Ashburton Minerals drilling for a large gold prize on Obi Island, Indonesia

Ashburton Minerals (ASX: ATN) is a Perth based exploration company with a focus on the Obi Gold Project in Indonesia.

The Obi Gold Project is located on the island of Obi, which is south of Halmahera Island in eastern Indonesia and covers an area of 77 square kilometres. Coast and port facilities are only 2.5 kilometres away.

Obi Island is situated to the south of the larger Halmahera Island which hosts Newcrest Mining’s (ASX: NCM) 5 million ounce Gosowong gold deposit with regionally similar geology. The mine has produced over 2.1 million ounces to date and boasts a current resource of 2.8 million ounces at a grade of 19 g/t gold.

What provides the excitement is the Obi Gold Project is on the Halmahera arc which hosts the 5 million ounce  Gosowong deposit could be a structural continuation of the Halmahera magmatic arc which hosts Gosowong.

Obi appears to have been the southern extension of the Halmahera magmatic arc which contains the Gosowong deposit.

Currently the known mineralised system is extensive, with a significant amount of epithermal vein/breccia style gold mineralisation identified over a broad area.

Obi also hosts both a productive artisanal goldfield that will allow Ashburton the opportunity to garner cash flows and support a major exploration effort over a 10 kilometre gold trend that has potential to host significant gold resources and a long mine life.

Evidence to date suggests the area has good potential to host a large scale gold deposit amenable to economic mining.

Artisanal workings

The project is located immediately to the south of the coastal village of Anggai, and contains the Ambon artisanal goldfield that is in production and an unexplored mineralized that extends for 10 kilometres across the permit area or IUP.

Main artisanal workings show the strike corridor extending southwards within tenement area.

The Ambon goldfield contains over 200 pits, shafts and adits that are scattered over a 1,000 metre long strike line of epithermal gold, silver and base metal veins and breccia zones that are currently being worked by about 1,000 miners.

Artisanal production is from a rich epithermal vein system that may extend 10 kilometres in unexplored ground.

Some of the larger veins appear to be continuous and extend over several hundred metres and are known to contain economic gold values to depths of at least 50 metres.

The miners had built a village and processing facilities that employ mercury to extract the gold and produce approximately 5,000 ounces of gold per year from within the Small Scale Mining area that covers 300 hectares and forms part of the IUP of 7,700 hectares.

Random sampling of run-of-mine ore by Ashburton geologists, comprising 15 samples which were brought back to Perth for analysis, showed average gold grade to be 16 g/t, ranging from 4.3 g/t to 42.3 g/t plus silver, lead, copper and zinc.

Consideration

Ashburton has paid the vendor US$1.5 million to upgrade ore processing with the addition of a crusher, ball mill, and gravity concentrator, that will boost production to approximately 20,000 ounces of gold per year in the form of a concentrate containing gold, silver and base metals credits.

This will allow the local miners to cease recovery of gold by a toxic mercury recovery system and allow for additional collection of base metal credits that are currently lost in the extraction process.

The funding entitles Ashburton to a 25% profit share of the expanded operation on the Oban goldfield, providing a very significant cash flow for development of the entire Obi Project area.

The company holds the right to acquire an 85% interest in the Obi Project by expending US$1 million on exploration over the next 12 months, and meeting additional terms in a two step acquisition process.

During the June quarter, the Company made the third, and final payment to the owner of the IUP (exploration licence) PT Eka Samudra Nusantara of US$500,000 (A$442,000), as per the terms of the heads of agreement between ESN and the Company.

The company’s remaining obligation is to expend US$1 million on exploration over the IUP by 10 December 2011 to earn the right to acquire a 51% equity interest in ESN by the payment of US$2 million and the issue of 30 million fully paid shares in the capital of the company.

Exploration at Obi

Historical information indicates an exploration program was conducted in 1996 by PT Obi Minerals on Obi Island, and including the area now the site of artisanal gold mining and the subject of the company’s present exploration focus, namely, the Obi Gold Project.

PT Obi Minerals was a subsidiary company owned by BHP Minerals Sulawesi Inc (80%) and PT Aneka Tambang (Persero) Tbk (20%). The work was conducted in the period November 1995 to August 1996, and included rock chip sampling, stream sediment sampling, soil sampling, trenching and drilling.

The culmination of the work completed by PT Obi Minerals was a 10-hole diamond drilling program, of which 5 holes were drilled in the vicinity of the current artisanal workings.

High-grade gold intercepts included:

- 9.15 metres at 26.25 g/t, in hole AOD 09, from 38.0 metres;
- 13.70 metres at 6.13 g/t, in hole AOD 10, from 39.4 metres; and
- 2.20 metres at 15.20 g/t, in hole AOD 07, from 78.6 metres.

The company has been unable to accurately confirm the location of these holes, there being some discrepancies in hole coordinates.

Further, geological drill logs are not available thus precluding a detailed understanding of the geology and the distribution of the gold within the reported intercepts – for example, whether related to massive veins or a series of narrow veins.

However, the fact that sampling was carried out to a 0.1 metre precision suggests a good degree of geological control and therefore gives confidence in the relevance of reported intervals.

Recent further sampling by Ashburton 3 kilometres away from the main workings in unexplored ground gave an average grade of 7.8g/t gold. It appears the potential mineralised trend may extend over 10 kilometres in Ashburton's ground.

This trend is known to extend for a further 7,000 metres beyond the known historic workings.
A first phase drilling program is already underway within the Small Scale Mining Area, and is aimed at completing 12 to 14 holes across a mineralised strike length of 500 metres, width of 100 to 200 metres, and depth of 300 metres, within the heart of the Oban goldfield.

Visual inspection of drill cores confirms the presence of geological formations that are consistent with widespread mineralisation that commences at shallow depths. Initial assay results are expected in early September.

A second drilling rig has been contracted to expedite the drill-out of the mineralized trend which has been estimated to contain a conceptual target over a width of 20 metres and depth of 200 metres at an average grade of 5 g/t gold.

These studies are based on current near surface mining activity, indicating potential for around 1 million ounces of gold, which covers approximately 5% of the entire strike line within the permit area.

Analysis

Ashburton Minerals and managing director Tom Dukovcic have targeted this project because it ticks a number of boxes including extensive evidence of mineralisation, under-explored, large tenure and potential to yield a significant discovery.

Evidence to date suggests the area has good potential to host a large scale gold deposit amenable to economic mining.

If continuity of high grade veins at depth is confirmed, then Ashburton may have itself a significant gold project.  If Ashburton can show that the high grade epithermal system extends below the existing artisanal workings, and also further along a projected 5-10 kilometre strike, then there may be plenty of upside.

At market capitalisation of just $29 million it’s not difficult to see the potential upside at Obi: with a conservative target (cumulative): strike: 500m Width: 20m Depth: 200m Grade: 5 g/t gold = 1 million ounces.

With a second diamond drill rig at the Obi Gold Project to accelerate progress of the current drilling program. With drilling progress to date, steady and without significant down time six holes have been completed for a total of advance of 1,433 metres.

Assay results from the laboratory will be available in late September.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/18915/ashburton-minerals-drilling-for-a-large-gold-prize-on-obi-island-indonesia-18915.html