EXCELLENT ECONOMICS FOR TAMPIA GOLD PROJECT SCOPING STUDY

Transcription

1 3 November 2017 EXCELLENT ECONOMICS FOR TAMPIA GOLD PROJECT SCOPING STUDY Explaurum Limited (ASX:EXU) ( the Company or Explaurum ) is pleased to announce the results of the scoping study ( Scoping Study or Study ) for the Tampia Gold Project ( the Project ) located in the wheatbelt of Western Australia, approximately 250km east of Perth near the township of Narembeen. Preliminary economics indicate the Project has robust financial metrics over an initial six year mine life with low capital and operating costs providing early project payback. Scoping Study Key Results Based on single open pit mining operation with ore being processed at a rate of 1.5Mtpa through an onsite plant. Low cost, high margin, low technical risk project. 94koz per annum production over first five years with Life of Mine (LOM) gold production target of over 500koz with a mine life of six years. LOM gold production target based on 8.1 million tonnes grading 2.1g/t Au in-pit resource (94% Indicated Resources and 6% Inferred Resources). Initial capital cost of A$95M with estimated payback period of 1.5 years using A$1,650oz gold price. Estimated LOM C1 operating costs of A$799oz 1. Estimated LOM all in sustaining cost (AISC) of A$888oz 2 (lowest industry quartile). Demonstrates Tampia is one of the highest margin undeveloped gold projects in Australia. This Scoping Study presents a base case scenario and does not include organic growth from the Tampia Gold deposit or other regional prospects. The Tampia Gold Resource remains open and future resource upgrades across the Company s broader project area are expected to provide significant opportunity to expand mine life at potentially higher annual production rates. 1. C1 costs include all mining and processing costs, site administration and refining costs 2. AISC includes C1 costs + sustaining capital, royalties, site rehabilitation and head office corporate costs IMPORTANT INFORMATION Cautionary Statements This Scoping Study is a preliminary technical and economic study of the potential viability of developing an open pit mine and standalone gold processing plant to be constructed onsite at the Tampia Gold Project. The Scoping Study referred to in this announcement is based on lower level technical and preliminary economic assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide Registered Office: Level 16, Waterfront Place, 1 Eagle Street, Brisbane QLD 4000 ABN Postal Address: GPO Box 3249, Brisbane QLD 4001 Contact Details: Telephone info@explaurum.com

2 certainty that the conclusions of the Scoping Study will be realised. The results should not be considered a profit forecast or production forecast. The Production Target referred to in this presentation is based on 94% Indicated Resources and 6% Inferred Resources for the mine life. The Company has concluded that it has reasonable grounds for disclosing a Production Target that includes a modest amount of Inferred material. However, there is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Measured or Indicated Mineral Resources or that the Production Target or preliminary economic assessment will be realised. The Study is based on the material assumptions described below. These include assumptions about the availability of funding. While the Company considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Study will be achieved. To achieve the potential mine development outcomes indicated in the Study, additional funding will be required. Investors should note that there is no certainty that the Company will be able to raise funding when needed. However, the Company has concluded it has a reasonable basis for providing the forward-looking statements included in this announcement and believes it has reasonable basis to expect it will be able to fund the development of the Tampia Gold Project. To achieve the range of outcomes indicated in the Study, funding in the order of A$100 million, exclusive of working capital, will likely be required. Investors should note that there is no certainty that Explaurum Limited will be able to raise the amount of funding required or when needed. It is also possible that such funding may only be available on terms that dilute or otherwise affect the value of the Company s existing shares. It is also possible that Explaurum could pursue other strategies to provide alternative funding options. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Study. Forward Looking Statements Some of the statements contained in this report are forward looking statements. Forward looking statements, include, but are not limited to, statements concerning estimates of tonnages, expected costs, statements relating to the continued advancement of Explaurum s projects and other statements that are not historical facts. When used in this report, and on other published information of Explaurum, the words such as aim, could, estimate, expect, intend, may, potential, should and similar expressions are forward looking statements. Although Explaurum believes that its expectations reflected in the forward looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward looking statements. Various factors could cause actual results to differ from these forward looking statements include the potential that Explaurum s project may experience technical, geological, metallurgical and mechanical problems, changes in gold price and other risks not anticipated by Explaurum. Explaurum are pleased to report this summary of the Study in a fair and balanced way and believes that it has a reasonable basis for making the forward looking statements in this announcement, including with respect to any mining of mineralised material, modifying factors, production targets and operating cost estimates. This announcement has been compiled by Explaurum from the information provided by the various contributors to the Study. All financial assumptions and estimates are quoted in Australian Dollars ( A$ or AUD ) only. 2

