Crescent Gold spins off uranium assets to focus on gold

by Greg Barns Australian gold producer crescent gold Ltd. [CRA-TSX; CRE-ASX; CRE5-FFT] announced on July 8 that it was suspending its mining and milling operations at its Laverton Gold Project until early next year, but the company is proceeding with a AUS $6 million exploration program this year. Crescent Gold's decision will not shock some analysts, given that the company has struggled with grade and production costs since its Laverton Project began production in March 2007. The Laverton Project, with 400,000 ounces of gold (7.5 million tonnes grading 1.7 grams/tonne) in the probable reserves category, is an old Sons of Gwalia open pit mine and Crescent Gold is looking to produce at around 80,000 ounces per year from a 1.5 million tonnes per year capacity plant, at a cash cost of AUS $600/oz. In its latest quarterly report for March 2008, the company announced that it had produced 14,275 ounces, which, if extrapolated out over the year, makes for total ounces of just under 60,000 ounces at a low head grade of 1.77 grams/tonne - 20,000 ounces short of the forecast production rate. Crescent now has a new screening process in place which separates the run of mine ore feed into three selectively determined sizes. "This allows separate treatment of coarse, medium and fine material. The fines are sent directly to the mill while the oversize material is stockpiled for separate crushing and subsequent processing. There is a biased grade to hardness factor in the Sickle ore with higher grade asso- as exploration, general and administrative, stock-based compensation, depreciation and depletion, the company as a whole reported a loss of $2.24 million in Q1, 2008. We do expect to reach breakeven on a consolidated basis by the end of the year,? he said. The company had been experiencing ciated with the harder oversize material mined. It is anticipated future processing will be enhanced in the following quarters due to the more effective ore handling process and more continuous supply of higher grade material to the mill,? the company noted in its March quarterly report. But in its July 8 announcement, Crescent Gold said that "there have been a number of difficulties encountered in the ability of the plant to reach targeted throughput. While experiencing some very encouraging monthly production results, the project was unsuccessful in achieving the original bankable feasibility study production estimates on a consistent basis, despite recent retrofitting of alternative crushing equipment and mill modifications,? the company said. "A technical review team has been assembled, including internal personnel and external industry experts, to implement a six-month remedial action plan for the processing plant. This group will also be reviewing various courses of action including further delineation of known resources, alternative mine scheduling scenarios and additional optimization of the plant configuration to enhance project economics,? the company noted. Some analysts have highlighted production costs at the Laverton operation. Widely respected Sydney-based analyst Warwick Grigor of BGF Securities, wrote in a note to clients recently that, while CRE didn't release a specific cash cost figure in its March quarter reporting, "we have calculated that direct production costs were higher than normal cash costs, particularly at the Guanajuato Mines. A large part of the higher cash costs were due to the rehabilitation of old underground workings and re-installing underground services. "In June, 2008, we completed the Phase I part of the Guanajuato mine upgrade program. As a direct result, we have seen

AUSTRALIAN

UPDATE

very high at AUS $1,217/oz. This is a worrying deterioration from the AUS $918/oz figure in the December quarter.? But the company's strong balance sheet - it has around AUS $86 million in the bank - should help in progressing the production improvements needed to ensure greater long term sustainability for the project. The exploration front for Crescent Gold looks very promising. Crescent is actively exploring a highly prospective tenement package covering over 1,000 square kilometres within the Laverton Greenstone Belt, where the Laverton Mine is situated. The company says it will spend around $AUS 6 million this year in exploration. Already the company has this year announced an upgraded mineral resource for the Craggiemore deposit following a major drilling campaign. The new resource of 1.5 million tonnes grading 1.6 grams gold/tonne for 84,000 ounces of contained gold using a 0.5 grams/tonne cut-off (combined measured and indicated categories) is up from the previous inferred resource of 0.3 million tonnes grading 2.7 grams/tonne for 28,000 ounces. An additional 0.1 million tonnes grading 1.4 grams/tonne of inferred resources remain in the new estimate. Another potentially significant deposit is the Bells prospect, where, in February of this year, the company announced a high grade intersection of 16.4 metres of 12.4 grams gold/tonne from 157.6 metres. Crescent points out that drilling on the Bells prospect has only been to a depth of 60 metres thus far. n production increase in June from 125 tonnes/day to 300 tonnes/day and cash costs fall in half. We expect that trend to continue for the rest of the year,? he said. Silver production at Guanajuato doubled to 98,285 ounces in second quarter 2008 and is expected to triple to about 140,000 ounces in the third quarter. n August 2008 www.resourceworld.com 37

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