Pre-Feasibility Study

The following is a summary of the Pre-Feasibility Study. For more information please refer to various ASX releases.

The Pre-Feasibility Study (PFS) for the Kalgoorlie North Gold Project is based on the development of a multiple open pit and underground mining operation centred on the Zoroastrian gold system located 45 kilometres north of Kalgoorlie-Boulder in Western Australia.

As well as being close to Kalgoorlie-Boulder, the Project has a sealed road and other infrastructure at its’ doorstep. This ready access to mining expertise, a skilled workforce and no fly-in fly-out requirements gives the Project added momentum as it develops.

The results of the PFS demonstrate a solid base case gold operation which the Company now expects to be able to enhance through further underground and open pit Ore Reserve conversion and expansion and refinement of capital and operating cost estimates.

The Company’s PFS incorporates the construction of a new standalone 1.0 million tonne per annum conventional carbon in leach (“CIL”) gold treatment plant to process ore sourced from large open pits at the Zoroastrian and Excelsior deposits and seven smaller satellite pits as well as underground ore from mechanised stope designs on a portion of the large Zoroastrian gold system.

The PFS utilised a gold price of A$1,450 per ounce to reflect the current gold price (A$1,507/oz at 2 March 2014), an apparent improving market sentiment and gold price and currency exchange rate forecasts for a potential production term from 2016 to 2024.

Table 1. PFS Summary

 

ORE RESERVES

The PFS Ore Reserves are 7.64 million tonnes @ 2.00g/t Au for 491,600ozs Au. The reserves are derived initially from Whittle optimisations and subsequent full open pit and underground designs.

Table 2. KNGP Ore Reserve Inventory

 

RESERVE EXPANSION PROGRAM AND MINERAL RESOURCE

While the current Ore Reserve position demonstrates a potential 7.5 year life of mine, production scheduling indicates that significant improvements in Project economics can be achieved by the inclusion of additional higher grade underground ore feed into the milling schedule.

Deeper Inferred Mineral Resources at a 3.0g/t Au cut-off which are outside the Zoroastrian Ore Reserves total 505,500 tonnes @ 5.80g/t Au for 94,300ozs and conversion of this Inferred resource, hence extension of the underground operations, is a priority target for further targeted drilling programs.

Figure 1. Zoroastrian Conceptual Mining Plan Long Section

 

Total KNGP Measured, Indicated and Inferred gold Mineral Resource are currently 23.6 million tonnes @ 1.80g/t Au for 1.37 million ounces at 0.6 and 3.0g/t Au cut-offs, and includes Inferred Mineral Resources of 8.09 million tonnes @ 1.80g/t Au (467,700ozs Au). These Inferred Mineral Resources are contained partially within the PFS deposits and in an additional 13 gold Mineral Resources which have not been subject to the current open pit and underground studies. These Inferred Mineral Resources and numerous advanced exploration targets offer immediate scope to increase the Ore Reserves and extend the life of mine.

Table 3. Mineral Resource Statement

MINING OPERATIONAL COST ESTIMATES

Open pit and underground mine designs were completed by Auralia Mining Consulting Pty Ltd (“Auralia”) and are based on Measured and Indicated Mineral Resources.

Optimisation runs were conducted in Whittle using independently tendered mining operating costs, vendor-sourced mining capital costs, independent metallurgical studies, environmental studies, government quoted capital costs and an independent geotechnical review.

Studies were carried out on fleet mining operation costs to assess the most cost-effective method (hourly dry hire rates versus full contract volume rates) The cost model build process was based on the selection of an all-inclusive full contract volume rate mine operating cost, covering site establishment, mobilisation/demobilisation, personnel, maintenance and drill blast operations.

A flat 1.0Mtpa mill constraint was applied during the optimisation process and during initial mine scheduling however it is noted that the Excelsior ore can potentially be processed at up to 1.3Mtpa rate due to is metallurgical characteristics.

