AS ASX Announcement 31 October 2013 ABN 23 106 296 106 Level 14, 31 Queen Street Melbourne Victoria 3000 T (+61 3) 8610 8633 F (+61 3) 8610 8666 W regalresources.com.au Quarterly Activities Report for the reporting ending 30 September 2013 The Directors of Regal Resources Limited ( Regal or the Company ) (ASX:RER) are pleased to present their Quarterly Activity Report for the period ended 30 September 2013. During the Quarter the Company has undertaken a strategic review of its activities with the key objective to find ways to increase shareholder value by the successful exploration for and/or production of minerals. Considerable effort went into looking to secure new mineral resource investment opportunities which are judged to have good potential for success and have the ability to deliver significant value to shareholders in the near term. The Company has also implemented a number of cost reduction initiatives both in the DRC and Australia where it has no further commitments to fund the development and commercialisation of the UCTL process. Highlights New Projects The Company has continued to investigate copper project opportunities in the DRC and Zambia that have the potential to host significant mineral resources and provide early cash flow. All projects under review are situated in areas amenable for cost effective exploration and development. REGAL SK Joint Venture, Democratic Republic of Congo Ngoy Project Highly encouraging results from a pilot metalurgical study on a batch of mineralised drill core from the Kautu gold project indicate that a recovery between 90 and 95% can be achieved by gravity concentration, dissolution of gravity concentrate and CIL dissolution of the gravity tails Matala Project The final results received for 1,137 soil samples collected on PR4816. 1
The results are highly encouraging as they have identifed a number of elevated gold-in-soil anomalies over a strike of 6km. The anomalies coincide with extensive artisanal workings. The results extend the previously delineated 17km long soil anomaly to a total strike length of 23km. Trenching across the 17km soil anomaly confirms that soil anomlaies reflect underlying bedrock gold mineralisation. Major upgrading of national roads in the area should signifcanty reduce future exploration costs EXPLORATION ACTIVITIES IN THE DEMOCRATIC REPUBLIC OF CONGO Gold Projects Regal has a 60% interest in the Regal SK Joint Venture, which holds the title to fourteen (14) exploration permits covering an area of approximately 2,000km 2. The permits are strategically located in an underexplored, emerging gold province, the Kibara Mobile Belt, in the eastern DRC (Figure 1). Exploration results from work conducted by Regal SK (see Figures 2 and 3), indicate that the permits have very similar geological characteristics to the nearby known deposits, held by Banro Corporation, which contain a reported 17Moz of gold resources (Figure 1). Regal s exploration work, including two phases of diamond drilling, also highlight that the Regal SK permits are highly prospective for hosting multiple significant high-grade gold deposits which warrants a long term exploration strategy (Figure 3). During the Quarter the Company, after taking into consideration the state of the mining industry, introduced cost saving measures with the intent of being able to ensure long term exploration success on the Regal SK permits. Cost reduction initiatives that were implemented included reducing the DRC staff to a minimum level sufficient for keeping the exploration camp at Ngoy in good standing, and the demobilising of the drilling and helicopter contractors. Future programmes are expected to be far more cost effective as they will benefit from important infrastructure improvements taking place in the area. CSA Global UK were requested to undertake a review and carry out an audit of the Kadutu drilling data base with the objective of the future establishment of a mineral resource estimate for the Kadutu Project. The CSA Global QAQC assessment report did not identify any maters of concern. The Company also started an extensive review of its data involving specialist consultants to assess for additional exploration targets on its properties and to plan for future drilling at Kadutu. 2
Figure 1. Central Kibaran-Ruzisian Terrane and major gold deposits Figure 2. Significant high-grade gold intercepts at Kadutu 3
Metallurgical Test Work Figure 3. Geological map of the Kadutu Area and Inset Map of the 6km Ngoy gold trend During the Quarter the Company submitted a suite of core samples from the Kadutu Project to the SGS Laboratories, Johannesburg South Africa, for metallurgical testing. The initial test work has been completed and SGS has submitted a formal report detailing the outcome of the work. The 4
