PUA - Peak Minerals

[condog]

Problem with these types of deposits is how sporadic they are. I noticed they didnt quote a g/t figure in the announcement, essentially because its only nuggets which can be found, meaning thye have little or know way of actually figuring out if it will be profitable to mine or not.

(Any geos feel free to correct me if im wrong)

IMO its in no way a sporadic find, its in a known zone after, 3d siesmics and may indicate the vein, and is subsequent drilling to that conducted in 2008 which indicated high grade gold deposits. This may be quiet large and is potentially extremely high quality as per other sections....(opinion only)...HEG owns a very significant tennement on this vein so if it is high quality we are talking about some serious volmue.....and with production starting this month, hopefull the cash will be flowing free and fast real soon...

Obviously assaying needs to be done to confirm quantities, but its extremely positive news.......hopefully time will prove you very wrong....lets wait and see....though.....no risk = no reward.....

 

[derty]

The fact that the gold is visible means that the grades will be very high. Most of the time the gold is not visible in intersections.

The Hargraves and Hill End systems are not single veins. They are saddle reefs and occur stacked on each other and consist of multiple veins of variable continuity. Never an easy mining proposition. Detailed 3d seismic may be able to delineate the geometries and is probably their best bet at understanding the system.

I dug up a paper on the Hill End system. The first attached image is a schematic showing the geometry of the vein systems within the folded rock. The second image is a schematic of the regional antiform (large scale fold in the rock) showing the large scale sedimentary units that comprise the sequence and the relative locations of the gold mineralisation within the sequence. Note the smaller parasitic folds that comprise the regional antiform.

There is a short description within the paper of how the gold is distributed within the vein system.

Economic gold mineralisation occurs primarily within narrow, laminated, bedding parallel veins. Veins thicken into saddle reefs at the anticlinal crests, but they generally contain economic gold only on fold limbs adjacent to the saddles. Veins commonly contain economic gold mineralisation on east-dipping fold limbs but are narrower and only rarely mineralised on west dipping limbs.

 

[prawn_86]

Thanks Derty, very helpful.

So any idea what that means for us mug punters? (in laymans terms?) What is required for this type of deposit to be profitable?

 

[derty]

What it means that it will be incredibly hard to model up a 4-5M oz Au deposit on such thin and complicated vein systems.

I have not kept up to date with all their releases, though to achieve a tonnage of this magnitude the only way I envisage that it could be done would be to model the system up as a large scale bulk mining proposition. Essentially taking all the veins and all the waste rock and lumping it all together resulting in a lot of ore at a low grade. If the veins are close enough together and of a high enough grade then it will be economic to attack it this way. If not then it will have to be progressed as a lower tonnage high grade concern with all the issues that go with small scale mining of complicated deposits.



For a bit of background understanding:
When producing geological models and resource models usually the only source of information available is the drill hole. The closer the drill holes the more you can know about the deposit and the more complicated the deposit the closer the drill holes need to be to have that understanding.

The drill holes are about 5cm in diameter and in the plane of the vein provide about 0.0025 sq.m of information. If the drill spacing is 40m then that 0.0025 sq.m of data is applied to the surrounding 1600 sq.m. If you want to improve your understanding and halve the drill spacing to 20m you will need 4 times the drill holes as at 40m spacing. At 20m spacing one hole will represent 400 sq.m.

There is an economic limit the how densely you can drill out an orebody. If you are wanting to prove up 4-5Mt of low grade ore you cannot afford to drill too tightly. And with that comes uncertainty, especially in complicated systems and assumptions are required to model the system. At the end of the day it is all about risk a it is very hard for the mug punter to quantify this from ASX releases.

 

[condog]

For the mere punter, visible gold is significantly better then non-visible gold....

?It indicates reliable, managment, reliable siesmics, reliable database, and huge potential profits....

Sure much more work and credibility, drills etc to be done to reach profitable production from these viens, but the fact its proven and in visible quantities is huge.......

The presence of copper is also a great plus for this drill program...

Derty the complicated viens are never to be under estimated, but at a depth of 37m to 370m they are easily economically viable with todays gold prices....asssuming no huge increase in explosive or machinery costs.....

All in all its hard to deny todays results as extremely positive and with massive upside potential for the tenement...

 

[outback]

Funny thing is, we have a share club at work. We each take it in turns buying shares when our weekly contributions reach a set limit. One member who knows squat about the market picked HEG. Whilst I thought gold was a good area to invest, I didn't think HEG were the best prospect, he may well prove me wrong.

 

[So_Cynical]

For the mere punter, visible gold is significantly better then non-visible gold....

?It indicates reliable, managment, reliable siesmics, reliable database, and huge potential profits....

