Kefi surges ahead

Drilling continues to demonstrate the potential for a small, shallow, open-cut mine at Jibal Qutman. Gold there is hosted in a thin series of quartz veins over three kilometres and, importantly, Kefi says "the continuity of mineralisation in each zone is excellent and grade distribution does not display a high nugget effect".

Encouraging gold intervals from this round of drilling included 12.75m of 3.78 grams gold per tonne starting from a depth of 36m; 4.5m of 17 grams gold per tonne starting from a depth of 8.5 metres; and 13 metres grading 2.35 grams gold per tonne starting from a depth of 62 metres.

Kefi has run the rule over Jibal Qutman and thinks there's potential for a "pilot heap leach mining operation". The company did not say anything about potential water supplies - no doubt a concern in the desert - but says it hopes to firm up a gold deposit of around 90,000 to 200,000 ounces, with an internationally compliant resource estimate expected later in the first half of 2013.

True, the operation would be small - Kefi envisages producing around 20,000 ounces a year for four years at cash operating costs of $640 per ounce - but it could be very profitable and wouldn't cost much. With an estimated $12m to $14m initial capital spend (of which Kefi would only be required to cough up 40 per cent), the operation is forecast to generate cash operating profits of around $80m.

That said, initial metallurgical testing have showed mixed results so far, with four samples attaining between 54 and 90 per cent gold recoveries. No doubt, this will require further testing.

While Jibal Qutman is shaping up to be smaller than we'd like, these early results are promising.

A second round of drilling has also begun at the Selib North project. The exploration programme will comprise 4,100m and will test several anomalies identified in geophysical surveys - including one big underground target that could be the parent stock of a series of steeply dipping rock formations.