3 EXECUTIVE SUMMARY The Company is pleased to report the findings of the Scoping Study on the Tampia Gold project located 240km east of Perth. The Scoping Study incorporates the recently Indicated and Inferred Resource of 11.3Mt grading 1.91g/t gold for 696koz of contained gold (Table 1). Table 1: Tampia Gold Project Mineral Resource classification Tonnes Average Grade Ounces Indicated 9,948, ,500 Inferred 1,370, ,000 Total 11,318, ,500 Notes: 1. The Mineral Resource is classified in accordance with JORC, 2012 edition. 2. The effective date of the mineral resource estimate is 11 September The Mineral Resource is contained within M70/ Estimates are rounded to reflect the level of confidence in these resources. All resources have been rounded to the nearest 0.01 million tonnes. 5. The mineral resource is reported as a recoverable resource at 6x6x3.5 SMU size, which includes dilution, and at 0.5 g/t Au cut-off grade. This new JORC 2012 Mineral Resource estimate, based on 287 drill holes totalling 36,339m, was reported to ASX on 13 th September 2017 and is the basis for the updated Scoping Study assessment. The Scoping Study has been prepared to an accuracy of ±35% by senior Explaurum staff with substantial input from a number of consultants including: ALS Metallurgy Pty Ltd AMC Consultants CMW Geosciences Ecoscape Pty Ltd E Precision Laboratory Gekko Systems JT Metallurgical Services Kenex Pty Ltd MBS Environmental Metallurgy Pty Ltd MinEcotech Pty Ltd Mintrex Pty Ltd Orway Mineral Consultants Rockwater Pty Ltd R & EO O Connor RSC Global Pty Ltd Assaying, Mineralogy & Metallurgical Testing Mining and Geotechnical TSF Design Flora and Fauna Survey Rock Strength Testing Metallurgical Testing Metallurgy program management Geology Environmental, Soil Survey Metallurgical Testing Project Management & Mining Plant design & costing, Power options Comminution Hydrogeology Aboriginal and European Heritage Geology and Resource Estimation The Scoping Study has assumed a single pit mining operation with a standalone processing plant designed for treatment of 1.5Mtpa. The process flowsheet consists of single stage crushing, grinding (SAG mill), gravity circuit, flotation, ultrafine grinding (UFG) of the flotation concentrate, carbon-in-pulp (CIP) leaching, and electrowinning to produce doré gold for refining in Perth. The base case material assumptions applied to the Scoping Study to determine the economic parameters for the Tampia Project are listed in Table 2. 3

4 The Project financials benefit from the gold resource being relatively high grade at shallow depth; most of the resource is less than 100m below surface. A sensitivity analysis of the base case NPV estimate has been undertaken in the key inputs of gold price, recovered grade, operating cost and capital cost. As is normal in the sensitivity analysis of gold projects generally, Tampia is most sensitive to gold price and recovered grade variation, and less sensitive to fluctuations in operating and capital costs. Modelling has been based on the Life of Mine (LOM) averages. The Project can be further optimised by scheduling the mining of higher grade material preferentially in the early years. Over the anticipated life of the Project, gold production will average 104kozpa for the first two years, and 84kozpa over LOM (6 years). Average C1 cost over the LOM is estimated at A$799 per ounce. Table 2: Base case Scoping Study material assumptions and key metrics Parameter Metric Potential mine life (years) 6 LOM mill feed (Mt) 8.1 LOM waste mined (Mt) 51.8 LOM strip ratio (Waste:Ore) 6.4 Indicated Resources (%) 94 Inferred Resources (%) 6 Annual mill throughput (Mtpa) 1.5 Average head grade (g/t Au) 2.1 Plant recovery (%) 92 Average LOM annual Gold production (kozpa) 84 Average annual Gold production first 2 years (kozpa) 104 LOM Gold production (koz) 502 Initial capital cost (A$M) 95 Initial capital cost incl. + 10% contingency 105 LOM Sustaining capex (A$M) 9 WA Govt royalty (%) 2.5 Average C1 cash cost (A$/oz)* Average AISC cash cost (A$/oz)* LOM gold price (A$/oz) 1,650 Gross revenue (A$M) 829 LOM EBITDA (A$M) 392 Average Annual EBITDA (A$M) 65 Base case pre-tax NPV 8% (A$M) 181 Project pre-tax IRR (%) 64 Payback period (years) 1.5 * 1 C1 operating costs include all mining and processing costs, site administration and refining costs * 2 AISC includes C1 costs + sustaining capital, royalties, site rehabilitation and head office corporate costs 4

