Resource Development Targets

CEN Local Bardoc Geology-ELP to BBS Nov 13 Small

Figure 2. Kalgoorlie North Project - Central Resource Area Geological Plan (showing major and satellite resources at 0.6 and 3.0g/t Au lower cut-offs with conceptual open pit outlines)

Previous exploration on the Project area has identified structurally and lithologically controlled gold mineralisation in numerous deposits and prospects associated with generally north to north-north-west trending shears and high grade cross cutting structures.

The multiple deposit styles and the extensive distribution of mineralisation within the Project present a variety of possible mining options. The Company has to date focussed its development activities on the highly mineralised Excelsior and Zoroastrian area in the central part of the tenements which host a large proportion of the current defined gold resources.

Future targeted drilling programs are proposed on the currently defined resources to progress structural interpretations, metallurgical testwork and resource upgrades to facilitate more extensive mining and development feasibility studies.

The resource development program for Excelsior Zoroastrian area includes:

  • Zoroastrian, Excelsior and satellite open pit and underground mine Pre-Feasibility Study scheduled for completion in March 2014
  • Drilling (in progress) to extend the Zoroastrian higher grade resource.
  • Metallurgical test-work on Excelsior, Zoroastrian and satellite deposits (demonstrates favourable free milling ore types)
  • Mill scoping study into the establishment of a 1 million tonne per annum treatment plant on site and evaluation of toll treatment milling options for open pittable resources
  • Infrastructure re-location scoping study rail and road diversion, power line and borefield upgrade (designs completed and constings in progress)
  • Environmental and heritage studies to facilitate lodgement and approval of mining proposals (completed)

The extensive geological database including historical drilling has provided the Company with a large number of potential resource targets throughout the tenements. Exploration and resource drilling programs are extending to other advanced prospects and zones of significant mineralisation identified from historic drilling outside the central Excelsior area. These targeted drilling programs have the potential to delineate new resources and open pit and underground mine development targets.

ZOROASTRIAN DEPOSIT

The structural model developed in 2012 for the distribution of quartz veining in the Zoroastrian Dolerite has demonstrated the continuity of the vein structures and enhances the understanding of the broader zones of stock-work style gold mineralisation.

Gold mineralisation occurs in quartz veins within and adjacent to the Zoroastrian Dolerite which is a geological unit equivalent to the northern extensions of the Paddington Dolerite which produced in excess of two million ounces of gold at the Paddington Operations located 17 kilometres to the south.

Previous mining at Zoroastrian was a combination of underground mining in the late 1890s and early 1900s and open pit mining by Aberfoyle Gold Pty Ltd between 1987 and 1991. Total historical gold production from the Zoroastrian Dolerite unit is approximately 72,000 ounces of gold.

The vein structures form a complex ladder array of steep west dipping and flat lying quartz veins within the differentiated Zoroastrian Dolerite. The veins develop broader zones of stock-work style veining as they pass into and through a granophyric phase of the dolerite developed close to the western sheared contact. This stock-work veining develops wide zones of high grade gold mineralisation which are more amenable to open pit mining than the narrower high grade veins previously mined in the Aberfoyle open pit or in the historic underground mines.

Figure 5

Figure 6

Figure 7

Figures 5,6 and 7 Zoroastrian Cross Sections showing Geology, Mineralisation Wireframes, Conceptual Open Pit and Conceptual Underground Mine Designs

These new broad zones of high grade gold mineralisation form part of a large gold mineralised system extending for over two kilometres which has remained the focus of the Company's resource expansion activities over the past year.

Approximately 36,400 metres of reverse circulation and diamond drilling were completed at Zoroastrian in the year to September 2013 which led to a resource increase of 238,100 ounces of gold. Current Indicated and Inferred resources, calculated at 0.6 and 3.0g/t Au cut off grades, total

6.69 million tonnes @ 2.70g/t Au for 581,200 ounces

Drilling during the period was a combination of resource expansion and infill drilling aimed at extending the Zoroastrian gold resource and increasing resource confidence.

