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ASX ANNOUNCEMENT RED MOUNTAIN MINING LTD
21 June 2016
BATANGAS GOLD PROJECT PRE-FEASIBILITY STUDY CONFIRMS LOW-COST AND A$ 46 MILLION OF FREE-CASHFLOW
Highlights
Pre-Feasibility Study shows Batangas Gold Project will generate A$ 46 million in free cash flow during first 7 years of production (after capital and pre corporate tax & admin. at gold price of A$ 1,700 / oz)
Maiden open-pit Ore Reserve of 128,000 oz of gold¹ including high-grade 100,000 oz at 4.2 g/t gold¹
Recovered production of 116,000 oz of gold¹, an increase of 26,000 oz of gold¹ from Scoping Study
Low C1 cash operating costs of US$ 735 per oz / A$ 999 per oz of recovered gold¹
Low up-front capital costs of US$ 16 million / A$ 22 million, including new CIL processing plant
Additional 320,000 oz of gold in majority Inferred Resources remains available for future conversion
Immediate upside potential within the 14 km of identified mineralised structures at Lobo
Perth, Western Australia: Red Mountain Mining Ltd (Red Mountain or the Company) is pleased to announce the results of the now completed Pre-Feasibility Study (PFS) on the Company’s flagship Batangas Gold Project, located 120 km south of Manila in the Philippines.
The PFS confirms low C1² operating costs of US$ 735 per oz / A$ 999 per oz, that will generate A$ 46 million² in free cash-flow (after capital and pre corporate tax at A$ 1,700 / US$ 1,250 per oz gold) over the initial seven (7) years of production, at a C3 all-in-cost (AIC³) of US$ 914 per oz¹ / A$ 1,243 per oz¹ (excluding corporate tax and admin.).
The PFS includes a maiden Probable Ore Reserve for the Batangas Gold Project of 1.44 million tonnes (Mt) at 2.6 g/t gold (Au), 9.0 g/t silver (Ag), or 2.8 g/t Au (incl. Ag credits)¹ containing 128,000 oz of gold¹. This includes high-grade gold ore of 746,000t at 4.0 g/t Au, 9.2 g/t Ag or 4.2 g/t Au (incl. Ag credits)¹ containing 100,000 oz of gold¹.
The Probable Ore Reserve is derived from optimised open pit designs based on Indicated Resources only, and represents a mining and production schedule that is expected to recover 116,000 oz of gold¹ during the initial 7 years of production. Importantly, the PFS has added 26,000 oz¹ of recoverable gold when compared to the Scoping Study that was completed in March 2014 (see ASX release, 20 March 2014).
Initial mining is planned to be ore from the high-grade South West Breccia and Japanese Tunnel open pits at Lobo, grading 6.6 g/t gold¹ high-grade ore for the first two years, then Kay Tanda open pit(s) ore grading 2.2 g/t gold¹ will be transported and processed at Lobo CIL plant at 250 ktpa for the subsequent five years of initial operations.
The project is expected to generate A$ 190 million in revenue from gold sales, A$ 117 million (4 billion PhP) of costs will be spent in the Philippines and A$ 13 million (440 million PhP) in royalties and taxes will be paid to the Philippines government and local communities during the initial 7 years of production.
The Batangas Joint Venture (BJV) partners, Red Mountain and Bluebird Merchant Ventures (Bluebird) have approved the PFS and the immediate transition to Definitive Feasibility Study (DFS).
¹Gold grade (g/t Au) and gold ounces (oz) include silver credits at silver price of A$ 23/oz and gold price A$1,700/oz. ²C1: Mining, ore transport, processing, site general and administration, local royalties and taxes, refining costs and silver credits. ³AIC: C1 + sustaining capital and pre-production capital, excluding corporate tax and corporate admin.
ASX : RMX COMPANY DIRECTORS Neil Warburton Non-Executive Chairman Michael Wolley Non-Executive Director Jon Dugdale Managing Director Shannon Coates Company Secretary
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Financing of the project will require a certain level of debt financing, particularly for the new CIL processing plant and associated infrastructure. Discussions with potential debt financiers are ongoing and will be advanced, targeting financing agreements in parallel with completing the DFS.