5 Figure 1. Tampia pit designs for the South Stage 1 (Orange), North Stage 2 (Red) and the LOM Final Stage (Grey) pits. Commenting on the results of the Tampia Scoping Study, Explaurum Managing Director John Lawton said; The outcomes of the Scoping Study based on the recently released Mineral Resource for the Tampia Gold Project indicate the potential for development of a low cost high margin gold project with robust economics. The Study concludes that a mine life of six years with production exceeding 500,000oz gold would provide a highly attractive payback period of approximately 1.5 years based on an initial capital cost of A$95M. The Feasibility Study for the Project and the exploration potential in the immediate vicinity are now the priorities for the Company as we look forward to optimising the Project s development. The Scoping Study has demonstrated that Tampia has the potential to be one of Australia s highest margin development opportunities in gold with considerable upside. 5

6 TAMPIA GOLD PROJECT SCOPING STUDY The flagship project of the Company is the Tampia Gold Project located in the wheat belt of Western Australia, approximately 240km east of Perth and 12km southeast of the township of Narembeen (Figure 2). The Company owns a 90% interest in two mining leases and a surrounding exploration licence through a joint venture, and 100% interest in a further seven exploration licences that complement the original tenure, totalling approximately 330km 2. The Scoping Study results are reported on a 100% project basis. The resource and proposed development is within a granted mining lease. The positive scoping study previously announced on 8 September 2016 has been updated using the recently completed mineral resource estimate (see ASX Announcement 13 September 2017) and more accurate cost data for processing and mining. The Project is located within an area of broad acre cultivation (predominantly wheat/barley) where there has been no previous history of mining. The resource and proposed development is within granted mining leases. The Project was discovered during a regional stream geochemical survey in Explaurum acquired the Project in September 2015 and has undertaken a comprehensive exploration and assessment program since that time. Figure 2. Tampia Gold Project Regional Location and Tenement Map Geology The Tampia Gold Project area covers a sequence of late Archaean mafic and felsic granulite facies paragneiss and orthogneiss, with the gold deposit hosted by an ovoid shaped mafic gneiss sequence that has been mapped in detail by ground gravity and drilling (described in more detail in the Resource Announcement dated September 13, 2017). The gneiss sequence dips between 35 o to 40 o to the south east and strikes 040 o. The base of the gneiss sequence that host the Tampia gold deposit, as interpreted from the structural position of the host rocks, is a well banded foliated and banded felsic feldspar-biotite-quartz augen gneiss that also can contain graphite and pyrrhotite. The original sequence for this unit is believed to be clastic sediment, wacke, arenite and graphitic shale. The next unit is a felsic feldspar-biotite-amphibole-pyroxene gneiss that appears to contain a mixture of sedimentary and mafic precursor lithologies. 6

