North Queensland Metals Limited has entered into an option agreement to purchase the Dotswood Gold Project, located 60km southwest of Townsville.

The project has a history of gold production, previous owners having extracted oxide ore and some higher grade underground ore in 1986-1987 and 2000-2004 respectively.

The project is at an advanced stage and NQM plans to undertake confirmatory drilling, including angle drilling, in the 6 month option period with the expectation of estimating a Resource on this project. A Scoping Study will then be undertaken in order to decide whether to proceed with the purchase of the project.

NQM will pay $220,000 to the vendor during the six month option period, and, if satisfied with the outcome of exploration, will purchase 100% of the project for an additional:

- $1,900,000 in cash
- 1 million NQM shares and
- a 1% royalty for the life of the mine

Subject to a subsequent Feasibility Study, commencement of mining is targeted for late 2010.

The Dotswood project offers NQM the following features:

- A history of gold production
- Current mining leases, with minimal environmental liabilities
- Geographically well located with good access to both Townsville and Charters Towers
- Potential to quickly establish resources with likely depth and strike extensions;
- Potential for relatively low cost open pit operation
- Free milling ore with high recoveries
- Relatively quick to develop
- Exploration potential beyond main structure
- Affordable buy-in cost.

Announcing the agreement, NQM’s Chief Executive Officer, Mr John McKinstry, said, “Dotswood provides NQM with the opportunity to develop a second gold mine to add to production from our currently operating Pajingo mine (NQM 60%).”

“If the confirmation drilling to be undertaken during the option period yields what we expect, then the purchase of Dotswood will take NQM a step closer to realising our goal of becoming a mid tier gold producer.”

Pajingo Update

During the month of March, operations at NQM’s 60% owned and managed Pajingo mine recovered to normal levels of activity. As previously advised, gold production for the March 2009 quarter was adversely affected by the abnormally severe wet season conditions and will be down on the record production of 16,287 oz gold achieved in the previous December 2008 quarter.

The company said it is now focused on maintaining the budgeted levels of production to which were returned during the final quarter of the 2008/09 year.

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