CRATER Gold Mining is set to become Papua New Guinea’s next gold producer after its local subsidiary Anomaly Limited was granted a mining lease for the High Grade Zone (HGZ) project at Crater Mountain.

The company said it expects to extract about 10,000 ounces of gold in the first year of operation.

Gold mineralisation at the HGZ is confined to several narrow, highly oxidised veins that would be best targeted by a small scale, underground mining operation, Crater Gold said.

Crater Gold chief executive Greg Starr described the granting of the lease as a “watershed” moment for the company on their transition from gold developer to producer.

“With the mill and gravity concentration circuit already commissioned on site, we can effectively commence mining activities and gold production in the current quarter,” Mr Starr said.

Crater Gold has reported “excellent results” in the planned mining zone, it said.

“The company is pleased with continued excellent high grade gold assay results from its ongoing diamond drilling programme,” it said.

Mining minister Byron Chan approved mining lease 510 at the Eastern Highlands Province site in early November after a rigorous technical and environmental assessment process was carried out by the Mineral Resources Authority and the Department of Environment and Conservation.

Mr Starr said the company was finalising a landowner compensation agreement to clear the way for gold production to begin.

He said cash flows generated by the project would be reinvested in developing the company’s other Crater Mountain projects.

“We appreciate the efforts of the PNG government authorities who have worked diligently to process the mining lease and look forward to reporting on gold production and revenues going forward.”

The drilling program at the HGZ started in February and has been looking to delineate the gold mineralised zone to generate a measured gold resource prior to the commencement of production.

“Eighteen holes totalling 1473.5 metres have been fully reported with gold assay results,” the company said in its September quarterly activities report.

“These holes have been drilled from a single drill platform on surface approximately 25 metres from the portal of the underground drive that has been developed through the known zone of mineralisation.

“The key outcome of the drilling results received to date is that they highlight the very strong correlation with the geology and grades encountered directly above in the underground development.”

The company said the nature of mineralisation at the HGZ was that of a clear set of structures trending approximately north-south.

“However, evidence from artisanal mining and exposures in underground development show that there is a set of east-west structures as well as shallow dipping link structures which influence the mineralisation and potential gold tenor,” the company said.

“From underground mapping and sampling it has generally been established that gold mineralisation is concentrated in very narrow oxidised structures rather than broad low grade zones.

“Additional drilling will be carried out from a drill pad which will allow a sequence of holes to be drilled as close to north-south as possible to test the importance of east-west mineralised structures in the overall gold inventory of the HGZ.”

Crater is also awaiting results from a further seven diamond drill holes from a second drill pad just north of the adit portal.

“These holes have been drilled in a south easterly direction to test possible east-west structures mapped in the underground development. Results from these holes are awaited,” the company said.

Crater is currently commissioning the mining plant on site, with rail and underground rail trucks ready to be installed.

The plant is of such a scale that in the initial phase it will be used for bulk sampling individual parcels of mineralised material currently stored on surface from the rock extracted during development of the drive and cross cuts.

Crater said metallurgical processing will be by simple gravity concentration via crushing, milling with a wet hammer mill and concentration using a centrifugal concentrator.

Crater Mountain is located 50 km southwest of Goroka in the Eastern Highlands Province.

Formerly a tier-1 BHP asset, there has been in excess of 14,500 metres of diamond drilling to date, the majority focussed on the Nevera prospect, which hosts the HGZ project.