Background
The Derewo River Gold Project is situated on the Derewo River within the central mountains of the Papua Province, Indonesia. The project is located approximately 110km north west of Freeport McMoRan's Grasberg complex. This is a promising placer gold project based on evidence from existing artisanal operations, but the real opportunity and focus of this project is in the potential of discovery of the primary source of nuggets being found.
The Company believes that Derewo River exhibits many similarities consistent with the early stages of several large gold projects on the PNG side of New Guinea. This project area exhibits favourable geology with significant gold deposits nearby, including Wabu and Grasberg. The exploration target is a Porgera Zone 7 and Wafi/Gopu type deposit.
Whilst many well known discoveries have been made on the PNG side of the border relatively few have been made on the Indonesian side until recently for a variety of historical reasons; including political environment and physical isolation. Derewo River provides a promising setting for the pursuit of a well known pattern for development of placer style deposits established over several decades in PNG but not yet undertaken on the Indonesian side.
West Wits currently owns a 50% interest in the alluvial gold project and 50% of the exploration rights for the hard rock source of the alluvials, which will increase to 80% on $2 million being spent on exploration. The Derewo River Gold Project is owned through its local Indonesian subsidiary PT Madinah Qurrata'ain (PTMQ) with local partners the Suhari family of Makassar. The project consists of one granted 40ha mining licence, an application for a further 491ha mining licence, a granted exploration licence of 86,000ha and two further exploration applications encompassing 43,000ha. PTMQ has also executed a Landowners Agreement with the local indigenous Wolami People which was one of the first of its kind in Papua Province.
This mining area was discovered in 2004 with local artisanal miners mining isolated alluvial gold pockets in the downstream of the Derewo River close to Nabire. This led to the discovering of high concentrations of alluvial gold in the Derewo River where it exits the central mountains of Papua. This area has shown potential with reports of several tonnes of gold having been extracted over the last few years.
The gold is occurring in the form of coarse nuggets which show clear signs of fluvial transport. These nuggets are found in Derewo River terrace deposits. The composition of the alluvial gravels does suggest a mixed alluvial and colluvial origin in that they are likely to be the product of slumping from the sides of the valley. Mining of these colluvial/alluvial deposits is possible using hydraulic recovery methods and sluice boxes to provide a relatively low cost method of gold recovery.
The source of this alluvial gold is potentially local, based on the size and shape of the nuggets discovered and the evidence of gold mineralisation from float samples observed within the mining area by independent geologists. The float samples consist of graphitic slates with associated with quartz veining. Evidence of silicification and hydrothermal alteration with fresh massive pyrite and disseminated chalcopyrite, sphalerite and galena indicate the potential for a larger mineralised system nearby which could provide a target to explore for a hard rock source.
West Wits intends to commence exploration work and develop a hydraulic gold mining project by introducing modern mechanised production methods. These activities are expected to enhance the Company's knowledge of the regional geology and assist with targeting the primary hard rock source of the gold nuggets. The development strategy will consist initially of mapping and sampling for alluvial assessment and development of the long term mining plan, which would include the construction of an access road, dam and pipeline to enable commencement of commercial scale mining.