Otis Gold says "positive" Kilgore metallurgy results to boost project economics

Otis Gold Corp.(CVE:OOO)(OTCQX:OGLDF) unveiled Tuesday what it called "positive" additional column leach gold recoveries from coarse-crush bulk samples at its flagship Kilgore gold project in Idaho.

Together with previous column leach testing conducted by prior operator Echo Bay Mines, as well as by Otis, these latest results continue to show that the Kilgore Mine Ridge deposit is "readily amenable" to standard heap-leach process technology, the miner said.

They also suggest that the gold ore is not particularly sensitive to crush size as there was not a substantial decrease of gold recovery in the coarser crush material. This means that the ore may not require processing by a tertiary crusher, boosting the overall economics of the deposit.

Otis said that tests further show that the coarser crush material should be tested to see if part of the deposit could be processed by run-of-mine material, resulting in even greater cost savings for the gold miner.

Overall, the tests revealed that the gold came out quickly in all samples from both size fractions, with 85 to 90 per cent of the recovered gold leaching in just 30 days.

"The results from column leach testing continue to be impressive, even for relatively coarsely crushed material," said president and CEO, Craig Lindsay.

"The Kilgore Mine Ridge deposit continues to have excellent recovery rates that will positively impact the economics of developing a potential mine.

"In the future, we plan to acquire coarse enough material for a run-of-mine test to help Otis make decisions as we move this deposit towards potential commercial production."
               
Both cyanide and lime consumption were relatively low and the ore charges did not require agglomeration pretreatment, Otis said.     

The column leach tests were done by McClelland Labs of Reno, Nevada on three samples comprising oxidized and non-oxidized dike - both thought to be responsible for the mineralizing fluids supplying gold to the host rock - and oxidized lithic tuff, the dominant host rock at Kilgore.

Both dike samples and the lithic tuff sample were composited from drilled PQ-diameter core that was stage crushed to a nominal 80 per cent, passing a 38 mm (1.5 inch) screen.

Each sample was divided and one split was further crushed to 80 per cent -12.5 mm (0.5 inch) to directly compare the difference in gold recovery between the two crush sizes, the company said.

Otis noted that only the oxidized dike showed feed size sensitivity in regard to gold recovery in column leach tests, possibly due to the shorter residence time of 78 days. Still, the oxidized dike represents only an estimated 14 per cent of the deposit by volume.

In an interview with Proactive Investors in late April, CEO Lindsay said that perhaps one of the greatest strengths of the project is the metallurgy, something on which investors tend not to focus.

In the mid 1990s, Lindsay notes that Kilgore was going to be Echo Bay's next production story, but a drop in gold prices to well below $300 per ounce halted the process.  At the time, Echo Bay completed extensive column leach metallurgy tests, achieving "very good" recovery rates.

Otis followed up with additional column leach tests using 1/2” crush material in late 2010, yielding similar results, with the announcement today providing further positive evidence.

Lindsay says that the larger the crush size, the less processing and crushing of rock is required, which helps decrease capital costs, thereby boosting economics.
               
The entire Kilgore project, which is 100 percent-owned by Otis with no underlying royalties, has two to three million ounce gold potential, with the latest NI 43-101 resource delineating 487,000 ounces of indicated and inferred gold.  The company is now working on a new estimate that will incorporate all the drilling through 2011.

The project is spread across 5,130 acres in southeastern Idaho, 60 miles north of Idaho Falls, and is accessible by road around 32 miles northeast of the town of Dubois and 15 miles east of Interstate Highway 15.

Lindsay says that an important achievement for the company this year was the addition of 1,880 acres, boosting its land position at Kilgore by 58 percent and giving the miner flat land that is appropriate for heap leach processing.

This year, Otis plans on drilling another 7,000 metres on its Mine Ridge deposit, completing the NI 43-101 resource update and initiating a scoping study. Twelve-month environmental baseline studies will start this summer, with the company having engaged a contractor for the task.