Sure much more work and credibility, drills etc to be done to reach profitable production from these viens, but the fact its proven and in visible quantities is huge.......

at a depth of 37m to 370m they are easily economically viable with todays gold prices....asssuming no huge increase in explosive or machinery costs.....

All in all its hard to deny todays results as extremely positive and with massive upside potential for the tenement...

I would argue the opposite is true...its one lousy hole and the "visible" gold is somewhat underwhelming and doesn't prove anything that wasn't already known....i would be inclined to wait for the next 7 or 8 holes to come in before i got to exited.

Couldn't help but notice the market agreed with me on the day this ann was released...and that the HEG SP has fallen more than 6% this week.
.

 

[condog]

Re: HEG -High Grade Results Today

• Diamond hole HGD35 has returned bonanza grade gold assays from the new highgrade South BNH zone at Hargraves.
• Assays are 627g/t (20oz/t) over 0.8m, including 1,667g/t over 0.3m at 38m in Veinset1 and 248g/t (8oz/t) over 3.6m, including 2,887g/t over 0.3m at 107m in Veinset 3.

The Veinset 1 and 3 positions have been intersected in most holes over a 300m strike length, showing moderate mineralisation and increasing in thickness and grade to the south.

Two drilling rigs are now on site at Hargraves and a third is expected in the next few days

Some exciting developments on what may turn out to be a significnat gold resource....

These results are fantastic...shallow depths and the resource is actually getting better the further they drill...

While the g/tonne are astounding the depthe of each find is pretty shallow....but it does indicate possible numerous outher high grade deposits in between drilling holes....

Its certainly a very positive announcment....

 

[Sean K]

Still a massive question mark over the potential to shore up a decent economical resource. Incredible grades, but incredibly narrow also.

I note that they have only announced results for one diamond drill hole.

Where are the other results? 30 diamond drill holes have been completed.

They do mention this:

Adjacent holes on the same section did not intersect bonanza grade material and further holes are planned to follow up the intense mineralisation.

How many adjacent holes?

And this:

The Veinset 1 and 3 positions have been intersected in most holes over a 300m strike length, showing moderate mineralisation and increasing in thickness and grade to the south.

What's going on? Why not provide the detail?



Are those alarm bells?

 

[condog]

Where are the other results? 30 diamond drill holes have been completed.

Are those alarm bells?

Obviously these are the ones immediately newsworthy, i absolutely hear what you say and have both eyes wide open.... but the important thing is they are continuing strngly in the right direction......

My guess is they are drilling perpendicular to find off shoots from the main veins... and to determine length, in that case most holes will come up with zilch, but it has to be done to achieve JORC and to lower costs at the other end...

No concerns what so ever yet....be optimistic....it makes the roller coaster so much more enjoysabe.....

 

[Sean K]

Obviously these are the ones immediately newsworthy, i absolutely hear what you say and have both eyes wide open.... but the important thing is they are continuing strngly in the right direction......

My guess is they are drilling perpendicular to find off shoots from the main veins... and to determine length, in that case most holes will come up with zilch, but it has to be done to achieve JORC and to lower costs at the other end...

No concerns what so ever yet....be optimistic....it makes the roller coaster so much more enjoysabe.....

Very good to hear you being objective on this one condog and keeping an open mind. I'm a glass half empty guy when it comes to investing. Caution is the better part of valour in the markets in my opinion. But, it's those that run head on into individual stocks that can make the big dollars. Or otherwise.

 

[condog]

EARNINGS ESTIMATES
The earnings estimates that result from the above production profile are as follows: 2010 = 1c , 2011 = 6c, 2012 = 16, 2013 =23c, 2014 = 26c, 2015 = 32c
VALUATION
The estimated cash flows from the above production profile result in an estimated Net Present Value (NPV) of $2.54 per share fully diluted including the existing listed options at a Discount Rate of 17.5% and at a constant Australian dollar gold price of $1,117 per ounce. The NPV will rise to $ 2.97 per share at a discount rate of 15%.

This was an interesting read from Sino Analysis Report on the HEG web site...
http://www.hillendgold.com.au/index.php?option=com_content&view=article&id=127&Itemid=158

Also of interst to new investors looking into this was these few quotes

If the Company’s drilling program achieves the expected outcomes outlined above the Company will be earnings positive in financial year 2010 and move into the ranks of significant Australian gold producers within 3 years with an ultimate target of approximately 250,000 oz pa., generating substantial EPS.

The Company’s drilling program which is refining and extending the resource both in acreage and at depth is at the same time producing gold averaging 1,000 ozs per month. The intention is to prove up a 500,000 tonne resource @ 15 g/t down to 400 metres level which will allow the production of approx 40,000 - 50,000 oz per annum within 24months.......and ........simultaneously ......35 kilometres north of Hill End, with the objective being to prove up a 10 million tonne resource at 4g/t down to 400 metres level. This will result in a progressive increase in production exceeding 200,000oz pa within 4 years......as well as laos......