The drilling during the year intersected strong gold mineralisation throughout the Zoroastrian area, including -

  • North end spectacular high grade results and broad zones of stockwork mineralisation:
    • 4 metres at 753.0g/t Au from 128 metres within a broader zone of 11 metres at 275.0g/t Au from 128 metres in hole KNCD120230)
    • 50 metres at 3.20g/t Au from 90 metres KNCD120230
  • Central stockwork mineralisation:
    • 12 metres at 5.20g/t Au from 234 metres in KNCD120169
    • 17 metres at 3.68g/t Au from 49 metres and 11 metres at 5.53g/t Au from 73 metres in KNCD130006
    • 19 metres at 5.44g/t Au from 318 metres in KNCD120257
  • Southern area shallow mineralisation:
    • 6 metres at 9.01g/t Au from 19 metres in KNCD120222
    • 16 metres at 13.9g/t Au from 78 metres in KNC130008

FIGURE 8 Zoroastrian Drilling Results and Structural Model Plan Small

Figure 8 Zoroastrian Drilling Results and Structural Model Plan View showing existing open pit, conceptual open pit design , mineralised structural trends, selection of recent drilling results (in red) and historic high grade gold results in yellow

The current Zoroastrian resource was calculated using an Ordinary Kriging methodology and the resource is subdivided into shallower zones of mineralisation, less than 150 metres vertical depth, which are potentially amenable to open pit mining, and zones greater than 150 metres vertical depth which present underground mining opportunities. The shallow resource was modelled and estimated at a lower grade cut of 0.6g/t Au and using a high grade top-cut of 50g/t Au. The deeper mineralisation was modelled at a cut-off grade of greater than 1.0g/t Au and was quoted at a 3.0g/t Au cut-off to reflect underground mining economic cut-off grades (refer Table 2).

Table 2 Zoroastrian Resource Summary

Table 2. Zoroastrian Resource Summary (November 2013)

The Zoroastrian area host good potential for substantial further resource expansion through targeted drilling campaigns on: -

  • Depth extensions to the plunging high grade gold mineralisation already defined at Zoroastrian Central and Zoroastrian South
  • additional vein structures not yet incorporated into the current resources on the western contact area
  • historical workings which can be traced for over 500 metres to the south of the present resource area
  • the Bank of England line of historical workings which can be traced for over two kilometres on the eastern contact of the dolerite.

Zoroastrian Conceptual Mining Studies

Auralia Mining Consulting Pty Ltd has conducted various preliminary conceptual mining studies to examine the potential economics of both open pit and underground mining at Zoroastrian.

The association of the gold mineralisation with multiple orientations of discrete quartz veining in the more massive central dolerite units and broader zones of stock-work style mineralisation in a granophyric unit developed along the western margin of the dolerite presents varied mining opportunities. Open pit and mechanised stope underground mining potential is evident for the broader stock-work style mineralisation and narrow vein underground mining potential exists on the more discrete vein sets.

Initial large open pit optimisation studies conducted in February 2013 indicated potential for a large first pass shell 1.2 kilometres long and up to 190 metres deep however subsequent open pit mining studies have been constrained to the stock-work mineralisation and to the discrete veining only within the oxide and transition zones with the intention to reduce overall strip and to bring forward ore material and the underground mining program within the current conceptual life of mine schedule.

The most recent conceptual mining studies favour the development of two open pit mines in the Zoroastrian area with decline access to the high grade multiple vein system from both pits. The current diluted material contained within the two conceptual open pit mine designs for all material types (Indicated and Inferred resources) is 1.51Mt @ 2.27g/t Au for 111,000 ounces of contained gold. (Note this refers to Resource material contained within the conceptual pit designs which does not constitute a Reserve.)

Figure 9

FIGURE 9 Zoroastrian Conceptual Mining Plan showing Resource Block Model at 3.0g/t Au lower cut-off (colour graded) , Open Pit Designs (red), Underground Design (yellow) with Mechanised Stoping (grey) and All Material Inventories contained within the Designs

The smaller conceptual Southern Pit is approximately 460 metres long and extends to a vertical depth of 100 metres. This pit is planned to provide initial underground decline mine access to the north plunging, high grade vein system which extends beneath the open pit. The conceptual Central Pit design is 710 metres long and 120 metres deep with a proposed underground decline access from the base of this pit to access the central and northern sections of the mineralisation.