final results are highly encouraging indicating that an optimum recovery of 94.4% is achievable from the mineralised zone at Kadutu. As part of the study several recovery methods were applied to the bulk core sample including diagnostic heap leach, gravity separation by Knelson concentrator and carbon in leach (CIL) test work. The diagnostic heap leach showed a high gold recovery at 91.21% and in addition the gravity separation results indicated the bulk core sample has good amenability to gravity separation with a gold recovery of 61.8%. CIL test work on the gravity concentrate (calculated at 203.5g/t Au) returned a maximum recovery of 96.2% after a 24 hour leach period with a 91.5% recovery on the gravity tailings. Overall the gold recovery based on gravity concentration, dissolution of gravity concentrate and CIL dissolution of the gravity tails is estimated to be 94.4% suggesting gravity followed by leaching of the products produces a better dissolution than direct cyanidation. The Company is extremely pleased with the results of the Gold Deportment Study which indicates high gold recoveries of 90-95% can be obtained from mineralisation at Kadutu. Matala Project During the Quarter, final assay results were received from ALS Laboratories, Johannesburg, South Africa, for a batch of 1,137 soil samples collected in May 2013 during a first pass, 100m x 400m soil sampling programme across permit PR4816. The soil sampling programme was designed to test for the extension of the 17km long soil anomaly previously delineated on the contiguous PR 4809 (Figure 4). The results of the soil sample programme have identified five discrete gold-in-soil anomalies ranging in value from 103ppb Au to 268ppb Au. The anomalies are grouped over a strike distance of 6km and follow along a topographic ridge. Geological mapping within the permit area further recorded a large number of artisanal alluvial gold workings along the anomalous 6km trend. The new results are highly encouraging and extend the length of the soil anomalies along strike from 17km to 23km, with mineralisation open to the northwest. Rock chip and trenching results indicate that the soil anomalies overlie mineralised bedrock. The Matala Project remains a high priority target area and infill soil sampling across the anomalous zone will be prioritised in the next phase of regional exploration when work resumes on the South Kivu Project. 5
Figure 4. Map of all geochemical soil sample results for the western Matala Project area including 2013 soil sampling results across PR4816 plotted on the backdrop of remote sensing imagery. Results of significant rock chip and trench results are also shown Infrastructure Improvements A number of important road improvement schemes are in progress that, when completed will enable far better access to Regal SK project areas and substantially reduce the need for helicopter support for drilling programmes in the future. Banro Corporation has recently upgraded some 320kms of road access to their Namoya Project along the N5 from Bukavu (See Figure 5). The DRC Office des Routes (national roads department) has begun work on the N2 that runs through Regal s South Kivu tenement area. The road will have a gravel surface and the bridges should bear 25 tonne loads. Estimated time to complete the approximately 150 km is five months. The road will pass Kitindi, which is less than 10 km from Regal s Kadutu Project. From Kitindi the road will continue on to Matala, passing within 7 km from Regal s Kanana prospect, which the Company intends to test with diamond drilling. 6
Figure 5. Infrastructure Development Map in South Kivu Province Project Generation The Company has reviewed a number of copper opportunities all located within the Central African Copper Belt (CACB) Katanga Basin, as it is one of the largest and most prolifically mineralised sediment-hosted copper province known on earth. Other provinces of this type include the Zechstein Basin (central Europe), the Kodaro-Udokan Basin (Russia), and the Paradox Basin (Utah). In 2011, the Democratic Republic of Congo was the 10th largest producer of copper worldwide, and with Zambia, the copper production from the Katanga Basin accounted for ~7% of global supply. As part of the review the Company has identified seven project opportunities in the CACB Katanga Basin that appear to potentially meet the Company s key criteria for further investigation, being the potential to host significant near surface high grade copper mineralisation with a capacity for fast tracking mining development. Two field trips were made to evaluate the identified projects. The Company will make further announcements as and when further progress is made on these new opportunities. 7
UNDERGROUND COAL TO LIQUIDS (UCTL) During the Quarter, the Company announced that a settlement arrangement had been executed between Magma Oil Pty Ltd ( Magma ), a 100% Regal owned subsidiary, and Forbes Oil and Gas Pty Ltd ( FOG ), both being 50% owners of UCTL Pty Ltd. Under the settlement arrangement, Magma will no longer have any interest in the UCTL Technology other than having a 2% worldwide net royalty on hydrocarbon products sold from the UCTL process. Pilot phase production of up to 500,000 tonnes of coal has been agreed to not attract a royalty to assist with the commercialisation pathway. The Directors of Regal are satisfied with the Royalty Agreement as it enables Regal shareholders to be exposed to royalty income in the future without having to fund the development and commercialisation of the technology. VICTORIAN BROWN COAL TENEMENTS No activity was undertaken during the Quarter. David Young Managing Director Competent Persons Statement: Scientific or technical information in this release has been prepared by Mr David Young and Dr Simon Dorling, the Company s Managing and Technical directors. Mr David Young is a Member of the Australian Institute of Mining and Metallurgy (AusIMM) and Dr Simon Dorling is a member of the Australasian Institute of Geoscientists (MAIG). Both Mr Young and Dr Dorling have sufficient experience which is relevant to the style of mineralisation under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr David Young and Dr Simon Dorling consent to the inclusion in this report of the Information, in the form and context in which it appears. 8
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