7 The uppermost part of the sequence, which is the main host to gold mineralisation at Tampia, consists of mafic gneiss dominated by pyroxene-plagioclase-amphibole. Minor biotite, spinel, enstatite and quartz with pyrrhotite up to 2% also occur. The precursor lithology is inferred to be tholeiitic basalt. Banding in the mafic and felsic gneisses defines zones of migmatite, which in places are intensely ptygmatically folded and crenulated. The leucosomes in the migmatites are composed of plagioclase and some quartz with orthopyroxene inclusions. The gneisses are intruded by quartzfeldspar granite dykes and sills that have complex cross-cutting relationships suggesting multiple phases of emplacement. These granites, particularly where they intrude the mafic gneiss, occur as parallel to sub-parallel sheets that follow the banding in the gneiss and the migmatite zones. The granites are parallel to, but also cross cut fabrics in the gneiss, have chilled margins, are undeformed and unmetamorphosed indicating emplacement post-granulite facies metamorphism. This entire sequence is intruded by several unmetamorphosed dolerite dykes that are thought to be of Proterozoic age. The Tampia gold deposit is hosted by an open synform that plunges 30 toward 120. The synform is well defined by banding in the migmatite zones and by the granite sheets that appear to be localised in flat late ductile high-strain zones defined by microstructures in oriented petrographic thin-sections. Gold mineralisation occurs in elongate to ellipsoidal stacked pods that vary in size from 1-10 m thick, m wide (east-west) and m long (north-south). These pods tend to be parallel to the migmatite zones and granite sheet contacts, and have a statistically welldefined spatial association with the granites. Gold mineralisation is predominantly disseminated throughout, with higher grade gold zones concentrated within zones of hornblende-biotitepyroxene and hornblende-biotite-plagioclase within pyroxene and biotite-bearing mafic gneiss that are aligned parallel to the plunge of the fold, forming linear rod-like shoots. The gold occurs in and with disseminated weakly magnetic pyrrhotite, arsenopyrite, chalcopyrite, löllingite, rare pyrite, and as coarse free gold, with nuggets up to 10 mm panned from RC samples and logged in core. Total sulphide contents of mineralised intersections are between 1% and 3%, with a maximum estimated 5% sulphide. Sulphides occur along foliation planes and banding in the gneiss. Average grades within a zone >1g/t Au vary between 1 and 25 g/t Au over 5-20 m intervals. The gold mineralisation drilled to date at Tampia has a 1,040 m by 550 m footprint striking approximately 030, and gold mineralisation remains open to the southeast and at depth. Two mineralised horizons have been drilled that are continuous along the strike of the deposit, with the upper horizon being the best mineralised. Additional zones of gold mineralisation have been intersected at depth, but these are less continuous. The gold zones appear to deepen along strike away from the fold hinge. Gold mineralisation occurs predominantly in the chemically reactive iron rich mafic gneiss, but does rarely occur in the late undeformed granites along their contacts and also as narrow lower grade intersections within the undeformed granite. This confirms that gold mineralisation post-dates the intrusion of the granite sheets. From this it is inferred that the metamorphic and structural architecture was established pre-gold mineralisation. Mineral Resource The Mineral Resource estimate used in this Scoping Study was announced on September 13, 2017, based on 287 RC holes for 36,339m that were drilled using a 40m by 40m drill spacing covering an area 1,040m along strike by 550m down dip to a depth of 140m. The new Mineral Resource estimate is an increase of 125% in contained gold compared to the estimate in 2015, containing 11,318,000 tonnes at 1.91 g/t Au for 695,500 ounces of gold at a 0.5 g/t Au cut off (Table 1). The new Resource estimate comprises 620,500 ounces in the Indicated category and 75,000 ounces in the Inferred category, exceeding the target Mineral Resource assumed for the Scoping Study announced on 8 September 2016 (Table 1). The Tampia Gold Project Mineral Resource was estimated by multiple indicator kriging (MIK), using a 20m by 20m by 2.5m block size. A recoverable resource was produced at 6m by 6m by 3.5m SMU scale based on preliminary mining option evaluations. This includes expected internal and external dilution, and expected mining losses. The MIK technique was used because the distribution of the 7

8 gold data has an excessive positive skew due to the presence of coarse gold. All data used in the estimate were rotated and unfolded to optimise the geo-statistical analysis. Unfolding was carried out using top and bottom trend planes. A top-cut version of the data was created to allow checkestimating by ordinary kriging (OK), with a top-cut value of 60 g/t Au determined from mean and variance plots and through tail analysis. A peer review of the resource model has been completed by comparing the OK and MIK estimates on section and in 3D with the original gold assay intersection. This review confirms that the MIK estimate is a good representation of the original data. Most of the mineralisation within the Mineral Resource has been classified in the Indicated category. Material on the edges, in the deeper less well-drilled parts, as well as some areas where ground conditions led to poor sampling, were classified as Inferred (Table 1). There is no material classified as Measured. The Resource classification has been carried out in accordance with the JORC Code (2012). The grade and densities are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence has been derived from adequately detailed and reliable exploration and sampling gathered through appropriate techniques, and is sufficient to assume geological and grade continuity between data points. Portions of the deposit that do not have reasonable prospects for eventual economic extraction are not included in the Mineral Resource. Mining (a) Geotechnical Assessment A preliminary geotechnical assessment of the Tampia Pit rock conditions based on diamond drill core and geological and structural logging of downhole optical data, produced the following indicative slope criteria for pit optimisation summarised in Table 3. Table 3. Geotechnical design criteria for Tampia open pit Material Inter-Ramp Slope Angle Overall Slope Angle Bench Face Angle Oxide Transition Fresh The weathering is shallow and weakly developed with fresh rock within 10-15m of surface, and in general the rock mass conditions are good to very good. An updated more comprehensive geotechnical study is currently underway, with initial results confirming the above parameters, and new results to be used as final inputs to the pit optimisation and design work for the Feasibility Study. (b) Pit Optimisation An open pit optimisation study was undertaken based on the new mineral resource estimate and the geotechnical parameters described above, along with conservative mining and processing costs. The inputs and results from the selected output pit shell are presented in Table 4. 8

