Ballarat Development Strategy

RNS Number:6184I
Ballarat Goldfields N.L.
07 September 2006



Ballarat Goldfields NL
ASX and Media release: 7 September 2006

Please see our website www.ballarat-goldfields.com.au for the release complete 
with pictures.

                   Ballarat East Revised Development Strategy

KEY POINTS

   *Deeper higher grade gold Resources, influenced by and adjacent to the
    Blue Whale fault, drive the revised development strategy.
   *New plan expected to deliver gold at a rate of 250,000 ounces per annum
    in 2009.
   *Cash operating costs planned to fall below A$300/oz when in full
    production.
   *The Blue Whale fault to the north, as yet un-explored, provides enormous
    upside potential from the new development plan.
   *Estimated funding requirement of approximately A$120 million.
   * Funding negotiations well advanced.

SUMMARY

Ballarat Goldfields NL (BGF) has undertaken a comprehensive review of its
development strategy for the Ballarat East project. The outcome is a new and
substantially superior development plan, which emphasises accelerated access to
the deeper, higher grade Resources. As a result, an increase of 25% in the
planned mine production rate should be achieved.

Early development in the upper levels of the mine encountered intermittent
geological features and unmapped historic mine workings, which negatively
impacted development advance rates and the availability of shallow ore sources.
The experience, from accessing these early stopes, lead to significant advances
in understanding the gold mineralisation of the field and, coupled with the
discovery of the higher grade features associated with the blue whale fault,
provided the framework for this review.

The new development plan, based on this strategy, incorporates:

  * Relocating a proposed ventilation shaft to the southern end of the mine
    and equipping it for haulage. This will provide faster access to higher
    grade zones, whilst boosting haulage capacity and flexibility.
  * The substantially higher grade of the deeper Resources allows BGF to
    develop a production plan which delivers the higher production rate, of
    250,000 ounces per annum, at a lower mining rate of 600,000 tonnes per
    annum. In full production, cash operating costs are expected to be under
    A$300/oz.
  * The new plan brings forward major shaft and decline development and
    by-passes upper level potential ore sources deferring 2007 production into
    2008.  This allows BGF to deliver higher production rates with increased
    development flexibility in 2008.
  * Enhanced understanding of the significance of the Blue Whale fault has
    substantially improved the confidence in delineating further high grade
    Resources. In particular, potential to the north is yet to be explored or
    incorporated into the production plan.

The recent exploration results and the revised development plan at Ballarat East
put BGF in the enviable position of developing an exciting and truly
significant, low cost, long life gold project. The Blue Whale fault and its
implications for grade and extent of mineralisation at depth may prove to be one
of the most exciting discoveries in the history of the Ballarat field.

BACKGROUND

GEOLOGY

Exploration drilling at Ballarat East has continued to validate the geological
model. The June 2006 Resource estimate of 3.9Mt @ 11.3g/t for 1.4Mozs includes
an Indicated Mineral Resource of 0.6Mt @ 13.4g/t for 0.24Mozs. This was a 27%
increase over the previous Resource and deeper drilling continues to delineate
zones of mineralisation with gold grades higher than the historical average from
the upper level mines. Our success in using the model to target resource
drilling demonstrates our ability to convert Exploration Potential to Resource.

                                       

Figure 1: June 2006 Resource, 1.4Moz (colour), with Exploration Potential (grey)
and the Blue Whale Fault

Earlier this year, drilling at depth intersected the largest fault ever
discovered in Ballarat. Named the Blue Whale fault, we now have over 20
intersections confirming its size and location. This presents tangible evidence
that it may have been the pathway for gold mineralisation for the entire
Ballarat East field.

Historically, the size of fault offset was directly related to the size of
associated gold lodes. The Blue Whale fault, with an offset of over 100 metres,
appears to be up to 5 times larger than the historically largest producing
faults in the field. The fault has been intersected at a depth of 600 metres
below the surface at the southern end of Ballarat East. Only a small section of
its available strike length has been drilled and, already, a Resource of 0.3
million tonnes @ 20.6 grams per tonne for 0.2 million ounces has been delineated
adjacent to the fault.

Our main target area lies to the north in an area not yet explored. The surface
projections of these targets correspond to the largest and most prolific
original alluvial workings, and lie beneath the highest concentration of
historic underground gold production.


Figure 2: Schematic diagram illustrating the Blue Whale fault (shown in blue)
dipping beneath the historical workings to the west. View looking from the
north-west.

Due to the nugget effect (very coarse gold) and the style of mineralisation in
Ballarat, the economics of mining at Ballarat East will be improved by
developing a more detailed understanding of the nature and timing of the quartz
veining.

Recent detailed geological mapping of the first stopes has revealed new
information, potentially enabling BGF to differentiate between high grade and
low grade mineralising events and associated quartz veins.

This discovery suggests there are several identifiable generations of quartz
veining, and that the high grade coarse gold is associated with flat to east
dipping veins that extend away from the large west dipping faults. The high
grade quartz veins are also recorded in the historical literature when detailed
mapping of the vein sets has been illustrated (Figure 3).

