Keegan adds ounces to Esaase

Vancouver – Keegan Resources (KGN-T, KGN-X) has added about a million oz. gold to its Esaase project in southwest Ghana after incorporating an additional 90,000 metres of drilling over 320 holes.

The company has been busy drilling to improve on the March 2009 estimate that was based on about 100,000 metres of drilling. This year Keegan has been targeting both down dip extensions in the main zone and step-out drilling along strike on the company’s 90%-owned, 89-sq.-km property.

With the added information, the project is now estimated to contain 84.9 million indicated tonnes grading 1.2 grams gold per tonne for 3.2 million oz., and a further 50.1 million inferred tonnes grading 1 gram gold for 1.7 million contained oz. gold.

The previous resource was reported to contain an estimated 2 million oz. gold indicated and 1.5 million oz. inferred, but that was using a 0.6 gram gold cutoff, compared to a 0.4 gram gold cutoff for the latest update.

At a 0.4 gram gold cutoff, the previous resource contained 58 million indicated tonnes grading 1.2 grams gold for 2.3 million oz gold and 41.7 million inferred tonnes grading 1.2 grams gold for 1.7 million oz, which works out to a roughly 25% increase in contained oz. in the update. 

Commenting on the update, Keegan president and CEO Maurice Tagami stated “The growth of the gold resources at the Esaase deposit is a continuing testament to the world class size and strength of the Esaase mineralizing system. We can now look forward to adding additional resources as part of our aggressive exploration program while we continue to rapidly advance our project development studies with the goal to begin mine construction in 2012.”

The resource update comes as Keegan works towards releasing a pre-feasibility study in the first quarter of 2011, having released a preliminary economic assessment in April.

The PEA outlined a 10-year mine life with a 3.5:1 strip ratio and recoveries of 1.98 million oz. gold. The after-tax net present value was set at US$168 million using a 5% discount and the after-tax internal rate of return at 17.2%, both using US$850 per oz. gold. Cost per oz. was estimated at US$452 for the life-of-mine and capital payback was estimated at within 3.3 years.

Analysts and investors continue to look at Keegan as a possible takeover target. The company is trading at a low in-situ market value compared with the market average, it is located in a stable part of west Africa, and it has one of the largest undeveloped gold projects in the region.   

Since hitting a 52-week low in July of $4.92, Keegan’s share price has nearly doubled, reaching $9.29 in early December. On the day the resource update was released, Keegan’s share price dipped 3¢ to $8.90 on 322,000 shares traded.

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