9 Table 4. Tampia open pit optimisation criteria and selected pit shell parameters Item Units Value Inputs Mining Cost average over LOM $/t material 3.65 Grade control cost $/t ore 1.00 Processing Recovery % 92 Processing and G&A Cost $/t ore State Government Royalty % 2.5 Gold Price (no escalation) AUD $/oz 1,650 Selected Pit Shell Ore Mt 8.1 Waste Mt 52.3 Total Material Mt 60.3 Stripping Ratio t : t 6.4 (c) Pit Design The selected pit shell (Table 4) above was used as the basis of the detailed design of the Tampia pit (Figure 3) using the following parameters: Two lane ramp width to 110m deep 26m Single lane ramp width below 110m deep 14m Ramp Gradient 10% Ramp Location West side, deposit footwall Ramp surface starting point South end Bench width 7m Bench Height 10m Weathered rock batter slope 60 Fresh rock batter slope 75 The resulting pit design based on these parameters produced the following LOM quantities: Total material 59.9Mt Waste 51.8Mt Strip ratio 6.4 In-pit resource 8.1Mt at 2.1g/t Au The final pit design is 1000m long, up to 400m wide at the surface, and a maximum depth of 130m. The mining and processing costs (Table 6) were developed based on the mining schedule (Figure 7). The LOM pit design assumes two starter pits designed to allow more material and higher grade mill feed to be mined in the early stages of the project. The permanent LOM haulage ramp starts at the south end of the pit, which is closest to the proposed ROM pad and initial waste rock dump. It is anticipated that a second temporary ramp will also run from the north end of the pit to improve productivity and minimise haulage distances to waste rock dumps north or west of the pit. Plan, long section, and cross section views of the pit designs are shown in Figures 3-6 including the resource block model with grades indicated by the legend. 9

10 Figure 3. Pit designs for the South Stage 1 (Orange), North Stage 2 (Red) and the LOM Final Stage (Grey) pits at Tampia. Section lines are shown in green, long section (N-M-S), south cross section (W1-E1) and north cross section (W2-E2). Figure 4. Long Section though the Tampia staged pits. 10

11 Figure 5. Cross Section though the Tampia Stage 1 South Pit (Orange) and the LOM Final Pit (Black). Figure 6. Cross Section though the Tampia Stage 2 North Pit (Red) and the LOM Final Pit (Black). It is expected the first waste rock dump will be located east of the pit, to provide waste rock for integrated waste landform/tsf. Other waste rock dump locations can be determined after exploration/sterilisation of areas north, west and south of the pit. (d) Mining Schedule Design The pits were scheduled based on a sequence of: south starter pit, north starter pit and LOM final pit, with some overlap between pits to ensure continuity of production. There is a phase when the LOM final pit cutback is scheduled (from quarters 9-14) when accelerated waste mining will occur. The schedule has a maximum total material movement rate of 3.5Mt per quarter, and is summarised in Figure 7. 11

12 Figure 7. Open Pit mining material movement. The estimated Life of Mine mining schedule comprises 96% Indicated Resource and 6% Inferred Resource categories mined in sequence shown in Table 5: Table 5. Estimated LOM mining schedule by resource category and gold production Inferred Gold Production Mining Total Resource Indicated Resource Resource mined (koz) period Mined (kt) mined (kt) (kt) Year 1 1,785 1,549 (97%) 236 (3%) 106 Year 2 1,775 1,775 (100%) 0 (0%) 102 Year 3 1,112 1,025 (99%) 87 (1%) 72 Year 4 2,062 1,975 (99%) 87 (1%) 104 Year 5 1,110 1,110 (100%) 0 (0%) 86 Year (99%) 56 (1%) 32 Total 8,103 7,636 (94%) 467 (6%) 502 Mining Operations The Scoping Study assumes technical and managerial direction will be controlled by Explaurum, using a drill and blast contractor, while the load, haul and support operations will be managed by Explaurum using a fully maintained dry hire mining fleet. Metallurgy and Processing (a) Metallurgical Recovery Estimate Comprehensive metallurgical test work has been undertaken on the Tampia gold mineralisation over the past two years. Earlier this year (ASX announcement 8 th May 2017), the results of a major metallurgical test work program indicated an overall gold recovery estimate for Tampia of 92% - 95%. Three styles of gold ore were described: free gold (estimated to constitute approximately 15% to 30% overall and having a process recovery of 95%), sulphide associated gold (estimated to constitute 60% to 70% overall and having a process recovery of 92%-94%), and löllingite gold mineralisation (estimated to constitute 5% to 15% overall and with a process recovery of approximately 80%). In addition to this test work, cyanidation bottle roll tests on a data set of 2411 RC samples, have produced a median recovery of 91%, and a mean recovery of 84%. When these raw data are weighted by ore type, a mean recovery of 92%-94% is suggested. 12

