AIM and TSX-quoted Cluff Gold (LON:CLF, TSE: CFG) is “extremely encouraged” with the first results announced this morning from its drilling programme targeting the VTEM (versatile time domain electro-magnetic) anomalies at its Baomahun prospect in Sierra Leone. The firm, which today also issued strong results for 2010, said the drill results confirm the association between gold and the sulphide minerals identified by the conductive anomalies recognised in the VTEM survey. The intercepts from the first hole assayed were five metres at 1.59 grams per tonne from 29 metres and two metres at 5.77 grams per tonne from 81 metres. "Whilst we cannot predict future exploration results, with the link between conductive anomalies and gold now clearly established, the project has taken a major step forwards in enabling targeted, cost-effective exploration," said Peter Spivey, chief executive officer of Cluff Gold. The first drill hole at Baomahun is one of seven top priority targets that the company is targeting, according to house broker Evolution Securities. The broker said that it believed “these drill results will help to demonstrate the potential upside of this flagship project” in a note to investors this week. Cluff’s results revealed that total production in 2010 came to 94,295 ounces. The average price of gold sold was US$1,228 per ounce, while the average cash cost achieved was US$883 per ounce. Total revenue for the year increased by 192 per cent to US$115.8 million, while the firm’s loss before tax was significantly reduced to US$976,000 (compared to US$35.5 million in 2009). This improvement was primarily driven by a 438 per cent increase in EBITDA to US$22.6 million, thanks to the increase in turnover far outstripping Cluff’s increase in costs. At Kalsaka, Burkino Faso, Cluff produced 74,073 ounces in 2010 – representing a 36% increase on 2009. The average cash cost achieved was US$793 per ounce, which was a slight increase compared to 2009 due to lower grades in H2 2010. Cluff is focusing on exploration here this year in order increase the resource base. At Angovia, Cote d’Ivoire, there were 20,222 ounces of gold produced last year – a reduction of only 6.5 per cent in spite of the political turmoil in the country that began Q4 2010. The operation was put on care and maintenance in Q1 2011. During the year, the Baomahun resource in Sierra Leone was upgraded, with the measured and indicated resources there increasing by 27 per cent in June 2010 to 1,420,000 ounces, grading 2.9 grams per tonne. There is also an additional 1,030,000 ounces, grading 2.6 grams per tonne, of inferred resources at the prospect. Cluff had closing net cash of US$20.9 million at the end of 2010, compared with net debt of US$3.6m a year earlier. “Our strong cash position, coupled with our ongoing operational cash generation, allows the Company to fund the expansion of our exploration activities in 2011,” said Spivey.

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