But hows that an NPV of $2.54 to $2.97......

 

[Speculator]

Just noticed HEG got a mention in Feb edition of Smart Investor.

Wont breach copyright so go check it out if your keen or don't if your not

 

[So_Cynical]

Fair to say the HEG share price isn't travelling to well...pretty much gone nowhere over the last 12 months and just struggling to find bottom, HEG is looking more and more like one of those Goldies where the reality cant match the hype.
~

 

[condog]

Its chart isnt looking too pretty, but they have a lot happening at Hill End and Hargraves at presnt while they put in the declines ready for the vertical stopes.

They have upgraded the plant, purchase new machinery and trippled its capacity, and have been undertaking extensive drilling.

There will be delays in sp rise till the declines are ready for mining. A turn around is due soon and once the increased production kicks in we should see a very good bounce.

 

[Sean K]

There will be delays in sp rise till the declines are ready for mining.

There is always a general chart from exploration to development to production, but this one doesn't fit the bill.

Looks decidedly back the front actually.

Especially when gold explorers have been generally well supported. Some up 100% since Dec.

The problem I see with this company and their deposits is that it's sporadic. Like a Bendigo, or Ballarat. Very nuggety so that they can say they hit 1000 g/tn over 0.003m, but over 10m it's crap. And, for an underground, or deep mine, this is unfeasable. High grade hits at depth do not add up to an economic resource unless they're over high width and massive length. Unless you have a Chinese workforce digging by hand of course.

I've only had a quick glance for now, but will keep checking.

What are the production guidelines anyway?

 

[Sean K]

What are the production guidelines anyway?

Jan 29 report:

The initial target scope of the Hill End project is 100,000 tonnes per year at ~10g/t to commence during 2010.

What is 100k at 10g/t?

10,000 ounces?

Hmmmm.

Is that right???

For the keen followers, at what depth are they going to produce this, and at what cost per ounce?

I'm not sure what to make out of this update on 8 April:

HIGHLIGHTS

• The Hargraves Project continues to return excellent drilling results and the on‐going drilling program has been expanded. The Company is considering various avenues for obtaining capital to accelerate the realisation of the outstanding potential of the project.

• Formulation of a new orebody model greatly increases the potential of the Hargraves deposit, in particular the potential to define significant depth extensions.

• The Hawkins Hill – Reward operation moves from the relatively high cost developmentrelated activities of recent months to a focus on high grade production. Exploration and development activities are continuing.

• The strategy at the Hawkins Hill ‐ Reward operation will switch, at least for the short term, to a selective lower tonnage/higher grade production approach to increase gold revenue.

• Investigation of the previously envisaged larger scale bulk stoping approach, which is subject to success in on‐going exploration and development activities, is continuing. However, expansion in the mine production rate to 100,000 tonnes per year in 2010, as previously announced, will be deferred until sufficient exploration and development work is completed to form an adequate basis for mine planning which confirms the practicality and economic viability of the larger scale approach.

So, not 100k pa, and what's the revised effort?

 

[Uncle Festivus]

I think that word 'deferred' has a lot to do with the sp being 'disinteresting' - unless you want to buy their mail order 1oz gold bars? I've bought 8 so far.

The purchase of one ounce gold bars is only available to Shareholders, at the rate of one, one ounce gold bar per 10,000 HEG shares up to a maximum of four bars per Shareholder per calendar month.

http://www.hillendgold.com.au/index...com_virtuemart&Itemid=194&vmcchk=1&Itemid=194

 

[Sean K]

I think that word 'deferred' has a lot to do with the sp being 'disinteresting' - unless you want to buy their mail order 1oz gold bars? I've bought 8 so far.

The purchase of one ounce gold bars is only available to Shareholders, at the rate of one, one ounce gold bar per 10,000 HEG shares up to a maximum of four bars per Shareholder per calendar month.

http://www.hillendgold.com.au/index...com_virtuemart&Itemid=194&vmcchk=1&Itemid=194

UF, you seem to be preparing for the end of the world.

1 oz gold bar?

Can you call that a 'bar'?



Where's your fall-out shelter? Can I buy in?

 

[Uncle Festivus]

UF, you seem to be preparing for the end of the world.

1 oz gold bar?

Can you call that a 'bar'?



Where's your fall-out shelter? Can I buy in?

LOL, dunno, they're small, shiny lumps of metal that cost about $1250 and do absolutely nothing but gather dust at the moment, has done for the last 12 months nearly

I've got a fully furnished cave in the Blue Mountains - you are welcome to join me, but you will have to bring your own ammo & women