13 Further to this, recent mineralogical studies and metallurgical test work indicates the gold recovery can be improved by: flotation, grinding the concentrate to P 80 of 38µm, and intensive cyanide leaching, which provides the confidence to assume a metallurgical recovery of 92% for this Scoping Study. The assumed recovery allows for the lower recovery of the minor proportion of gold associated with löllingite (FeAs 2), which responds poorly to UFG and intensive cyanidation. Test work is currently under way to determine the best process option for the minor fraction of löllingite hosted gold. (b) Process Plant Design A throughput rate of 1.5Mtpa has been adopted for the study. For scoping purposes, a grind requirement of p80 125µm is assumed to be the most cost effective. There is provision in the plant layout to add additional crushing and/or grinding capacity in the future if a finer grind and/or higher throughput rate is found to be justified. Comminution modelling based on rock strength, crushing indices, and grinding indices indicated a single stage primary jaw crusher and single stage SAG mill is the preferred comminution approach to achieve this grind. The process design proposed is a sequential gravity, flotation and CIP plant that can treat both weathered (oxide) ore and fresh (sulphide) ore. A high intensity cyanide reactor will further treat the gravity concentrate, and ultra-fine grinding (UFG) and intensive leaching will be applied to the flotation concentrate. The combined gravity and flotation concentrates ( mass pull ) are not expected to exceed 10% of the initial ore feed tonnage. Conventional elution and gold room processes will then produce gold dore bars. The proposed site layout based on the described design is shown in Figure 8. Figure 8. Proposed Processing Plant Layout (c) Process Plant Operations Based on the mining schedule and the nominal processing rate of 1.5Mtpa, the expected processing schedule is summarised in Figure 9. 13

14 Figure 9. Processing Plant Feed, Tonnes and Grade The processed grade estimate assumes a stockpile management strategy is used to ensure higher grade ore is preferentially treated, leaving lower grade ore on the ROM stockpile to be treated when the milling rate drops off near the end of the pit life. This has been simulated by applying a maximum high grade feed of 2.5g/t, and allowing the ROM stock pile tonnage and grade to respond accordingly, as summarised in Figure 10. Figure 10. ROM stockpile Tonnes and Grade (d) Tailings Storage Facility (TSF) The Tailings Storage Facility is proposed to be located east of the pit, and based on the Integrated waste landform concept, being a clay lined valley style TSF located upstream of the eastern waste rock dump. A preliminary TSF design has been prepared using an embankment ranging from 13m to 21m high, to progressively provide 4Mt up to 15Mt storage capacity, with a footprint area ranging from approximately 50 to 150ha. Further storage capacity is possible by using additional lifts with waste rock centreline, or tailings upstream, raising methods, so the proposed TSF provides low cost long life tailings storage for the Tampia ore and any future satellite resources. Tailings dam decant liquor will be recycled to the process plant. A preliminary soil survey has identified adequate local supplies of grey non cracking clay suitable for lining the TSF. Testing of samples of tailings from the metallurgical program and more advanced TSF studies are currently underway. 14

15 Project Infrastructure (a) Narembeen The project is located in the Western Australian Wheatbelt Shire of Narembeen (population 800), approximately 250km east of Perth and 12km southeast of the township of Narembeen (Figure 2). Narembeen has a number of facilities which can be readily utilised by a future mine development at Tampia, including post office, police and emergency services, hospital and school, excellent sporting facilities, various community organisations and businesses servicing the region s agricultural industry. (b) Access The roads from Narembeen, west to Perth (290km distant via York) and north to Merredin on the Great Eastern Highway, are sealed and currently rated for double trailer road trains. The mine site is approximately 16km from Narembeen, and accessible via a well-developed network of allweather roads. A bus service will transport operations personnel between town and the mine. The Narembeen airstrip is 12km north of the mine and can be used for urgent or emergency travel. (c) Accommodation It is proposed that all mine staff will reside in Narembeen, and a 100+ person accommodation complex will be built to house the construction workforce, rostered employees and visitors. (d) Power Supply Based on the proposed treatment rate and indicated crushing and grinding indices, approximately 60GWhr per year will be required. It is anticipated the mine will be supplied with power from the WA grid via a new power line from the Kondinin substation, approximately 40km south of Tampia. Discussions with Western Power regarding this option will commence once the plant design is finalised, but there is no certainty that this will be a viable option due to supply shortages. The capital cost is assumed to be incorporated in the $/kwhr tariff. During the power line design and construction phase and the first two years of operations, power can be generated at an onsite diesel power station, provided by a specialist power generation supplier, with diesel supplied by Explaurum. (e) Water Supply The observed groundwater hydrogeology at Tampia is a fractured rock aquifer with the ground water level at 10-30m below surface. The ground water is comparatively low in salt, having total dissolved solids (TDS) in the order of 17,000 mg/l. Ground water in the surrounding region can be higher in salinity, at up to 60,000 mg/l, but still well below the salinity recorded elsewhere in the Goldfields of Western Australia. A recently completed testing program identified a zone of high water transmissivity located in the northern part of the open pit. Explaurum is planning a test production bore near the NE corner of the pit, which will allow the total water availability and sustainable supply rate to be estimated. If additional bores are needed, there appears to be ample ground water in the region. The estimated average water demand balance for mineral processing, dust suppression and evaporation losses is anticipated to be in the order of 4ML/day. Environment and Social Impact Preliminary studies indicate no significant environment issues are anticipated, because most of the project is located on cultivated land, and the site layout is designed to minimise the disturbance of 15