The conceptual underground mining studies are based on only a few of the numerous lode structures occurring at various orientations within the dolerite. The Southern Underground conceptual design is centred on four lodes and the Central Underground conceptual design incorporates seven lodes. Other lode structures will be included in the mining schedule for both areas once further drilling confirms gold grades. All mine development planned to date has been specifically designed to avoid known mineralised lodes positions to facilitate the potential future mining of the additional structures. The mineralised system is open at depth and the Central Underground area is limited by a lack of drilling information at depth.

Figure 10

FIGURE 10 Zoroastrian Conceptual Mining Plan Long Section showing Resource Block Model at 3.0g/t Au lower cut-off (colour graded) , Open Pit Designs (red), Underground Design (yellow) with Mechanised Stoping (grey) and All Material Inventories contained within the Designs

The current diluted material inventory contained within the ore development and mechanised stopes in the conceptual underground mining design for all material types (Indicated and Inferred resources) is approximately 1.2 million tonnes grading 3.7g/t Au for 146,000 ounces. (Note this refers to Resource material contained within the conceptual underground design which does not constitute a Reserve.)

Deep reverse circulation drilling conducted in September 2013 to infill and confirm grade estimates in deeper portions of the Southern Underground design as outlined in the Drill Target Area in Figure 10, intersected strong gold mineralisation including -

  • 11 metres @ 6.46g/t Au from 233 metres including 4 metres @ 13.2g/t Au from 240 metres (KNC130062)
  • 11 metres @ 3.24g/t Au from 242 metres including 4 metres @ 7.91g/t Au from 242 metres (KNC130063)
  • 14 metres @ 5.88g/t Au from 282 metres including 4 metres @ 17.0g/t Au from 291 metres (KNC130063)

The conceptual underground studies demonstrate the potential of the underground operations at Zoroastrian to significantly contribute to the development of long term mining operations.

EXCELSIOR DEPOSIT

The Excelsior gold deposit located 300 metres to the north east of Zoroastrian is hosted within a sequence of tightly folded and sheared ultramafic/sedimentary schists within the Excelsior Shear Zone. Gold mineralisation occurs in a broad 20 to 50 metres wide zone of intense alteration in which the host lithologies are now represented by quartz-sericite-carbonate schists.

The Excelsior Shear is a major north-north-west trending structure up to 80 metres wide and extending for over six kilometres to the north within the Kalgoorlie North Project tenements. Satellite resources at Lochinvar, Three Star and Ellen Pearce to the north of Excelsior are evidence of further gold mineralisation within the Excelsior Shear Zone. Little work has been carried out on the extensions of the shear to the south of Excelsior.

The current Measured, Indicated and Inferred resources, based on gold mineralisation interpreted and wire-framed at a nominal 0.6g/t Au lower cut-off with high grade cut to 40.0g/t Au total

11.10 million tonnes @ 1.28g/t Au for 456,100 ounces

Conceptual mining studies have confirmed that the broad zones of gold mineralisation host potential for large open pit mine development as well as possible bulk underground mining.

During the past year work on the Excelsior deposit has primarily been directed at mining, geotechnical and metallurgical studies.

Metallurgical test work conducted by ALS Ammtec demonstrates that the Excelsior mineralisation is free milling and has high leach recoveries in excess of 90% within 12 hours and high gravity recoverable gold content. The material is highly amenable to a conventional crush, grind, gravity recovery, CIP treatment route and the oxide, transitional and primary mineralisation have low to moderate work indices and do not exhibit excessive crushing and grinding power requirements or abrasion issues.

Excelsior Deposit Infrastructure Relocation Study

Conceptual mine design studies conducted by Auralia Mining Consulting have been concentrated on open pit designs. The current design is a large open pit approximately 630 metres long and up to 175 metres deep. The pit is driven by the extensive wide (20 to 50 metres) mineralised zone in the southern part of the resource and by broad internal high grade lenses (e.g. 13 metres @ 7.4g/t Au, 24 metres @ 4.4g/t Au and 12 metres @ 7.1g/t Au).

