Construction of Pan Australian Resources’ Phu Kham Copper-Gold Mine in Laos is nearing completion with production of the first concentrate scheduled for March.

The mine is being progressively commissioned and construction costs remain within the US$241 million capital budget. The work is well ahead of the original schedule with the first concentrate sales now scheduled for the June quarter.

The mine is designed to process 12 million tonnes per annum of ore to produce more than 200,000 dry metric tonnes of concentrate containing on average 50,000 tonnes copper, 50,000 oz gold and 400,000 oz silver.

Significant construction advances have been achieved. The high voltage power line to the site was energized in late November with energizing and testing of site transformers, motor control centres and other electrical circuits following. Assembly of the structural components of the SAG mill and ball mill has been completed and the ring gears installed, allowing the mills to be turned using their inching drives.

At the processing plant, the SAG mill and ball mill segments were lifted into position and by the end of December assembly of the mills was about 75% complete with all structural components installed. Lining of the SAG mill and ball mill was completed in early January.

Mechanical fit out of the flotation cells was completed and mechanical installation of the thickening, filtration and concentrate storage area has followed. Installation of the primary crusher was completed in mid-January and the final concrete pour for the crusher vault was completed in January.

Construction of the 1km overland conveyor from the primary crusher to the processing plant was completed during February.

The concentrate haulage contract has been awarded to Deuan Sawanh Group (DSG), a Lao incorporated company. Copper-gold-silver concentrate, loaded into 25-tonne containers, will be trucked from the concentrator to a port facility at Sri Ratcha in Thailand, about 120 km south of Bangkok, for export to custom smelters. On the return leg of the journey, the otherwise empty containers will be used to transport bulk commodities and general freight to the mine site, generating significant savings on freight costs.

Pan Australian’s concentrate sales agent, BHP Billiton, has already awarded an initial spot sale contract covering 40,000 tonnes of Phu Kham copper-gold-silver concentrate for delivery in four 10,000-tonne lots during 2008.

Strong heap leach gold production performances continued at Phu Kham, resulting in a quarterly gold production record of 13,501 ounces in the December quarter, which was up from 4683 ounces for the same period in 2006.

The heap leach gold operation is based on recovering gold from the oxide gold cap that overlies the Phu Kham Copper-Gold deposit. This provides a valuable revenue stream and offsets the cost of waste material mining for the Phu Kham Copper-Gold Mine.

The exploration and infill drilling programme continued at the Ban Houayxai Gold-Silver Project. The programme is targeting a steeply-dipping zone of primary gold-silver mineralization that has been defined over a strike length of about 1km. The program comprises 20 diamond core holes totalling about 6000m and will infill existing drilling to a spacing of 100 metres x 100 metres.

Data from the drilling will provide the basis for a pre-feasibility study to be completed during the June quarter. Subject to a positive outcome from the study, Pan Australian will proceed to complete a further phase of drilling and a full feasibility study with the aim of establishing an ore reserve that could support a project producing greater than 100,000 ounces of gold per year and with a target for first gold production in 2011.

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