Tembang Gold-Silver Project (100% owned)

BACKGROUND

Sumatra Copper & Gold's principal focus is on the exploitation and exploration of its 100%‑owned Tembang Gold-Silver Project located within the Province of South Sumatra in Indonesia. The Tembang Project is owned by PT Dwinad Nusa Sejahtera (PT DNS), an Indonesian Foreign Direct Investment Company (PMA) which holds the mining permits (IUPs) over the Project area. PT DNS is a wholly-owned subsidiary of Sumatra Copper & Gold plc. 

The Tembang Project covers an extensive, low sulphidation epithermal vein system within the Barisan mountain range of the Sumatran volcanic arc, which extends along the western side of the island. The vein system was discovered in 1986 by CRA and was explored by the operating company PT Barisan Tropical Mining. The Project was subsequently mined by Laverton Gold in a series of open pits from 1997 to 2000 (the Rawas Gold Mine) and produced approximately 230,000 ounces of gold until its closure in 2000 due to the low prevailing gold price.

Sumatra Copper & Gold gained tenure over the Project in 2006 and continued detailed resource definition drilling at the main vein targets following its ASX listing in 2009. After completing a Feasibility Study in September 2012, the Company raised US$19.7 million in equity and commenced construction of the mine in June 2013. However, during 2013 the gold price fell from a high of US$1,690 per ounce to US$1,200 per ounce. As a result, the Company was unable to complete debt funding and construction at Tembang was suspended in December 2013 after project expenditure of approximately US$15 million. Key works conducted during the initial period of construction included upgrading the access road, construction of a 300-man camp, construction of the main administration buildings at the plant site, commencement of explosive magazine construction, detailed engineering design, erection of the six main leach tanks and fitting of the apron feeder. All major equipment items, except for electrical components, were ordered.

Following a further drilling campaign to define additional Measured and Indicated Resources, the Company announced updated Mineral Resources and Ore Reserves in March 2014 and in April 2014 published a revised Definitive Feasibility Study. The DFS was based on a five-year plan with total life-of-mine production of 2.1 Mt ore at a mill process rate of approximately 400,000 tpa at 2.8 g/t gold and 33 g/t silver for a total of 169,000 ounces of recovered gold and 1.8 million ounces of recovered silver. Total ore mined under the DFS was 1.7 million tonnes at 2.0 g/t gold and 30 g/t silver from open pits and 0.4 million tonnes at 6.1 g/t gold and 48 g/t silver from underground operations. 

In October 2014 the Company successfully obtained a senior secured debt facility of up to US$45 million. Following drawdown of Tranche 1 of the debt facility (US$40 million), the Company recommenced construction at Tembang on 21 November 2014. The Project was scheduled to achieve first gold pour in November 2015, 12 months after construction recommenced. However, practical completion was reached on 7 September 2015 with the first gold pour on 29 September 2015, eight weeks ahead of schedule. The plant was completed under budget with overall project costs at approximately US$36.6 million (from re-commencement of construction in November 2014).

Open pit mining commenced in July 2015 with free dig material from the Buluh, Siamang, Bujang and Berenai open pits to provide low grade material for mill commissioning. Pit dewatering at Belinau and Bujang was completed in September and dewatering of Berenai continued while mining was conducted above the waterline. The Asmar open pit was progressively introduced to the run-of-mine feed in late 2015. Decline development at the Belinau underground mine commenced in September 2015.


The conventional CIP processing plant ramped up rapidly post-commissioning and achieved nameplate capacity of 50 tonnes per hour (400,000 tonne per annum) during October 2015. The Company is targeting annual production in the range of 40,000 to 50,000 gold equivalent (AuEq) ounces per annum (life-of-mine average of 33,000oz Au and 345,000oz Ag) with forecast a C1 cash cost of US$525/oz and AISC of US$800/oz net of silver credits for the first three years of operation.