Figure 11

Figure 11 Zoroastrian and Excelsior Mine Development Potential showing conceptual open pit and underground mine designs, historical pits and gold mineralisation wireframes

The conceptual pit design has a low waster to ore strip ratio of less than 5:1 and contains diluted all material (Measured, Indicated and Inferred) resources of 3.92 million tonnes at 1.36g/t Au for 171,000oz of contained gold. (Note this refers to Resource material contained within the conceptual pit design which does not constitute a Reserve.)

Although the overall resource grade of the deposit is modest, the open pit economics are enhanced by the low strip ratio, the low cost bulk mining methods and the highly favourable metallurgy which indicates that processing unit cost for this ore type are potentially reduced due to the soft nature of the material and the rapid leaching of the gold.

Open pit mining at the Excelsior deposit would necessitate the relocation of the Kalgoorlie to Leonora rail line and the Goldfields Highway which cut across the mineralised Excelsior Shear to the north of the historical open pit mined by Aberfoyle Gold in the late 1980s.

In 2012, Snowy Mountains Engineering Corporation, SMEC Australia Pty Ltd, conducted design studies on a 2.9 kilometre diversion of the rail line, highway and associated infrastructure to facilitate the development of the extended open pit.

The current rail and road diversion is designed to accommodate an open pit to a vertical depth of 230 metres to allow for any future expansion of the present conceptual pit which is designed to 175 meters vertical depth. Initial cost estimates for the 2.9 kilometre relocation of the infrastructure are in the vicinity of A$15 to $18 million. These costs are being reviewed and are expected to decrease in the current competitive engineering design and construct market.

Figure 12

Figure 12 Excelsior Conceptual Open Pit and Infrastructure Relocation Plan showing conceptual open pit design, gold mineralisation wireframes, pit abandonment bund and rail and highway diversion designs

A preliminary first pass underground mining review has previously been conducted on the Excelsior deposit. This study examined large sub-level open stoping of an internal higher grade mineralisation core and the conceptual design incorporated large stopes 60-100 metres high and 30 metres wide with 1 or 2 drilling sub-levels. The low cost structure of block cave underground mining is potentially attractive to the wide mineralised zones at Excelsior and could potentially negate the need to relocate the surface rail and road infrastructure.

Underground mine potential is further supported by drilling outside of the current conceptual pit design which intersected strong mineralisation at depth including 4 metres @12.4g/t Au, 4 metres @ 8.0g/t Au and 2 metres @ 16.4g/t Au.

Geotechnical drilling and assessment is required to progress any further underground mining study options and the extent of the potential underground design work is also hampered by the relatively shallow extent of the current Excelsior resource which is limited to a vertical depth of less than 240 metres due to limited drilling information at depth.

These underground mining concepts are not being considered as part of the Pre-Feasibility Study due to the lack of supporting geotechnical information at this time.

Excelsior Deposit Infrastructure Relocation Study

The extension of open pit mining at the Excelsior deposit would necessitate the relocation of the Kalgoorlie to Leonora rail line and the Goldfields Highway which cut across the mineralised Excelsior Shear to the north of the open pit previously mined by Aberfoyle Gold.

Snowy Mountains Engineering Corporation, SMEC Australia Pty Ltd, were engaged to conduct design studies on a 2.9 kilometre diversion of the rail line, highway and associated infrastructure which would impact on the development of the open pit.

There are numerous precedents in the Goldfields for the diversion of both the rail line and the highway to accommodate mining operations and the 2.9 kilometre relocation of the infrastructure under review to facilitate open pit mining at Excelsior is physically and economically viable. Initial costing of the project indicates capital costs in the vicinity of A$20 million and a timeframe of approximately 24 months.

While the capital costs are a substantial impost on the open pit development plan for the Excelsior Deposit, these costs are not prohibitive when offset by infrastructure establishment costs such as access, power, water, communications and accommodation, associated with most mine developments and which are not applicable to the Kalgoorlie North Gold Project due to its location.

