Exterra Resources Ltd (ASX:EXC) has successfully completed an ore sorting trial, a key milestone in the development of the Second Fortune gold mine within the Linden Project located in Western Australia.

The trial involved processing multiple bulk samples from Second Fortune using a Tomra ore sorting plant.

The results show that in excess of 60% of ore mass can be rejected on site prior to haulage and processing.

By eliminating waste material from the ore, costs can be lowered and project economics can be improved.

John David, chairman, commented: 'We are very pleased with the outcome of the sorting programmes and the potential benefits the technology delivers to the project.

'We look forward to advancing the development of the project through to production over coming months.”


Gold production opportunity

The company is currently undertaking a development study on the Second Fortune gold mine, which is part of the Linden Project and positioned 220 kilometres by road north northeast of Kalgoorlie.

The Second Fortune underground mine feasibility study highlighted the low cost entry to gold production.

Study details include:

- 131,000 ounces at 8.5 g/t gold JORC Resource at Second Fortune;
- 56,300 ounces at 9.7 g/t gold JORC Reserve at the Main Lode only;
- $97 million revenue to 300vm on Main Lode over 30 months;
- $34 million net cash flow (at A$1700 an ounce gold price); and
- +/-A$5 million pre-production capital.

Exterra has executed a management and services agreement with the Mitchell River Group (MRG).

MRG brings the requisite skills to the Linden Project on a cost plus basis to ensure a smooth development pathway for the Second Fortune mine.

Production is scheduled for Q1 2017.

All regulatory approvals have been received to commence project development of an underground mining operation.


Analysis

The ore sorting trials have proved successful for Exterra - by minimising the amount of ore needing to be hauled and processed, Exterra will be able to lower costs.

Second Fortune has the potential for a high-grade, profitable, narrow vein underground mining operation, with a low estimated capital cost via third party processing.

The mine feasibility study has already demonstrated the project is robust, generating free cash of $34 million at current gold prices, with preproduction costs of $5 million.

The inclusion of sorting to the project will likely provide a significant benefit to the project operating costs.

The potential to remove waste from ore also has a significant impact on the potential to mine narrow vein ore by removing mining dilution at low cost allowing for greater conversion of resources to reserves.

Exterra is trading up 680% year to date, currently priced at $0.078.

Key milestones to be achieved include:

– Mining Approvals: Granted
– Water Abstraction licence: Granted
– Mining design and scheduling: In progress
– Ore Sales Term Sheet: Advanced
– Mining contractor appointment: Advanced
– Financing: Discussions underway

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