The PFS is based on a detailed financial model and economic analysis that has been verified by independent consultants, and incorporates the detailed work that has been completed over the last 18 months by high quality Australian (and New Zealand) consultants including;
- Process engineering and design by Como Engineers based on metallurgical testing by ALS.
- Detailed mine design and planning by Crystal Sun Consulting,
- Geotechnical work by RDCL Ltd (NZ) and
- waste, residue and water storage design and earthworks by ATC Williams and Crystal Sun Consulting.
The PFS results have been compiled by Jon Dugdale, the Managing Director of Red Mountain. Mr Dugdale is a Fellow of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the various styles of mineralisation under consideration and the activity currently being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
Commentary
Red Mountain’s Managing Director Jon Dugdale said: “This is the culmination of the detailed work undertaken by both the Company and the team of high-quality Australian consultants during the last 18 months.
“This Pre-Feasibility Study demonstrates the low operating costs, high margins and strong cashflow potential of the Batangas Gold Project.
“The high initial ore reserve grades from surface, averaging over 6.6 grams per tonne gold for the South West Breccia pit, will allow this project to achieve strong early cash flows and a high rate of return on initial capital.
“In addition, there is potential to expand ore reserves through drilling of the over 320,000 ounces of additional, mostly inferred, resources and upside potential remains to be tested within the 14 kilometres of identified epithermal gold structures at Lobo.
“The JV partners are now aiming to complete the Definitive Feasibility Study on the Batangas Gold Project by this calendar year.
“The JV partners very much look forward to developing the Batangas Gold Project, which will deliver major positive benefits to the people of Lobo and the Batangas region, as well as the Batangas Joint Venture partners.”
Pre-Feasibility Study Parameters – Cautionary Statement
The Probable Ore Reserves in the PFS referred to in this announcement are derived from optimised and designed open pits based on Indicated Resources only. The Probable Ore Reserves provides 100% of the total planned production schedule and financial projections. There is no dependence of the outcomes of the PFS on non‐Ore Reserve material contained within the optimised and designed open pits. All cash flows are undiscounted, unless otherwise stated, and are not subject to inflation/escalation factors. The PFS has been prepared to an overall level of accuracy of approximately +/- 25%. The Company has concluded that it has a reasonable basis for providing forward looking statements included in this announcement. See Appendix 1: Forward Looking and Cautionary Statements.
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Introduction
The Batangas Gold Project (the Project) is located 120 km south of Manila on the Island of Luzon in the Philippines. The Project is accessible by sealed road from Manila to Lobo township then by well formed roads to the Lobo resources, 2 km to the east of Lobo, and 15 km via the coastal road to the Archangel (Kay Tanda) resources.
The Batangas Gold Project includes two Mineral Production Sharing Agreements (MPSA’s), Lobo MPSA 176-2002-IV and Archangel MPSA 177-2002-IV, that contain all of the identified resources. In addition the Project includes 8 granted Exploration Permits (EP’s) and 3 EP applications (see Figure 1 below).
The two MPSA’s and the majority of the EP’s are owned by Philippines company Egerton Gold Philippines Inc. (EGPI). Another Philippines company, MRL Gold Inc. (MRL), holds a direct and indirect contractual right interest in EGPI and is 100% owned by Red Mountain Mining Singapore Ltd (RMMS). The Batangas Joint Venture (BJV) is incorporated at the RMMS level, Red Mountain currently holding 75% of RMMS and Bluebird holding 25% of RMMS with the right to earn up to 50.1%.
The Company completed a Scoping Study on the Project in March 2014 (See ASX release, 20 March 2014). Based on the financial outcomes of the Scoping Study Red Mountain commenced a Pre- Feasibility Study (PFS) on the Project. The results of the PFS will be converted to DFS following the completion of additional technical work including;
geotechnical drilling and final pit designs,
detailed design of waste storage and water management structures,
final haul road design/upgrade from the Kay Tanda pits to the CIL processing plant at Lobo and,
further detailed cost inputs associated with mining and milling parameters.