16 the limited native vegetation in the area. Flora and fauna field work studies for the spring season baseline survey were completed in October Work is currently underway to carry out the remaining environmental baseline surveys and studies during the Feasibility Study Phase, and it is proposed to prepare and lodge environmental applications in early Native Title has been extinguished within the Tampia Project area because all property that would be impacted by mine development is privately owned, while a first stage review of Aboriginal and European Cultural heritage has not identified any impacts. Financial Evaluation A financial evaluation was completed for the Tampia Gold Project at a Scoping Study level of accuracy (±35% accuracy), using the base case production target of 8.1 million tonnes of potential mill feed at a feed grade of 2.1 g/t Au, and a Life of Mine strip ration of 6.4:1. The results of cash flow modelling, discounted at 8%, produced the estimates presented in Table 6 to Table 8. Operating Cost Estimate (a) Mining Costs The mining operating cost estimate is based on benchmark data for conventional Australian excavator and truck pit operations of similar productivity to Tampia, to which an allowance of $1/t of ore for grade control drilling has been added. The resulting mining cost averages approximately $27/t of ore mined, or $3.65/t of material mined. (a) Processing Costs Based on the proposed processing flow sheet, treatment rate, estimated crushing and grinding power, and typical reagent and consumable costs, a total processing cost of $19/t ore has been estimated. An additional $1/t ore has been allowed for the first two years to cover the higher cost diesel power generation and provide for fine tuning activities. (b) Administration An allowance of $3/t ore treated for General and Administration (G&A) costs has been made. (c) Total Site Costs The total site operating cost averages $50/t of ore processed. (d) Corporate The calculation of the All in Sustaining Cost (AISC) includes provision of $1M per year towards project related corporate costs. Table 6. Estimated LOM C1 Operating Cost Summary Operating Expenditure AUD per tonne treated AUD per oz. gold produced Mining Processing General & Site Admin 3 48 TOTAL* *Summary figures subject to rounding errors. 16

17 Capital Cost Estimate The 1.5Mtpa process plant initial capital cost of $86M has been estimated using the cost of gold plants of similar size and design operating in Western Australia. The design includes a primary jaw crusher, SAG mill, gravity circuit two banks of flotation cells, followed by ultrafine grinding of the flotation concentrate, carbon in pulp leaching and electrowinning. The TSF has an assumed total staged construction cost of $1M initial capital with $0.5Mpa to build a 10Mt storage capacity of processed ore (Table 7). The capital cost of both diesel and grid power supplies is incorporated in the kwhr tariff. Provision has been made for $1M to establish mining operations, but because the mineralisation starts at surface, no pre-stripping capital is required. General site and infrastructure costs of $5M have been allowed, along with $3M towards communications, transport and camp establishment. A contingency of 10% on the initial capital cost has been estimated. Table 7. Estimated LOM Capital Cost Summary Capital Expenditure AUD (M) Initial Plant Capital Cost (+/-30%) 86 Infrastructure and Site Establishment 9 Contingency (10%) on Initial Capital 10 Sustaining Capital (6 years) 9 TOTAL 114 Table 8. Estimated Financial Statistics (100% Project basis) Unit Total Pre-tax NPV 8% AUD (M) 181 Revenue AUD (M) 829 Pre-tax IRR % 64 Average Annual EBITDA AUD (M) 65 C1 Cash Cost A$/oz 799 AISC Cash Cost A$/oz 888 Sensitivity Analysis The Scoping Study was prepared at a ±35% level of accuracy to investigate the technical and economic parameters of a standalone gold operation at Tampia. The investment case was subjected to a sensitivity analysis on Net Present Value (NPV) and Internal Rate of Return (IRR) against the key variable parameters of gold price, recovered grade, operating costs and capital costs. Each parameter was estimated for a +30% to -30% variation on the base case assumption (Table 9 and Table 10). Table 9. Sensitivity Analysis of the pre-tax NPV8% for +/- 30% variation of key parameters (A$M) Parameter -30% -20% -10% 100% +10% +20% +30% Gold Price (AUD) Recovered Grade (g/t) Operating Costs ($M) Capital Cost ($M)

