Red Back expands Chirano (January 29, 2004)

Perth, Australia-based Red Back Mining figures its latest round of drilling has boosted the size and economics of its Chirano gold project in Ghana.

Results include a 50-metre intersection (beginning 148 metres below surface) grading 4 grams gold per tonne in hole 572. Included in a larger, 62-metre section running 3.45 grams, the hole represents new mineralized shoots in the Tano area.

Two other holes on the Tano area retruned 11 metes (from 150 m) of 4.2 grams gold and 13 metres (from 54 m) of 4.2 grams, respectively. The new shoots will be captured by a US$400-per-oz. pit outline.

Drilling has also extended the Akoti North and Akwaaba shoots to vertical depths of 180 metres and 150 metres, respectively.

Hole 559 at Akoti North returned 19 metres (from 206 m) grading 4.7 grams gold. Hole 555 cut 21 metes (from 148 m) of 4.5 grams.

At Akwaaba, hole 537 cut 24 metres (from 114 m) of 3.05 grams. Two other holes returned 7 metres of 21.4 grams and 17 metres of 3.3 grams, both from around 80- metes below surface. Both shoots remain open at depth, and also lie within the pit outline.

Meanwhile, hole no. 550 yielded mineralization below shallow portions of the current 3.5-km-long proposed pit complex, grading 1.3 gram over 77 metres, beginning at a depth of 48 metres. Hole 551 returned 29 metres (from 119 m) of 2.3 grams.

So far, Red Back has sunk some 4,900 metres worth of drilling in 32 holes, with assays in for about 90% of those. The holes are part of an ongoing 10,000-metre program aimed mostly at converting some 545,000 oz. contained in inferred resources into reserves. An updated resource/reserve estimate is expected by the end of March.

At last count, measured and indicated resources totalled 30.4 million tonnes running 2.1 grams gold per tonne, for 2.05 million contained oz. A bankable feasibility study completed last year pegged proven and probable reserves at 16.1 million tonnes averaging 2.1 grams gold, or 1.06 million contained oz., based on a gold price of US$325 per oz. That study concluded Chirano could support annual production of more than 140,000 oz. of gold for more than 6.5 years.

The company has submitted an environmental impact statement to Ghana’s Environmental Protection Agency, and expects to receive a mining lease some time in March. Construction would begin immediately thereafter; the first gold pour is expected in the second quarter of 2005.

Red Back lodged a scheme of arrangement for its proposed merger with Vancouver-based Champion Resources (CHA-V) with the Australian Securities and Investment Commission in mid-January. The pair still needs Western Australian Court approval in addition to that of their respective shareholders. They face a March 31 deadline.

Under the proposed nuptials, Champion would consolidate its shares at a 3:1 ratio, with Red Back shareholders receiving one share of the consolidated company for every three Red Back shares. The new company will retain the Red Back Mining name.

In the end, Red Back shareholders would own about 87% of the new company, which would pursue a Toronto Stock Exchange listing.