Figure 1: Batangas Gold Project location, tenements, Mineral Resources (JORC 2012) and planned project infrastructure
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Study Inputs and Derivation
The Batangas Gold Project PFS is based on the following key input parameters:
i) The JORC 2012 compliant Mineral Resources reported 30 June 2014, (see ASX release 30 June 2014).
ii) A Probable Ore Reserve and detailed, monthly, mining and processing schedules derived entirely from the Ore Reserve, produced by Crystal Sun Consulting after the application of mining parameters and ore cartage costs based on contractor/owner miner supplier inputs, processing inputs and geotechnical considerations.
iii) Geotechnical inputs from RDCL Ltd.
iv) Process engineering design, capital and operating costs by Como Engineers.
v) Metallurgical recovery inputs based on test work by ALS Global (Perth) and interpreted by Como Engineers.
vi) Waste, residue and water storage design and earthworks by ATC Williams and Crystal Sun Consulting.
vii) Other cost inputs e.g. power, administration and accommodation by owners team and consultants inputs.
viii) Financial model designed by Value Advisors, compiled by owners team and verified by Manitoba Consulting.
Key Financial Outcomes of the PFS
The financial cashflow model outcomes for the Batangas Gold Project PFS are summarised in Table 1 below. The Company has adopted the World Gold Council (WGC) guidance on cost reporting measures.
Cash flows are undiscounted unless stated (e.g. NPV) and are not subject to inflation/escalation factors. The PFS has been prepared to an overall level of accuracy of approximately +/- 25%.
Table 1: Batangas Gold Project PFS key financial model outcomes
Batangas Gold Project Unit A$ US$
Mine life (processing) Years 7.2 7.2
Tonnes Processed Mt 1.44 1.44
Head Grade Gold (Au) Au g/t 2.6 2.6
Head Grade Silver (Ag) Ag g/t 9.0 9.0
Head Grade (Au Equ., including Ag credits) Au Equ g/t 2.8 2.8
Matallurgical Recovery Gold (%) % 91% 91%
Recovered Ounces Gold including silver credits Oz 000's 116 116
Total Net Revenue from Gold Sales $ Mn 190 140
Total C1¹ Cost (inc. Royalties & local taxes & silver credits) $ Mn 116 85
Operating C1¹ Cash Flow $ Mn 74 55
Operating C1¹ Cost/Oz $ / Oz. 999 735
Sustaining Capital $ Mn 6 5
Pre Production Capital (including contingencies) $ Mn 22 16
Total C3² AIC Cost (including all capital) $ Mn 144 106
Total C3² AIC Cash Flow (incl. all capital excluding corporate tax and admin.) $ Mn 46 34
Total C3² AIC Cost/Oz (including all capital) $ / Oz. 1,243 914
Net Present Value (NPV) (5%), (excluding corporate tax &admin.) $ Mn 33 24
Internal Rate of Return (IRR), (excluding corporate tax &admin.) % 34% 34%
Corporate Admin & Taxes (estimated, subject to certain BIR assumptions) $ Mn 11 8
Total Corporate Cash Flow (including corporate tax and admin.) $ Mn 35 26
Gold Price A$ / Oz. 1,700 1,250
Silver Price A$ / Oz. 23 17
Exchange rate A$ / US$ 0.74 0.74
¹C1 = Mining, ore transport, processing, site general and administration, local royalties and taxes, refining costs and silver credits ²C3 AIC = C1 + all in costs (AIC) sustaining capital and pre-production capital, excluding corporate tax and corporate admin.
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Processing throughput rates will vary from approximately 100,000 tpa for the South West Breccia (SWB) and Japanese Tunnel production from the Lobo MPSA, recovering approximately 17,000 ozs Au per annum for the first 2 years. Processing throughput rates will then lift to 250,000 tpa for the Kay Tanda (West and East) production from the Archangel MPSA, recovering approximately 17,000 oz Au per annum for a further 5 years. Total recovered production is a planned 120,000 oz Au (including Ag credits) for the initial 7 years of operations.
