Australian miner Red Back Mining announced yesterday that it is targeting a significant increase in the reserve base of its two-million ounce Chirano gold project in Ghana through a major 10 000 m reverse circulation drilling programme.

The drilling programme, set to start in mid-December 2003, comes ahead of Red Back’s proposed merger with Canadian explorer Champion Resources, a reverse takeover that will result in the listing of Red Back on the Toronto Stock Exchange.

Red Back MD Ross Ashton said the purpose of the drilling was to convert currently defined Inferred Resources at Chirano (545 000 oz) into the measured and indicated categories, making them available for conversion into Ore Reserves.

Chirano, which is expecting the grant of a mining lease in the March 2004 quarter, has proved probable reserves of 16,1-million tons grading 2,1 g/t for 1,1-million ounces, based on a gold price of $325/oz.

At this gold price, the project has forecast production of 130 000 ounces a year.

"However, there is considerable upside in the project particularly at current higher gold prices, and this drilling programme, which is being partly funded by our recently completed $3,6-million placement to Canadian institutions, is the first step towards unlocking that potential," Ashton said.

"Our proposed merger with Champion and listing on the Toronto Stock Exchange is the next key step in this strategy".

"The drilling programme is designed to achieve a significant increase in the reserve base of the project, test the mineralisation at depth to maximise the economic size of the current pits at a higher gold price, and test other promising geochemical anomalies within the Chirano lease," he added.

Ashton said the project had been reviewed by a number of project finance banks, which had all indicated a high degree of willingness to fully debt fund Chirano based on its current reserve base and economics.

Ashton told shareholders at the AGM the Champion merger was designed to tap into the very strong levels of investor interest in North American markets for gold projects in Ghana and would position Red Back to realise a premium in its share price ahead of the development of Chirano.

"Champion has an established management team and domicile in Toronto, which satisfies all the Canadian regulatory requirements and has a strong depth of expertise in North American financial markets, where there is currently a very high level of interest in gold projects in West Africa, especially Ghana".

Champion is part of the Geneva-based Lundin Group of companies, which has substantial mineral and petroleum assets in over 20 different countries and raised over $1-billion in development financing. Recent strategic transactions by the Lundin Group include the development and sale of the world-class Alumbrera copper-gold project and +10-million ounce Veladero gold deposit in Argentina.

"The Lundin Group has a very high profile in North American and international capital markets, and can open many doors for us as we progress the development of the Chirano Project," Ashton said.