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June 2004 Quarterly Report |
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HIGHLIGHTS
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The drilling to date has established that a previously unknown fold in the stratigraphy hosting the Tasmania Reef has resulted in a strike offset of the mineralisation of approximately 150 metres to the east. The fold hinge is recognised in the 840 metre level east sill drive and the drilling indicates that it plunges to the west at around 50 degrees. Sufficient detail is now available to strongly indicate that the folding of the stratigraphy occurred before the onset of shearing which led to the formation of the Tasmania Reef, and certainly prior to the main mineralising events.
1.2 ORE RESERVES / RESOURCES
1.2.1 As at 30 June 2004
The reserves and resources for the Tasmania Reef as at 30 June 2004 have been calculated by Allstate as Manager of the BMJV. Allstate released a detailed report to the ASX, as did Beaconsfield Gold, on 20 July 2004.
The updated reserves and resources are as follows:
After allowances had been made for mine design parameters and cut-off grade (6 g/t gold), the in-situ ore grade was reduced from 24.2 g/t gold to the diluted reserve grade of 16.1 g/t gold (a reduction of 8.1 g/t or 33%).
1.2.2 Reconciliation between 31 December 2003 and 30 June 2004 Ore Reserves
Total gold milled by the BMJV in the six months to 30 June 2004 was estimated to be 72,963 ounces. Subtracting this total from the ore reserves at 31 December 2003 (352,000 ounces) gives 279,037 ounces.
As the ore reserves at 30 June 2004 were 381,000 ounces, there was a net increase in ore reserves over the six months, allowing for the mining depletion, of approximately 101,963 ounces or 37%.
Tonnes milled for the 12 months to 30 June 2004 were 234,440 tonnes. Total tonnes of reserves as at 30 June 2004 were 736,000 tonnes, indicating a reserve life, based on mill throughput for the last 12 months, of approximately 3.1 years.
1.2.3 Inferred Resources
At 31 December 2003, inferred resources for the Tasmania Reef were 188,000 tonnes at 10.9 g/t gold, containing 66,000 ounces of gold. At 30 June 2004, they had increased significantly to 586,000 tonnes at 19.0 g/t gold, containing 358,000 ounces. The increase over the six months was 212%, 74% and 442% respectively for tonnes, grade and contained ounces.
Based on mill throughput for the last 12 months, the tonnes of inferred resources as at 30 June 2004 infer further resource life, in addition to the reserve life, of some 2.5 years.
1.2.4 Overall Trends
The impact that the resource drilling program has had so far can be seen from Graph 1 attached which shows the trends for cumulative ounces of gold milled, ounces of reserves, and ounces of inferred resources for the Tasmania Reef since ore milling commenced in September 1999.
The size of the Tasmania Reef below the historic (1877 to 1914) workings is estimated at any time by adding cumulative ounces milled to reserves and inferred resources. The overall size of the Tasmania Reef has increased significantly since December 2003, as has anticipated remaining mine life.
1.2.5 Long Section
The following long section, prepared by Allstate, is a computer-generated section showing the remaining orebody as it is currently defined by mine workings and exploratory diamond drilling. The contouring represents horizontal thickness of ore (in metres) times grade (in g/t gold) or "gold content". Also indicated on the long section is the stoping carried out to 30 June 2004, the fold hinge referred to in section 1.1, the location of various diamond drilling intersections, and the outlines for the Measured, Indicated and Inferred Resources.
The Inferred Resource zone at the base of the long section will be the target of the remainder of the current drilling program (around 19,000 metres of further diamond drilling is planned). Currently, the great majority of the Inferred Resource is defined by the deep intersections F21, F25, F29 and F32.
1.3 MINE PERFORMANCE
Ore production at the end of the quarter was available from over 10 levels throughout the mine, down to the 940 metre level, allowing significant flexibility in mine scheduling. The decline / waste development layout and the modified ½ Upper / Avoca mining method continued to provide operating benefits and efficiencies. Decline advance during the quarter totalled 236 metres with the face of the decline 975 metres below surface at 30 June 2004.
The Hart Shaft continued to perform well during the quarter with 59,308 tonnes of ore and 29,605 tonnes of waste (total material 88,913 tonnes) being hoisted. An additional 5,860 tonnes of waste rock were not hoisted, being utilised underground as stope backfill. A further 6,590 tonnes of "sand fill", a coarser fraction of the mill tailings, were also pumped underground and used as stope backfill.
Development and stoping underground continued to be unimpeded by groundwater. The current total mine pumping rate (groundwater plus water produced in the mine) of 69 litres per second is unchanged from a year ago.
The average June 2004 quarter head grade of 18.4 g/t gold was down on previous quarters. Impacting on grade was stope cycling towards the end of the quarter which resulted in the better grade stopes being unavailable for mining.
