improve metal recoveries, lower costs and reduce utilisation of the tailings dam.

“Bass Metals is clearly on the cusp of a major growth phase based on existing resources and proven technologies,” Rosenstreich said.

“Our next mine - Fossey - is poised to commence production, with mine development and Mill refurbishment activities on track to start processing Fossey ore and achieve first concentrate sales in January 2011."

"Furthermore, we are assessing several exciting opportunities with strong potential to more fully utilise the large Hellyer Mill and increase metal output and cash flow,” Rosenstreich added.