18 Table 10. Sensitivity Analysis of the pre-tax IRR for +/- 30% variation of key parameters Parameter -30% -20% -10% 100% +10% +20% +30% Gold Price (AUD) 9% 28% 47% 64% 81% 98% 115% Recovered Grade (g/t) 9% 28% 47% 64% 81% 98% 115% Operating Cost ($M) 88% 80% 72% 64% 56% 47% 39% Capital Cost ($M) 98% 84% 73% 64% 57% 51% 45% These relationship are illustrated graphically in Figure 11 and Figure 12: Figure 11. Sensitivity Analysis of the pre-tax NPV8% for +/-30% variation of key parameters Figure 12. Sensitivity Analysis of the pre-tax IRR for +/- 30% variation of key parameters Development Funding Over the past 12 months, the Company s market capitalisation has grown to approximately A$42 million (and recently held a market capitalisation of circa A$60 million), following achieving key milestones and the Project continuing to deliver positive results. The Company is targeting Q1 of CY2018 to announce the Tampia Gold Project Feasibility Study. The Company remains confident that its market capitalisation will converge closer to the Company s future funding requirement as the Project is de-risked and greater certainty of initial development capital cost funding is obtained. 18

19 This share price appreciation and the resulting increase in market capitalisation reduces the dilution from further equity financings and allows larger funding scenarios, improving the potential ability of the Company to finance the Project into production in the future. The Company is in a strong position with cash of A$3.3 million (30 September 2017) and no debt. Financing for development of mining companies often involves a broader mix of funding sources rather than just traditional debt and equity, and the potential funding alternatives available to the Company include, but are not limited to: prepaid off-take agreements; equity; joint venture participation; strategic partners/investors at project or company level; senior secured debt/project finance; secondary secured debt; and equipment leasing. It is important to note that no funding arrangements have yet been finalised or put in place. The composition of the funding arrangements ultimately put in place may also vary, so it is not possible at this stage to provide any further information about the composition of potential funding arrangement. The Board of Explaurum believes there is a reasonable basis to assume that the necessary funding for the Project will be obtained, because of (but not limited to) the following: The quantum of finance required is relatively small compared to the quantum of capital required by similar companies globally at a similar development stage; The quantum of finance required is relatively small compared to the size and frequency of recent capital raisings by mining companies at a similar development stage on the ASX; The economics of the Scoping Study are highly attractive and for this reason it is reasonable for the Company to anticipate that equity financing will be available to further develop the Project; In addition to future equity financing, the Company plans to commence discussions with potential debt providers, and will continue these discussions to progress funding options. It is expected given the economics of the project, the stable jurisdiction and attractive mine life debt financing will be readily available for a part of the project funding; The Company s cornerstone investors and shareholders have been strongly supportive of the Company since the discovery of the Project and continue to demonstrate strong support for the Company; The Board & Management have significant experience on ASX and have long track records of securing equity financing and developing gold operations; The Company has a history of successful capital raisings and over the last 2 years has completed over A$12.0 million in heavily oversubscribed equity capital raisings to sophisticated and professional investors, institutional investors and shareholders; The Company is confident there is a strong possibility that it will continue to increase the JORC Mineral Resource base at the Project to extend the mine life beyond what is currently assumed in the Scoping Study. As announced to ASX, the Company is proposing to undertake further resource extension drilling at the project; The Company has strong support from an experienced leading resources broker. This broker has assisted in raising billions of dollars in new equity, a great deal of which has been applied to financing the development of resources projects. Given the above, and the Project s economic metrics and low-risk location, the Company has concluded it has a reasonable basis to expect that the Project s development capital cost could be funded following the completion of a positive Feasibility Study and obtaining the necessary project approvals. Project Implementation It is currently estimated that the Feasibility Study and Environmental approval document preparation will be completed in Q1 of calendar year

20 Subject to a successful outcome of the Feasibility Study, lodgement of approval applications and project financing activities will progress through H1 of calendar The Board will be in a position to approve the construction of the Project if and when these matters are satisfactorily resolved. Construction would be unlikely to take more than 12 months. For further information, visit the Company s website at or contact: John Lawton Managing Director Explaurum Limited Competent Person s Statement The information in this report that relates to Mineral Resources is based on information announced to the ASX on September 13, Explaurum confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement, and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. 20