Ore treatment plant gold recovery for the June 2004 quarter, excluding changes in gold in circuit, was 92.6% (March 2004 quarter 94.9%). Gold production was significantly affected by an unusual electrical failure in the ore treatment plant mid June. A total loss of power occurred for eight hours following an insulation failure with the copper bar duct interconnecting the 22kV / 425V transformer and the treatment plant motor control centre. Power was first restored to the bacterial oxidation section of the circuit but, with the temperature in the oxidation tanks having dropped from around 45 degrees to around 30 degrees, full bacterial activity was not regained for around 10 days. Power was restored to the front end of the circuit (crushing, grinding, gravity gold recovery and flotation) approximately three days after the electrical failure. The copper bar duct has been permanently replaced by nine high-voltage copper cables to prevent a similar event occurring in the future.
Gold production for the June 2004 quarter was 30,848 ounces compared with the March 2004 quarter result of 37,622 ounces. The percentage of gold production recovered by gravity processes during the quarter was 56%.
1.4 BMJV EXPENDITURE PER OUNCE
Direct operating expenditure for the June 2004 quarter was $9.682 million (March 2004 quarter $9.668 million).
Capital expenditure for the June 2004 quarter was $2.103 million (March 2004 quarter was $2.849 million). The main abnormal capital expenditure activity was the extensive ore reserve diamond drilling program.
1.5 EXPLORATION JOINT VENTURE BETWEEN DDV AND THE BMJV
The exploration joint venture between Diamond Ventures NL (DDV) and the BMJV has been outlined in previous quarterly reports.
DDV has advised that the Lyons prospect, 2 km north of the Beaconsfield Gold Mine, was tested with 13 RAB (rotary air blast) holes totalling 265 metres. Assay results were negative, suggesting the strong gold-in-soil anomalies at this prospect result from contamination from historic workings. Assay results from the RAB drilling conducted at Hinds Hill during the previous quarter were also negative and DDV has withdrawn from this particular tenement. A 140 metre diamond hole was drilled to test the eastward projection of gold mineralisation previously intersected at Salisbury Hill, located 5 km south of the Beaconsfield Gold Mine. Host rocks equivalent to those at Salisbury Hill (and the Beaconsfield Gold Mine) were intersected but with diminished alteration. Assays are awaited.
Diamond drilling is next planned at the Moonlight and Little Wonder prospects to the west of the Beaconsfield Gold Mine.
1.6 ARBITRATION AWARD
As previously reported in January 2004, an arbitration award was made in favour of the BMJV participants (Beaconsfield Gold group 48.49% and Allstate group 51.51%) against ACN 005 585 795 Pty Ltd (formerly Brown & Root Engineering & Construction Pty Ltd ("BREC")) and Batepro Australia Pty Ltd ACN 009 006 777 ("BA"). The arbitrator, Mr J Tyrill, found that BREC and BA are jointly and severally liable to the BMJV participants for $60,366,785 together with interest after 17 January 2004 at the rate of $29,292 per week. The Arbitrator also found that the cross claims by BREC and BA against the BMJV participants fail.
On 30 April 2004, Administrators were appointed to BREC and, on 7 June 2004, liquidators were appointed to BA. The Deed Administrators of the Allstate group, together with the Beaconsfield Gold group, are dealing with the relevant appointees in regard to the arbitration award.
| Maturity |
Ounces |
Lease Rate @ 1.5% p.a. A$ Price |
A$ |
| 2-Jul-04 |
3,246.189 |
536.70 |
1,742,230 |
| 30-Jul-04 |
8,000.000 |
485.69 |
3,885,523 |
| 31-Aug-04 |
1,929.068 |
567.00 |
1,093,782 |
| 30-Sep-04 |
1,800.000 |
567.00 |
1,020,600 |
| 29-Oct-04 |
1,800.000 |
567.00 |
1,020,600 |
| 30-Nov-04 |
1,800.000 |
567.00 |
1,020,600 |
| 31-Dec-04 |
4,225.000 |
567.50 |
2,397,687 |
| 31-Jan-05 |
4,150.000 |
571.00 |
2,369,650 |
| 28-Feb-05 |
4,150.000 |
571.00 |
2,369,650 |
| 31-Mar-05 |
4,200.000 |
572.87 |
2,406,054 |
| 29-Apr-05 |
4,200.000 |
571.41 |
2,399,922 |
| 31-May-05 |
2,680.863 |
574.18 |
1,539,298 |
| Total / Average |
42,181.120 |
551.56 |
23,265,595 |
The marked-to-market value of the hedge book at 30 June 2004, when the spot price of gold was A$570.37 per ounce, was negative $1.3 million.
2.3.1 Gold Hedging as a Percentage of Ore Reserves
The BMJV ore reserves as at 30 June 2004 were 381,000 ounces so that Beaconsfield Gold's 48.49% direct interest was approximately 184,700 ounces. As a percentage of those ore reserves therefore, Beaconsfield Gold at 30 June 2004 was only approximately 23% hedged.
