CRATER Gold Mining has lodged a mining lease application (MLA) with the Papua New Guinea Mineral Resources Authority as it travels towards production at its High Grade Zone project at Crater Mountain later this year.

The MLA for the High Grade Zone covers an area containing high-grade gold where local artisanal miners mined an estimated 15,000 ounces between 2005 and 2012.

Crater Gold Mining has been exploring the HGZ since 2013 through the development of an underground adit and cross cuts.

The focus on the HGZ area of the project is designed to allow early commencement of production once the mining lease is granted. The company is targeting first gold production sometime in the third quarter of 2014.

Crater Gold Mining managing director Greg Starr said lodging the MLA was in line with its strategy of fast tracking gold production.

“We are excited to be progressing the rich HGZ to production, as this will generate strong cash flow to assist ongoing development activities,” he said. “We believe that gold can be extracted from the HGZ via a simple process that requires modest capital with low operating costs.”

Mining of the HGZ will be carried out underground using a hand held mining methods. The company is optimistic it can produce 10,000 ounces of high-grade ore in the first year of production.

The Crater Mountain project in PNG’s eastern Highlands is the company’s flagship asset given its potential to be a low cost, cash generating development with good potential upside.

To date, exploration has focused at the northern end of Crater Mountain’s Nevera prospect where three zones of gold mineralisation have been identified – the HGZ and the Mixing zone, as well as deep porphyry copper-gold potential.

While the current focus remains on the HGZ, Crater Gold Mining also has an inferred resource of 24 million tonnes grading one grams per tonne gold for 795,000oz defined at the Mixing Zone.

The company has already put plans in motion to upgrade the resource at HGZ by kicking off a drilling program. The aim of drilling is to further delineate the zone to generate a measured resource prior to beginning production.

A Diamec 250 hydraulic underground diamond drill rig has been mobilised which will be used initially to drill from the surface adjacent to the exploration adit portal before being installed underground to drill from specially prepared drill cuddies.

A first stage of about 1,800m of drilling comprising sixteen diamond drill holes will be drilled in four fans providing potential coverage for 80m strike and 100m of dip extension of the identified high grade mineralised zone. These holes are planned to intersect the mineralised zone with each hole approximately 20m apart. The first fan to be drilled is E Section Line which will be followed by fans at bearings of 75 degrees, 140° and 45° respectively.

In light of an encouraging underground sampling program previously undertaken at the site, Mr Starr said he was confident of a successful drilling campaign.