The Pre-Feasibility Study will address these issues in detail but the Company is also progressing more detailed bulk underground mining studies at Excelsior which would negate the requirement to relocate the existing rail and road infrastructure.

SATELLITE RESOURCE DEVELOPMENT TARGETS

The Zoroastrian and Excelsior conceptual mining plans are complemented by a series of satellite open pits which extend the life of the potential mining operations and provide flexibility in mining fleet scheduling.

Some of these satellite resources are also regarded as potential sources of early cash flow from short life open pit mining operations and toll treatment of ore to assist with funding the major mine development at Zoroastrian and Excelsior.

Drilling and mining studies during the year have expanded the satellite resources under review as part of the Pre-Feasibility Study. The satellite mining program currently includes the resources at

Satellite Resource Development Program

The addition of the Big Blow South resource to the satellite resource study (325,000 tonnes @ 2.64g/t Au for 27,600ozs) is particularly significant as it demonstrates potential for other similar style mineralisation along the 25 kilometres of strike of the Big Blow Chert within the tenements and the opportunity for a series of open pits and potential high grdae underground operations.

PRE-FEASIBILITY STUDY

The Pre-Feasibility Study into the development of mining operations at the Project has been subject to a continually changing scope of work since the study program was initiated in January 2012.

Originally commenced to evaluate open pit mining at Excelsior and a series of satellite pits utilising toll treatment or ore purchase arrangements at nearby processing facilities, the study has had to be vastly expanded to incorporate the rapidly growing Zoroastrian deposit and the new mining opportunities it presents. The Project has now developed to a size where standalone milling facilities appear justified to maximise the long term value of the Project.

In the March Quarter 2013, Como Engineers Pty Ltd, provided scoping study cost estimates and design parameters for the establishment of a new staged 0.6 to 1.0 million tonne per annum treatment facility and a direct 1.0 million tonne per annum facility. The robust gold grades of the Zoroastrian deposit support both size treatment facilities however the extremely high rate of ore delivery resulting from the low waste to ore ratio in the Excelsior deposit and the more modest gold grades are best suited to the higher throughput and lower treatment costs achievable through the larger 1.0 million tonne per annum plant.

The Study has therefore focussed on the larger plant size and Como estimated initial capital cost of the 1.0 million tonne per annum plant at approximately $65 million. In addition to this are owner costs estimated at $10.8 million which include tailings dams, borefield refurbishment, reagents and spares.

Total process unit cost of the 1.0 million tonne per annum facility were estimated at $23.10 per tonne of ore (+/-30%) utilising grid power and $25.80 per tonne for diesel generated power. These processing cost estimates and a A$1,500 per ounce gold price have been incorporated in the conceptual mining studies to date.

Subsequent metallurgical test work indicates that acceptable gold recoveries are achievable for all ore types at a coarser grind than the 106 micron grind utilised in the mill studies. A coarser grind of 150 to 225 micron has potential positive impacts on reducing the capital costs of the processing plant and the power consumption cost per tonne of ore. The mill studies are currently being reviewed to streamline the process route and reduce the capital requirements.

The preliminary results from the conceptual open pit and underground design work and life of mine scheduling of the Zoroastrian, Excelsior and eight satellite deposits indicate that the current resources base and development plan could potentially sustain long term mining and processing operations for in excess of seven years on the basis of current gold resources.

The total diluted all material types within the various open pit and underground conceptual designs is approximately 7.3Mt @ 2.03g/t Au for 477,000 ounces of contained gold. (Note this figure is pre-mill recovery and refers to Resource material contained within the conceptual mine designs which does not constitute a Reserve for the Kalgoorlie North Gold Project.)

To facilitate the possible conversion of these mineral inventories to Probable mining reserves the Company has conducted infill drilling programs to elevate any Inferred resources captured within the conceptual designs to at least an Indicated classification.

In addition to the Pre-Feasibility Study, the Company has considered, and continues to assess, alternate development strategies involving a range of proposals including fully funded plant development, relocation of existing used plants and potential toll treatment and ore purchase scenarios. Various funding structures and financial models have also been considered.

