Phu Kham Copper-Gold Operation

The Phu Kham Copper-Gold Operation’s consistent high performance and strong cash-flow is the foundation of PanAust’s growth strategy.

The Operation uses a conventional open-pit mining method comprising drill, blast, load and haul. The process plant, which has a design capacity of 12 million tonnes per annum of ore, comprises a SAG mill and ball mill grinding circuit. These are each rated at 13 MegaWatts, with copper and precious metal recovery by flotation.

The final product is a copper-gold concentrate, grading approximately 25 per cent copper, 7 grams per tonne gold, and 60 grams per tonnes silver. Concentrate is trucked 1,000 kilometres in covered containers to Sriracha Harbour, south of Bangkok in Thailand. The concentrate is shipped to smelters throughout Asia.

The current total estimated Phu Kham Ore Reserve supports a mine life to 2025 (assuming ore processing rates of 12 million tonnes per annum).

Mining and Processing

For the twelve months to 31 December 2011, Phu Kham produced 59,897 tonnes of copper in concentrate, 53,590 ounces of gold, and 538,123 ounces of silver.

Phu Kham production and cost guidance 2012*

PanAust estimates that 2012 production at Phu Kham will be between 63,000 and 65,000 tonnes of copper in concentrate at an average C1 cash cost of between US$1.05 and US$1.15 per pound copper after precious metal credits from 50,000 to 55,000 ounces gold, and 550,000 to 600,000 ounces silver.

* Cash cost guidance assumes by-product credits based on average gold and silver prices for 2012 of US$1,800 and US$30 per ounce respectively.

Phu Kham Growth Projects

Phu Kham Upgrade Project

PanAust is upgrading the Phu Kham process plant to increase ore processing rates and improve metal recoveries through an increase in grinding and flotation capacity. The investment is expected to deliver an increase in copper in concentrate production capacity from current design levels of between 60,000 and 65,000 tonnes per annum to between 65,000 and 70,000 tonnes per annum. The Upgrade is timed to coincide with a scheduled decline in ore head grade.

By the end of 2011, detailed engineering and procurement were largely completed and off-site fabrication of long-lead items was nearing completion. Commissioning is scheduled for the June quarter 2012 with ramp-up to continue into the following quarter.

Phu Kham Increased Recovery Project

In February 2012, the PanAust Board approved the Phu Kham Increased Recovery Project. Once implemented in the second half of 2013, the Project is expected to result in increases in annual copper and gold production of approximately 5,000t and 7,500oz respectively.
The Project stems from a two-year evaluation of various technologies to improve metallurgical recoveries at Phu Kham. Plant-scale test work confirmed that recovery rates for both copper and gold could be increased by more than six percentage points. Cash operating cost per pound of copper would correspondingly reduce by more than five per cent. 
The preliminary capital estimate for the Project is US$65 million. On that basis, and assuming a US$3.80/lb copper price and US$1,700/oz gold price, the payback period will be less than 18 months.
Following design work that is scheduled to be completed in June 2012, a detailed capital cost estimate will be defined. Project commissioning is scheduled to commence in the second half of 2013.

Phu Kham District incorporating the Nam San and Long Chieng Track (LCT) Deposits

PanAust has established a brown‐fields exploration team to investigate potential extensions to the Phu Kham-style mineralisation along a highly prospective corridor which extends at least seven kilometres due north and along strike of the northern boundary of the Phu Kham deposit.

The high-grade Nam San copper-gold deposit lies approximately 200 metres north of the Phu Kham deposit. Lateral continuity of mineralisation has been confirmed over 500 metres and the zone remains open to the east, northwest and at depth.

Drilling at Nam San is aimed at defining an inferred mineral resource in the December half of 2012. Scoping study work has commenced for Nam San including:

• preliminary metallurgical test work
• selection of possible portal locations for underground access
• mining methods
• mining rates.

The LCT prospect is approximately six kilometres northwest of Phu Kham. It contains significant primary mineralisation.

Should sufficient inferred resources be identified during 2012, PanAust will commence a scoping study to investigate opportunities for increasing copper and gold production from the Phu Kham district through either:

• blending high-grade feed from the newly discovered deep zone with ore from the current open pit, or
• the development of new processing facilities.