2.3.2 Average Received Price per Ounce
Compared with its hedge book, Beaconsfield Gold has received higher prices on average as a result of generally favourable gold lease rates and selling spot when the spot price is favourable. Total net gold book proceeds and effective average received price per ounce of production are approximated in the following table.
2.4 BEACONSFIELD GOLD CASH FLOW FROM ITS 48.49% DIRECT INTEREST IN THE BMJV
Cash flow accruing to Beaconsfield Gold from its 48.49% direct interest in the BMJV, before BCD corporate and debt servicing costs, is approximated in the following table. The approximate cash flow for the 12 months ending 30 June 2004 was $17.0 million.
2.5 REPAYMENT OF DEBT TO PRE - 8 JUNE 2001 ALLSTATE UNSECURED CREDITORS
The Company entered into a Transitional Arrangements Deed ("TAD") on 11 March 2004 under which the Company is required to pay a total of approximately $2,621,000 to Allstate Explorations NL (Subject to Deed of Company Arrangement) (Manager of the Beaconsfield Mine Joint Venture) ("Allstate"). The amount is equal to the Company's 48.49% share of the total owing to the unsecured creditors of Allstate, the providers of goods and services to the Beaconsfield Mine, who had their invoices frozen when Allstate, the Manager of the BMJV, went into administration on 8 June 2001.
Beaconsfield Gold has consistently stated over time its commitment to repaying the Allstate unsecured creditors the full outstanding amount as soon as practicable.
The first payment of approximately $328,000 under the TAD was paid to Allstate by the Company on 12 March 2004. The second payment of approximately $328,000 was due on 1 July 2004 with the remaining six payments of approximately $328,000 each then payable at six-monthly intervals. Due to an administrative oversight, the Company did not make the second payment of approximately $328,000 to Allstate on 1 July 2004 but made it on Monday morning 5 July 2004. To date, none of the approximately $656,000 paid to Allstate by the Company has been passed on to the Allstate unsecured creditors by the Deed Administrators but the Company understands that this will occur in August 2004.
The Allstate Deed Administrators considered that the failure to make the second payment on 1 July 2004 triggered an obligation by the Company to pay all the remaining instalments to Allstate, totalling approximately $1,966,000, and convened a meeting of Allstate creditors in Launceston, Tasmania on 15 July 2004 to consider the matter. Ahead of that meeting, the Company had proposed that it pay an additional instalment (approximately $328,000) immediately and so bring forward the remaining repayment schedule by six months overall.
At the 15 July 2004 meeting of the Allstate creditors, it was resolved that the Deed Administrators for Allstate would negotiate an acceptable (at the Deed Administrators' discretion) compromise with the Company by 31 July 2004, failing which a further meeting of the Allstate creditors would be held. The Deed Administrators invited Beaconsfield Gold either to accept a counter offer that was made by them in response to Beaconsfield Gold's original proposal or for Beaconsfield Gold to put forward a further proposal.
Under the arrangements in place with its current banker, BankWest, the Company is restricted from accessing the cash held in its accounts with BankWest (currently approximately $3.8 million). The Company is currently in advanced discussions with two leading banks for new banking facilities that will underpin the Company's continued financial growth. Based on the term sheets being provided by the two banks, the Company will shortly select one ("NewBank") to replace BankWest.
Based on its stated commitment to the Allstate unsecured creditors and the declared banking support, Beaconsfield Gold made a revised offer to the Allstate Deed Administrators on 27 July 2004. The offer is to pay all of the outstanding amount due to the Allstate unsecured creditors (approximately $1,966,000), subject only to the Allstate Deed Administrators facilitating the replacement of BankWest by NewBank pursuant to the TAD and other joint venture documentation. The Company aims to have the necessary banking documents finalised by end August 2004 or early September 2004.
2.6 CURRENT BEACONSFIELD GOLD ISSUED SECURITIES
Graphs 2 and 3 show the Beaconsfield Gold share price and market capitalisation respectively since listing on the ASX in March 1993. Both graphs show the commencement of gold production in September 1999 which heralded the protracted commissioning problems in the ore treatment plant and, to a lesser extent, in the mine. They also show the points at which trading in the shares on the ASX was suspended (8 June 2001) and subsequently was recommenced (2 April 2004). During the trading suspension, the market capitalisation graph was adjusted for the new share issues, based on the last sale price for the shares on the ASX in June 2001 of $0.23.
2.7 TENEMENTS
Beaconsfield Gold has interests in the following tenements in the Beaconsfield area.
2.7.1 BMJV Tenements (Beaconsfield Gold 48.49% Direct Interest)
2.7.2 Beaconsfield Gold 100% Owned Exploration Licences
2.8 INTERNET
Shareholders are reminded that ASX releases (including all quarterly and annual reports), can be seen on the Company's web site:Shareholders who wish to receive Beaconsfield Gold ASX releases by e-mail are encouraged to contact the Company on:
Yours faithfully
Mike Trumbull
B.E. (Mining, First Class Honours), M.B.A., F.AusIMM
Managing Director
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