                                      

Figure 3: Cross sections showing the relative position of high grade zones and
generic drill plan to define reserves. The historical section shows similar
features from the Last Chance mine "pug lode" (after W. Baragwanath, 1923;
Geological Survey Report, Memoir 14, Figure 58).


REVISED DEVELOPMENT STRATEGY

The framework for a comprehensive review of the development strategy was
provided by growth in the Resource base, higher gold grade at depth, the
discovery of the Blue Whale fault and experience gained from access to the first
stopes. This led to changes in the development plan to focus on accessing the
higher grade zones at depth, whilst prioritising development to Resource blocks
well below the historical workings.

The new plan has additional haulage capacity, achieved by relocating the planned
ventilation intake shaft to a position close to both the decline portal and the
processing plant and equipping the shaft for haulage. This will provide earlier
access to the deeper high grade areas at the southern end of Ballarat East,
including the Blue Whale fault.

The original development plan, outlined in the June 2004 pre-feasibility study,
used twin access declines in the upper levels of the mine to provide drilling
platforms, haulage and ventilation, and 4 internal declines equally spaced along
the strike of the field to access ore horizons. (Figure 4)

The decline system was to be supported by two ventilation shafts, the
now completed North Prince Extended exhaust shaft, at the southern end of the
field, and a proposed air intake shaft at Golden Point, approximately midway
along the strike of the field.

The plan was effectively a generic development plan based on a uniform grade
profile and designed to fully develop the field whilst accurately estimating the
decline development required. Initial production from the upper levels was to
fund the ongoing development of the mine.


Figure 4: 2004 Pre-feasibility development plan.


The new development plan is similar in concept to the previous plan utilising
decline access to all planned mining areas with production using mechanised
stoping methods. The overall underground mine development metres are similar in
both plans but the new plan brings forward major shaft and decline development
prior to production ramp-up.

The main intake ventilation shaft, now planned to be located in the
south, will be developed to a depth of 600 metres below surface and is expected
to take 9 months to complete. Further development in the lower levels, which is
expected to take around 9 months, will be required prior to hauling the first
ore. Exhaust ventilation is provided by raises from the mining zones to a
collection drive (Sulieman decline) which is connected to the exhaust
ventilation shaft. This drive will also provide a diamond drilling platform for
Resource definition.

The new decline layout is expected to provide more efficient access to the
Resource with development rescheduled to provide more rapid access to the higher
grade blocks located below 400 metres depth.


Figure 5: 2006 design, ventilation shaft moved south and First Chance decline
now 200m below the Sulieman decline.

PRODUCTION SCHEDULE

The revised production schedule targets an annual production rate of 250,000
ounces in 2009 from 600,000 tonnes of ore. It achieves this by prioritising
access to the higher grade Resources, defined below the historical workings,
with estimated head grade rising from around 9g/t in 2008 to around 14g/t in
2010. This compares to an estimated 8.4g/t in the original plan. The throughput
rate matches the current installed capacity of the processing plant, 600,000
tonnes of ore per annum.

The revised plan based on Resource and Exploration Potential gives a 20 year
mine life delivering over 14 million tonnes of ore. Using the Exploration
Potential grade of 8.4g/t, recovered to the surface, this would produce
approximately 4 million ounces during the life of the mine.

The impact of the Blue Whale fault and higher grades at depth is not yet
reflected in our published Exploration Potential and we expect to update these
calculations in the coming 18 months.

                                      
Figure 6: Production estimates from the revised Ballarat East development plan.


Figure 7: Major underground development overlaying current Resource plan.

FUNDING REQUIREMENT

The new development plan now brings forward major mine infrastructure prior to
ramping-up production. The funding required for the new plan is estimated to be
approximately A$120 million. This covers the accelerated development of the
southern shaft, all decline and mine development and additional surface
infrastructure.

BGF intends to implement an appropriate financing structure which complements
business risk and aims to fully fund the project until it is producing a
positive cash flow, expected in 2008.

BGF is currently in advanced negotiations with potential funding providers and
will provide further details once the structure and timing is determined.

Note:

The information in this report that relates to Exploration Results, Mineral
Resources and Exploration Potential is based on information compiled by Mr
Steven Olsen. Mr Olsen is an employee of Ballarat Goldfields NL, is a member of
the Australian Institute of Mining and Metallurgy and is a Competent Person
under the definition of the 2004 JORC Code. The Exploration Potential described
above is conceptual in nature, and there is insufficient information to
establish whether further exploration will result in the determination of a
Mineral Resource. Mr Olsen consents to the publication of this information in
the form and context in which it appears. The terms Exploration Results, Mineral
Resources and Exploration Potential are used in accordance with their
definitions in the 2004 JORC Code, which is available at www.jorc.org.


The future estimates, forward-looking statements and any other prospective
financial information set out in this document by Ballarat Goldfields NL are
inherently uncertain, are predictive in nature, may be affected by inaccurate
assumptions or by known or unknown risks and uncertainties, and may therefore
differ materially from results ultimately achieved or events ultimately
occurring. None of these estimates or statements is or will be or is intended to
be a representation or warranty as to any future matter on which any person can
rely.


For further information, please visit our website www.ballarat-goldfields.com.au
or contact Joel Forwood, Manager Corporate and Markets, on 03 5327 1111



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