The gold price applied to open-pit optimisations and the Ore Reserve estimate and the financial model was A$ 1,700 / US$ 1,250 per oz Au and A$ 23 / US$ 17 per oz Ag. An average exchange rate of A$/US$ of 0.74 was applied. Cash flows at variable gold prices are tabulated below:
PFS Gold Price Sensitivity
US$ /Oz 1,180 1,250 1,330 A$ /Oz 1,600 1,700 1,800
Operating C1 cash-flow A$ Mn 63 74 86
Total C3 AIC Cash Flow (excl. corporate tax and admin.) A$ Mn 35 46 58
NPV (5%), (excl. corporate tax and admin.) A$ Mn 24 33 42
IRR (excl. corporate tax and admin.) % 27% 34% 42%
The Probable Ore Reserve represents 100% of the total planned production schedule and financial projections. There is no dependence of the outcomes of the PFS on non‐Ore Reserve material contained within the optimised and designed open pits, that were optimised on the basis of Indicated Resources only.
Mineral Resources
The two Mineral Resource areas the subject of the PFS are located on the Lobo and Archangel MPSA’s (the Philippines equivalent of Mining Leases), located 2km and 10km east of the city of Lobo respectively (See Figure 1).
The Mineral Resources that form the basis of the PFS Ore Reserves and Production Schedule were reported 30 June 2014, in accordance with the 2012 edition of the JORC Code, using a cut-off grade of 0.85g/t gold for potential open pit resources and a cut-off grade of 2 g/t gold for potential underground resources, limited to West Drift at this stage.
The Mineral Resources were estimated with the assistance of Optiro, minerals industry consultants based in West Perth, Western Australia. Optiro have since completed a Competent Person’s Report (CPR) on 9 February 2016 (included in the Bluebird Prospectus for Admission to the LSE), that represents an independent assessment of the geology, exploration data, Mineral Resources and exploration potential of the Batangas Gold Project. In the CPR, the Competent Person, Jason Froud, stated that he considers that the resource estimates, methodologies and underlying data are appropriate and confirms that the reporting and classification of the Mineral Resource estimate is in accordance with JORC (2012) Code guidelines.
The new JORC 2012 Mineral Resources for the Batangas Gold Project are summarised in table 2 below:
Table 2: Batangas Gold Project Mineral Resource, JORC 2012, >0.85 Au g/t - June 2014
Deposit Resource
Classification
Tonnes Au g/t
Au Oz Ag g/t
Ag Oz
Kay Tanda West Indicated 1,421,000 2.1 96,000 9.2 421,000
Inferred 229,000 2.3 17,000 2.1 15,000
Total 1,650,000 2.1 113,000 8.2 436,000
Kay Tanda Main Indicated 1,161,000 1.9 69,000 1.4 50,000
Inferred 2,775,000 2.0 180,000 1.2 109,000
Total 3,936,000 2.0 250,000 1.3 159,000
Archangel MPSA Total Archangel MPSA 5,586,000 2.0 363,000 3.3 595,000
South West Breccia Indicated 214,000 6.4 44,000 1.8 13,000
Inferred 7,000 2.3 1,000 1.9 400
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Total 221,000 6.3 45,000 1.8 13,000
Japanese Tunnel Indicated 26,000 3.3 3,000 5.9 5,000
Inferred 7,000 2.3 1,000 5.7 1,000
Total 34,000 3.0 3,000 5.7 6,000
West Drift (>2 g/t) Indicated 145,000 3.1 14,000 4.7 22,000
Inferred 205,000 2.9 19,000 4.3 28,000
Total 350,000 3.0 34,000 4.4 50,000
Lobo MPSA Total Lobo MPSA 604,000 4.2 82,000 3.6 69,000
Batangas Gold Project Indicated 2,968,000 2.4 227,000 5.4 511,000
Inferred 3,222,000 2.1 218,000 1.5 154,000
Total Batangas 6,190,000 2.2 444,000 3.3 665,000
The SWB Mineral Resources at Lobo are associated with a linear, steeply dipping, epithermal lode with high-grade “shoots” of mineralisation. The Kay Tanda Mineral Resources at Archangel are associated with a low to moderate grade stockwork gold deposit in andesitic volcanics and dioritic intrusions. Both ore deposits outcrop at surface and include oxide, transition and fresh rock zones.