As this strategic assessment has progressed it is apparent that the scale of the current Project is of such that the long term interests of shareholders could best be served by the construction of a standalone processing plant. This strategy would potentially allow the maximum value of the Project to be realised through the development of the existing gold resources by a combination of open pit and underground mine development while retaining exposure to the significant long term exploration upside potential of the Project.

The Company has therefore now committed to the completion of the Pre-Feasibility Study based on the construction of a standalone 1.0 million tonne per annum processing facility adjacent to a proposed Zoroastrian open pit and underground mine and within a short haul distance from the large conceptual Excelsior open pit. The Pre-Feasibility Study is scheduled for completion in early 2014.

RESOURCE DEVELOPMENT PROGRAM

While there remains excellent potential to expand resources at Zoroastrian and Excelsior, both along strike and at depth, future resource expansion programs will increasingly target areas outside the central resource area.

The Kalgoorlie North Gold Project represents a compact tenement holding over a well mineralised, structurally complex setting of intersecting shears and favourable rock units. The gold mineralisation is structurally and lithologically related to neighbouring large gold deposits at Paddington and Mount Pleasant and the Project area already hosts in excess of 80 known gold occurrences.

Gold mineralisation is associated with five major NNW trending shears and multiple NE and NW trending cross structures providing a lattice of gold occurrences and abundant drill targets.

CEN Local Geology-EXG to TalbotN April 13 Small

Figure 13 Kalgoorlie North Gold Project Resource Expansion Targets and Prospects showing geology, gold resources, conceptual pit outlines, prospect drill intercepts, Black Flag Fault and Big Blow Chert target trends

The intensity of gold mineralisation within the tenements and the need to prioritise resource targets to maximise the effectiveness of drilling programs has prompted the Company to embark on a geological modelling program in conjunction with CSIRO to assist the Company to rank its numerous exploration targets. The program has been initiated to gain a better understanding of the regional to camp-scale structural controls on the gold mineralisation in the region.

The research collaboration between the Company and CSIRO is aimed at modelling the many styles of gold mineralisation locally within the Kalgoorlie North Gold Project tenements and regionally within the Bardoc Tectonic Zone with a view to identifying signatures for the localisation of larger gold deposit.

The Company has identified three main mineralisation domains which warrant further detailed work and it is anticipated that the CSIRO collaboration program will significantly improve drill targeting in these areas and provide additional priority targets. The main target domains are -

  • Dolerite Hosted Gold Mineralisation (e.g. Navan, Pleasurebound, Duke North, Eldorado, Skyline prospects)
  • The Black Flag Structural Corridor (e.g. Bulletin South, Botswana Locker, Leilani, Nerrin Nerrin, Parkerville prospects)
  • Big Blow Chert Trend (e.g. Big Blow South, Big Blow North, Ajax, Hut/Baby 700 prospects)

The new geological models developed for these target areas and the CSIRO research program are expected to have a profound positive impact on geological understanding, exploration drill targeting and resource growth within the Project.

NORTHERN TERRITORY URANIUM PROJECTS

The Company's focus on gold exploration and mine development activities has resulted in a reduction in exposure to uranium exploration projects. The Company has successfully divested all but one of its uranium tenements located in the Northern Territory, the Allambi Project.

ALLAMBI PROJECT (EXG 100% - FARM IN AND JOINT VENTURE)

The Allambi tenement (EL25347) covers 702 square kilometres of land situated 72 kilometres south-east of Alice Springs. Exploration on the area is targeting sandstone style uranium mineralisation within Amadeus Basin sediments, similar to the Pamela and Angela uranium deposits located 40 kilometres to the north-west.

On 12 June 2011, the Company finalised a Farm In and Joint Venture Agreement with Parker Resources NL (ASX:PKR) on the Allambi tenement. Under the terms of the Agreement, Parker Resources is entitled to earn up-to 70% interest in EL25347 by sole funding A$400,000 of exploration expenditure within three years.

At the date of this report, Parker Resources are one year into the term of the agreement and have yet to earn its interest in the Project.

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