North Queensland Metals

Growing Gold Production

North Queensland Metals (Australian Stock Exchange listed under NQM), an Australian mining company just turned gold producer focused on “growing gold production,” aims to be a mid-tier gold producer within the next five years.

The company listed in 2006 with a focus on tin/silver/indium deposits, then joined the ranks of gold producers with its flagship project, the Pajingo Gold Mine. Pajingo, in which NQM purchased a 60 per cent holding, marked the perfect place to start the company’s five year strategic goal.

The Pajingo Gold Project

NQM’s 60 per cent in Pajingo is a joint venture project with Heemskirk Consolidated (40 per cent) in which NQM is the operator. This 820 square kilometre site of tenements covers the entire epithermal field of the project situated south of Charters Towers in North Queensland.

NQM and Heemskirk bought Pajingo from Newmont through a Sale and Purchase Agreement on December 28, 2007, for a total of $25 million. Pajingo is within 100 kilometres of famed historic gold mines Kidston, Mt Leyshon, Yandan and Wirralie and this district has produced over 10 million ounces of gold. The project comes with extensive research previously completed by Newmont.

This high grade, low sulphide epithermal deposit stands at an operating total of 300,000 tonnes per annum, is capable of 500,000 tonnes per annum operating and currently has an extendable five year mine life.

Pajingo has funded NQM and today placed the company “in a sound, debt free, financial position with little to no gold hedging,” according to the company overview.

On September 10, 2009, NQM completed their first drill hole on Pajingo’s promising Moonlight prospect. This confirmed the existence of gold mineralisation. This was a broad zone at 365 metres depth down hole and at intersections of 138 metres at 1.38 gpt gold. Included within this is an intersection of 30 metres at 3.52 gpt gold from 430 metres depth down hole including another intersection of 8.10 metres at 7.80 gpt gold from 452.9 metres to 461 metres down hole.

These results marked the beginning of Pajingo’s part in NQM’s strategy for growing gold production.

“There are many under-explored targets at Pajingo, and many projects for consideration

and evaluation around Charters Towers,” NQM’s strategy says.

“Pajingo exploration will provide additions to the resource base and delineate new targets for drilling.”

“Dividend-paying NQM’s equity in gold production could increase in the next 12 months to ~60kozpa with ore from satellite ore bodies feeding the under-utilised Pajingo mill. This has increased our assessed NAV to A$0.48/share,” a report in December 2009, by Research Capital Report (RCR) stated.

The next project in the NQM strategy is the Dotswood Gold Project, formerly known as Far Fanning.

The Dotswood Gold project

NQM’s 100-per-cent-owned Dotswood Gold project is 60 kilometres south west of Townsville and about 80 kilometres by road from Charters Towers, where NQM’s residential base for Pajingo is situated.

The company entered into an option agreement to purchase the project in April, 2009.

“Dotswood provides NQM with the opportunity to develop a second gold mine to add to production from our currently operating Pajingo mine (NQM 60 per cent),” John McKinstry, NQM’s CEO said.

“If the confirmation drilling to be undertaken during the option period yields what we expect, then the purchase of Dotswood will take NQM a step closer to realising our goal of becoming a mid tier gold producer.”

At this time, it was announced that, subject to a feasibility study, NQM planned to commence mining on this project in late 2010.

On October 6, 2009, the media reported that NQM had extended its option to purchase Dotswood because continued evaluations on the project were leading to announcing a new resource estimate.

Dotswood is an advance-stage project which has seen previous owners extract oxide ore and a portion of higher grade underground ore in 1986-1987 and 2000-2004, respectively.

The December RCR report states that Dotswood, “could be the first step in a focused strategy aimed at becoming a mid tier ~100kozpa producer within five years.”

“We believe that NQM’s purchase of the Twin Hills and (possibly) Dotswood projects will underwrite NQM’s strategy to significantly increase gold production,” the report continues.

The Twin Hills Gold Mine

On July 2, 2009, NQM and joint venture partner Heemskirk signed an agreement to purchase the Twin Hill gold mine from BMA Gold Ltd for $1.75 million (100 per cent). NQM holds 60 per cent of this project.

“Twin Hills was closed in 2007 by then owners BMA Gold. The mine has a significant drill defined mineralisation target in the order of approximately 800,000 to 850,000 tonnes at 7.0 to 7.5g/t of gold,” NQM’s overview states.

“The joint venture partners will embark on a feasibility study based on trucking ore to Pajingo for treatment. This may include additional drilling and subsequent modelling to suit a revised mine plan as a satellite mine. Trials in June have confirmed that the Pajingo mill could process up to 500,000tpa on a single mill, thus allowing approximately 200,000tpa to be brought in from new sources.”

The acquisition of Twin Hills marks NQM’s latest move to add value to Pajingo and move further towards its goal of becoming a mid-tier producer.

On December 10, 2009, NQM announced a new resource of 3.69Mt at 2.59g/t for 307,300oz Au for the 309 deposit within Twin Hills.

“We always considered Twin Hills to be a natural fit with Pajingo. The Resource estimation on the 309 Deposit shows that it was also a good purchase compared with any discovery cost. Twin Hills shapes as a long term adjunct to the Pajingo operation,” McKinstry said.

NQM has gone from strength to strength over the past year. Both a rise is gold production and the continued strength of the gold market has served the company well. With this prime gold portfolio and additional projects concentrating on copper (the 100 per cent-owned Ball Gammon Copper project), and tin, NQM’s goal to become a mid-tier producer looks well within reach.

www.nqm.com.au

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