Mining Schedule and Ore Reserve
Mining Schedule
Based on the JORC 2012 Mineral Resources, released 30 June 2014, a new mining (and processing) schedule has been generated by independent expert Dallas Cox of Crystal Sun Consulting, a Chartered Professional (CP) mining engineer contracted by the Company.
The new mining schedule is derived from open-pit optimisations and designs, including mining dilution and ore-loss, optimised at a gold price of A$ 1,700 per oz based on Indicated Resources only.
The mining schedule has been derived from the Mineral Resource estimates above after the application of mining parameters that include mining and ore cartage costs based on contractor/owner supplier inputs and haulage trials (mining and haulage operating costs summarised in Table 3 below), as well as geotechnical considerations generated by RDCL that produced new pit wall slope assumptions (subject to additional geotechnical drilling prior to conversion to DFS). Processing recoveries and parameters have also been applied to the optimisations as summarised under “Metallurgy, Processing and Gold Production” below, see Figure 3 for a graphic representation of the high-grade and low-grade ore mining schedule.
The key mining input parameters applied to the mining schedule and Ore Reserve are summarised below:
Mining will involve conventional open pits, selective mining method, using mining, drilling, blasting and ore haulage contractors. The initial mine development to SWB pit will involve the construction of access roads using small excavators and dozers.
Mining will be carried out on 2.5 metre benches. The mining fleet will consist of a 40-50 tonne excavator in backhoe configuration, loading 35-40 tonne payload articulated dump trucks, an hydraulic drill rig and ancillary fleet for dump management and road maintenance.
Ore and waste will be blasted using ammonium nitrate explosives or packaged explosives depending on wet ground conditions. Some free digging is anticipated in the upper zones of the topographic profile.
Drilling and blasting will be performed on 5 m high benches, with blasted material excavated in two 2.5 m flitches.
Mining dilution factor of 15% has been applied to SWB ore due to the geometry of the orebody. At Kay Tanda, mining dilution factor of 5% has been applied to ore. Dilution grade of 0.5 g/t Au has been applied at both deposits.
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Cutoff grades derived and applied to the SWB reserve for Oxide/Transitional and Fresh ore were 1.15 g/t Au and 1.20 g/t Au respectively. Cutoff grades derived and applied to the Kay Tanda reserve for Oxide,Transitional and Fresh ore were 0.90 g/t Au and 0.95 g/t Au respectively.
Environmental analysis of drill core carried out during the metallurgical and environmental investigation programs for the PFS have determined non acid generating (NAG) and potentially acid forming (PAF) regions of rock in each pit for differential disposal into designed waste dumps during mining operations.
The mining (and processing) Schedule is 100% Probable Ore Reserves included in the open pit optimisations and designs based on Indicated Resources only. The total mining (and processing) schedule that forms the basis of the PFS includes 1.44Mt @ 2.6 g/t Au and 9.0 g/t Ag, or 2.8 g/t Au including silver (Ag) credits, containing 128,000 ozs Au (incl. Ag credits).
Mining is scheduled to commence at South West Breccia on the Lobo MPSA and will continue for just over two years at Lobo, mining 185,000t @ 6.2 g/t Au containing 37,000 ozs Au (incl. Ag credits). Mining is scheduled to commence at Kay Tanda (West) on the Archangel MPSA seven months before South West Breccia pit is completed and will continue for over five years at Archangel based on this initial schedule (then low grade stockpiles to be processed for a further 3 years), mining 1.26Mt @ 2.1 g/t Au, 10 g/t Ag, or 2.3 g/t Au (incl. Ag credits) containing 91,000 oz Au (incl. Ag credits), see Figure 3 for project layout, mining areas and infrastructure locations.
Table 3: Batangas Gold Project mining costs
Planned Open Pits Ore A$/t Waste A$/t Total A$/t Cost/t Ore Average Strip Ratio
South West Breccia and Japanese Tunnel $7.16 $4.84 $4.98 $79.06 14.9
Kay Tanda, West and East $5.08 $4.90 $4.92 $36.53 6.4
Total $5.35 $4.88 $4.94 $42.02 7.5
Figure 2: Batangas Gold Project planned mining areas, processing plant and associated infrastructure
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Figure 3: Batangas Gold Project high-grade and low-grade mining schedule
Ore Reserve
The Ore Reserve for the Batangas Gold Project is reported in accordance with the 2012 edition of the JORC Code for “Reporting of Exploration Results, Mineral Resources and Ore Reserves”. The Mineral Resource was converted to Ore Reserve having considered the level of confidence in the Mineral Resource and reflecting modifying factors. The Probable Ore Reserve is based on Mineral Resources classified as Indicated Resources only, and represents the proportion of the Indicated Mineral Resource that lies within the optimised and designed open pits, excluding ore loss.
