High River revises Taparko-Bouroum plan

An optimization study by SRK Consulting has boosted reserves at the Taparko-Bouroum gold project, 200 km northeast of Ouagadougou, Burkina Faso, by 16% to 826,500 contained ounces.

High River Gold Mines (HRG-T) retained SRK to rework the project’s mine plan using a gold price of US$400 per oz., and more current prices for fuel and other consumables.

SRK’s study concludes the project is capable of supporting production of 100,000 oz. of gold in its first year of operation, ramping up to more than 140,000 oz. annually in years three and four.

A bankable feasibility study completed last June pegged average annual gold production at 90,000 oz. over 7.6 years, with total cash cost coming in at US$204 per oz. That study was based on a gold price of US$350 per oz. The project’s internal rate of return and net present value (NPV) at 24.6% and US$65.8 million, based on US$400-per-oz. gold. The NVP dips to US$24.7 million at a 10% discount.

The latest study indicates an approximate 20% increase in operating costs, while the annual milling rate increases by 50% to 1.5 million tonnes, at a minimal investment. High River says it would consider expanding the proposed production rate should drilling on several satellite targets on the Taparko exploitation license, and properties controlled under its strategic alliance with partner Jilbey Gold Exploration (JLB-V) prove fruitful.

At last count, the project’s reserves totaled 7.6 million tonnes averaging 2.9 grams gold per tonne, for 714,000 oz. of contained gold.

Meanwhile, camp construction, detailed engineering, the acquisition of long-lead items, and the refurbishment of used mechanical equipment have begun at Taparko. Construction is also underway on a water reservoir that will pump overflow from the Yalogo dam, 9 km away, during the rainy season. The reservoir is slated for completion in June. The pipeline material and pumps are expected onsite by the end of May; pumping will begin in July. A used ball mill currently in the Philippines is expected to arrive on site by mid-year.

Mindful of rising energy prices, the company has acquired new heavy fuel oil power generators that are expected to lower operating costs by around US14 million over the mine’s life, compared with diesel generators.

The 2004 bankable feasibility study pegged capital costs for the project at US$51.9 million; by the end of March 2005, High River had spent some US$12.1 million on development and construction. The company does not foresee capital costs increasing by any more than 10%. On that note, High River is finalizing a US$36-million project loan with South Africa’s Absa Corporate and Merchant Bank; the first draw down is expected in June.

Commercial production from the open-pit project is expected by the end of the first quarter of 2006. High River holds an 80% interest in Taparko, with the government of Burkina Faso holding the rest. Three-quarters of the government’s interest is carried.

The government recently granted High River an exploitation permit for the Bouroum deposits, 49 km northwest of the planned mill at Taparko. The properties are held under an option agreement with Axmin (AXM-V).

The company is currently in the midst of cutting 13 trenches (for 1,630 metres) into the Yeou 1, 2 and 3 prospects. At Yeou 3, an artisanal mining site, about 36% of 56 rock samples exceeded 1 gram gold per tonne, with eight of those running higher than 8 grams. The target has been traced over at least 1.5 km; geochemical and geophysical anomalies suggest the structure may extend some 6 km to the Yeou 1 target.

On the Baola permit, compilation work has outlined a 27-sq.-km area of soil geochemical anomalies extending from Bouroum’s Welcome Stranger and F-12 gold deposits. Soil sampling and geological mapping will wrap up in early June, with follow up drilling planned for the fourth quarter.

On the Labola property in the southwest of the country, 2,940 metres worth of reverse-circulation and rotary-air-blast (RAB) drilling is aimed at testing a series of sub-parallel quartz veins striking some 11 km within a 300-metre wide deformation corridor. Based on significant artisanal mining, the width of the zones varies from 5 to 50 metres. The RAB drilling will test a 1.7 km stretch were thick overburden prevented artisanal mining.

Previously, 110 samples of quartz vein material derived from waste piles at artisnal mining sites returned an average of 5.4 grams gold, with a maximum of 72.6 grams. Fifty-two samples of host rock averaged 0.8 gram gold.

Drilling at Labola will run the month of May.

At the Gandi permit, 90 km south-southwest of Taparko, High River has begun 540 metres worth of trenching to follow up on a previous trench that returning 1.7 grams gold over 16 metres. Mapping and regional soil sampling are also ongoing on the Tanbyanga showing. Nearby sampling returned 38 samples exceeding 1 gram gold, with 12 samples running higher than 5 grams.

In other news, High River recently upped its stake in Jilbey Gold to 29% by acquiring more than 4.9 million shares and 2 million warrants from European investors in return for the issuance of nearly 2.4 million High River treasury shares.

Some 1.1 million of the warrants are exercisable at 60 per share until Oct. 14, 2005, with the remaining 900,000 good for an additional share at 70 apiece until May 12, 2006. High River now owns more than 10.2 million Jilbey shares; its stake would climb to 36% assuming its exercises all of its warrants.

High River’s strategic alliance with Jilbey gives it back-in and operatorship rights on gold discoveries found within trucking distance (less than 100 km) of the Taparko mill. It also allows the company the right of first refusal on discoveries outside trucking distance.

Combined, the partners hold control around 8,000 sq. km of prospective ground in Burkina Faso. Jilbey’s recent gold discovery at Bissa Hill lies outside of trucking distance to Taparko.