The project is ''technically stalled'' and owner Oceana Gold does not appear to be rushing to take it to the next phase, which requires more exploration at greater depths.
As Oceana's northern Philippine gold and copper mine, Didipio, continues to ramp up and provide highly profitable returns on gold sales, the company is considering winding down its New Zealand operations during the next two years at Macraes, in East Otago and Reefton, on the West Coast, because gold production costs are many times that of the Philippines.
Oceana this week lodged a 225-page ''preliminary economic assessment of the Blackwater gold project'', with the New Zealand and Australian stock exchanges.
Oceana said it undertook the study to assess technical and economic potential of the Blackwater project, and to support investment decisions for an exploration decline [tunnel].
Oceana said environmental studies were complete and resource consent obtained.
''Due to the scale of the investment relative to the size of Oceana Gold's operating activities, the project can be funded from Oceana Gold's operational cashflow, should it so choose,'' the company said.
An Oceana spokeswoman said, when contacted, while ''the base case economics are robust'', Oceana had not made a decision to advance the project to the next phase.
''Each opportunity we have is required to compete for capital to maximise shareholder value. There is no timeline in place on a decision to advance this project to the next phase,'' she said.
Oceana said in the conclusions and recommendations of its report: ''The results from this study demonstrate that the project is technically and economically viable and it is recommended that the project advances to construction of the exploration decline''.
Further diamond drilling could move the project to a full feasibility study.
Oceana estimated a two-and-a-half-year pre-production start-up, then a 10-year mine life.
About 120,000 tonnes of ore per year would yield 58,000oz, recovering a total estimated 570,000oz, producing the rough ''dore'' gold bars, which are sent to mints for refining.
Because of the depth and geometry of the Birthday Reef, which hosts the gold resource, and surface land ownership constraints, Oceana said the project was ''technically stalled'' because it could not be progressed from the surface, in order to determine the commercial viability of the estimated gold resource.
''Further evaluation work and appropriate studies are required to establish sufficient confidence that this [gold] target will be met,'' Oceana said in the assessment.
The Blackwater Mine, 37km south of Reefton, lies beneath the abandoned township of Waiuta, in the foothills of the Victoria Range, about 440m above sea level.
Historically, 740,000 ounces of gold was recovered from Blackwater from 1908 to the time of shaft collapse and closure in 1951.
From 1.6 million tonnes of ore, a remarkable 14.6 grams of gold per tonne of ore was extracted.
Each vertical metre of the Birthday Reef in the Blackwater mine was credited with having yielded 1000 ounces of gold.
The permitted area covers about 4308ha and Oceana had entered into an option agreement to acquire the land required for surface infrastructure works, which expires in April 2016.
Oceana had received resource consent for the construction of an exploration decline, mining and associated infrastructure works, but requires specific building permits.
A variation to the resource consent was also required, to permit ore processing on site and co-disposal of filtered tailings.
An ''independent technical report'' on the project by Brisbane-based AMC Consultants Pty Ltd looked at the results of deep drilling, during 1996 and 2010-13, and the intersections of gold within four holes drilled by Oceana, and historical data.
Oceana had said the results had indicated the Birthday Reef continued for at least 680m vertically below the last worked level of the Blackwater mine.
The mineral resource estimate for Blackwater's Birthday Reef, at December last year, was 700,000oz of gold, from 900,000 tonnes of ore, equating to 23 grams of gold per tonne.
AMC said twin declines would be developed, both 4m by 4m with a 1:7 gradient, one as the main access and intake airway and the other as the return airway, which would eliminate the need for ventilation shafts to surface.
AMC estimated two and a-half years of pre-production activity was required to establish the access decline, and initial underground exploration drilling platform.
Capital expenditure during the first two years, where there was no ore mined, was estimated to be $US76 million.
''Blackwater pre-production mining capital amounts to $US30 million and capital costs for the life of the mine amount to $US98 million,'' AMC said.
More representative samples to validate the metallurgical test work already done would only become available from underground drilling, AMC said.
''Only when this information is collected and analysed will the project not be technically stalled,'' AMC said.