Underground stope design was undertaken for Zoroastrian using an iterative approach. An initial estimate for the cut-off grade for this project was used to determine the limits of the potential underground stopes both along strike and down dip. Second and third pass stope design/selection was then undertaken using incremental cut-off grades (ore drive development, stoping and processing costs for second pass, stoping and processing costs for third pass). At the conclusion of the stope design/selection, each stoping level was costed to ensure all stopes made a positive contribution to the project economics.

UG Costs included

  • • Variable costs:
    • Lateral development
    • Vertical development
    • Stoping costs
    • Processing costs
  • • Fixed costs:
    • Contractor
    • Excelsior UG Mining
    • Power
    • General and Administration

MILLING OPERATIONAL COST ESTIMATES

Process plant design and cost estimates by Mintrex were based on independent metallurgical testwork results from programs formulated by Daniel Schwann Consulting Pty Ltd and carried out by ALS Ammtec. Additionally, supporting studies by Aquaterra (water supply) Cardno-BEC (electrical) and Western Power (power supply assessment) were used.

Metallurgical characterisation testwork was conducted using dedicated diamond drill core samples with various ore sources tested separately by weathering type (Oxide, Transitional or Fresh). The comprehensive testwork program included detailed elemental analysis, mineralogy, comminution, gravity gold recovery, leach extraction recovery, leach optimisation, gold deportment and rheology analysis and this information provided the inputs for the process facility design criteria.

The metallurgical testwork demonstrated relatively rapid leach extraction rates, low grind size sensitivity and high gold recoveries on all of the individual ore sources.

The processing facility proposed is a 1.0Mtpa CIL plant specifically designed for the KNGP mineralisation and consists of primary crusher, secondary crusher, ball mill, gravity gold recovery, CIL, carbon elution, electrowinning and smelting circuits to produce gold doré.

The planned process is robust and conventional utilising established technology suitable for the mineralisation in all the Project deposits tested to date and demonstrated by successful similar historical operations at the site and within the region.

Table 4. KNGP Operating Cost Parameters

 

The C2 cash costs for each deposit are summarised in Table 5 below.

Table 5. KGNP PFS C2 Cash Costs

CAPITAL COST ESTIMATES

The total Project capital cost estimates (refer Table 5) are based on an all-new 1.0Mtpa treatment facility and associated milling and open pit and underground mining infrastructure as well as capital to relocate infrastructure impeding the development of the Excelsior open pit.

Current mine scheduling is focussed on the mining of the higher grade Zoroastrian and selected satellite deposits ahead of the large Excelsior open pit which requires relocation of the Kalgoorlie to Leonora rail line and the Goldfields Highway prior to mining. The Excelsior pit does not figure into the base case mining schedule until Year 4 and capital expenditure for the road and rail component of the infrastructure relocation program, totalling approximately $16.06 million, is not required until Year 3.

Initial start-up capital for the Project is therefore A$76.73 million with a further $16.06 million in deferred capital.

Table 6. KGNP Capital Cost Summary

DEVELOPMENT PROGRAM

The PFS Ore Reserve, operating and capital cost estimate is a solid base from which the Company now expects to significantly expand open pit and underground gold Ore Reserves and focus on cost reductions to enhance the project economics.

At a time of apparent improving gold price, depreciating exchange rate and more positive investor sentiment, the Company intends to devote its resources to improving the economics of the Project. Subject to available capital the Company will initiate further dedicated drilling programs to expand the Ore Reserves to in excess of 600,000 ounces of gold during 2014 in order to extend the potential mine life and drive improved return on capital investment.

Further, the optimisation process for the PFS is restricted to a flat 1.0Mtpa mill constraint. In the subsequent study, the Company will incorporate the potential significant increases in the milling rate of ore sourced from the Excelsior deposit given its favourable metallurgical characteristics and additional mining cost reductions due to the broad ore zones and low waste to ore ratio. These elements have the potential to significantly bring forward the cash flow and also reduce the unit cost of production at Excelsior.

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