A classic move as CLZ fast tracks Kat Gap to gold production

In an extremely important development for Western Australian mining group Classic Minerals Limited (ASX:CLZ), the company has secured a gold gravity processing plant to be used for onsite processing of gold ore at its Kat Gap Gold Project.

With strong grades and near-surface mineralisation, as well as evidence of new zones outside the original drilling perimeters, there is now the option to fast track Kat Gap to early production.

Consequently, an on-site processing plant is an important part of management’s plans to bring Kat Gap into production in the near term.

Kat Gap is located approximately 120 kilometres south-east of Southern Cross, WA and has an existing 93,000 ounce JORC Resource with strong exploration upside and scope for high-grade open pit mining.

The equipment secured is a Gekko gold gravity processing plant, and Gekko are world leaders in the manufacture of gold processing plant and machinery with their plants boasting small footprints and low environmental impact.

An added attraction to Classic is that the Australian-made Gekko plant ,as shown below, is modular and mounted on containerised elements providing for scalability and ease of modification.

The plant has a 30 tonne per hour capacity and is scalable to a Gekko Python plant with a processing capacity of 250 tonnes per hour.

Also, the mobility associated with the modular construction enables Classic to locate the plant adjacent to the ore body which further minimises cartage and processing costs.

Production to commence when mining approvals granted

Classic’s purchase is for a two-stage gravity concentration plant from Gekko which will be provided fully refurbished to new condition.

The two-part plant will form the basis of the processing facility to be set up and operated by Classic at its Kat Gap gold deposit.

Classic is now on track to set-up, commission and test the Gekko plant and commence processing of the gold-rich ore at Kat Gap.

The Gekko plant is ideally suited to processing Kat Gap ore which has a unique high gravity gold concentration.

The company will have the capability and capacity to commence production as soon as the mining approvals (MLA 74/249) have been granted.

In order to provide an immediate revenue stream, Classic has also commenced negotiations to toll treat any initial parcels of ore from Kat Gap, while the full-scale plant is configured to suit Kat Gap ore.

Where Kat Gap fits into the broader Forrestania Gold Project

The main thrust of exploration at the Forrestania belt has been the Lady Ada and Lady Magdalene tenements.

These, along with Kat Gap, have a JORC-defined gold resource as outlined in the following table.

Classic made a major discovery at the 100% owned Kat Gap tenements, about 50 kilometres to the south-east of Lady Ada and Lady Magdalene.

Very significant high-grade gold intersections have been identified at Kat Gap, and Classic has upgraded the priority of Kat Gap, making it the main focus of its exploration.

Classic has great faith in Kat Gap with management now giving it the designated title ‘’flagship project’’.

Indeed, it could be argued that the mix of promising exploration results which have also indicated the prospect of significantly greater resource expansion than originally anticipated, combined with management’s decision to facilitate early-stage processing, positions the group for a market capitalisation based rerating.

Classic’s market capitalisation of approximately $20 million doesn’t even capture the value of gold in ground, let alone the group’s exploration potential.

As a guide, if Classic were able to extract 50,000 ounces of Kat Gap’s 90,000 ounce resource, applying the current gold price (approximately A$2500 per ounce) and average production costs (approximately A$1300 per ounce) the company could net A$60 million.

Now that management is a master of its own destiny in terms of transitioning from explorer to producer one would expect the company to attract a significantly higher market capitalisation.

This would translate into a considerable share price increase which is likely to see the company at least test its 12 month high, implying share price upside of 100% relative to Friday’s closing price.