The table’s 4 and 5 below present a summary of the Ore Reserves (100% project) at a A$1,700 per oz gold price (US$ 1,250 at A$/US$ 0.74).
The total Probable Ore Reserve for the initial project is 1.44Mt @ 2.6 g/t Au, 9.0 g/t Ag, or 2.8 g/t Au (incl. Ag credits) containing 128,000oz (incl. Ag credits).
Table 4: Batangas Gold Project Ore Reserves (Total), JORC 2012, June 2016
Deposit / Open Pit(s) Ore Reserve Category
Tonnes Au g/t Au Oz Ag g/t
Ag Oz Au Eq g/t
Au Eq Oz
South West Breccia Probable 178,000 6.2 36,000 1.8 10,000 6.3 35,800
Japanese Tunnel Probable 8,000 4.6 1,000 11.0 3,000 4.7 1,200
Total Lobo MPSA Probable 186,000 6.2 37,000 2.2 13,000 6.2 37,000
Kay Tanda West Probable 1,068,000 2.2 75,000 11.4 393,000 2.3 80,000
Kay Tanda East Probable 187,000 1.8 11,000 1.6 10,000 1.8 10,800
Total Archangel MPSA Probable 1,255,000 2.1 86,000 10.0 403,000 2.3 91,000
Total Batangas Project Probable 1,441,000 2.6 122,000 9.0 416,000 2.8 128,000
Lobo MPSA: SWB + JT Pits
Archangel MPSA: Kay Tanda West then Kay Tanda East Pits
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The Probable Ore Reserve includes high-grade ore of 0.75Mt @ 4.0 g/t Au, 9.2 g/t Ag, or 4.2 g/t Au (incl. Ag credits) containing 100,000 oz Au (incl. Ag credits).
Table 5: Batangas Gold Project Ore Reserves (High-Grade), JORC 2012, June 2016
Deposit / Open Pit(s) Ore Reserve Category
Tonnes Au g/t Au Oz Ag g/t
Ag Oz Au Eq g/t
Au Eq Oz
South West Breccia Probable 164,000 6.7 35,000 1.8 9,000 6.7 35,200
Japanese Tunnel Probable 7,000 5.1 1,000 11.7 3,000 5.2 1,200
Total Lobo MPSA Probable 171,000 6.6 36,000 2.2 12,000 6.6 36,000
Kay Tanda West Probable 501,000 3.4 54,000 12.6 203,000 3.5 57,000
Kay Tanda East Probable 74,000 2.8 7,000 1.8 4,000 2.8 6,600
Total Archangel MPSA Probable 576,000 3.3 61,000 11.2 208,000 3.4 64,000
Total Batangas Project Probable 746,000 4.0 97,000 9.2 220,000 4.2 100,000
Metallurgy and Processing:
Results from metallurgical testing (at ALS, managed by Como Engineers) on composite samples from the South West Breccia (SWB)/ Japanese Tunnels (JT) and Kay Tanda West (KTW) and Kay Tanda East (KTE) Indicated Resources have been incorporated into PFS cost inputs, metallurgical parameters and CIL recoveries summarised in table 6 below.
Table 6: Batangas Gold Project PFS processing cost inputs and metallurgical parameters and recoveries
PFS METALLURGICAL PARAMETERS Unit SWB Ox -Tr SWB Fresh KTW Oxide KTW Trans KTW Fresh
Tonnage Rate t/h 12.5 12.5 32.3 32.3 32.3
Au Resource Grade g/t 7.3 6.2 2.7 2.8 3.3
Au Recovery at Resource Grade % 85.6 85.6 94.4 91.2 91.3
Ag Recovery at Resource Grade % 59.7 43.4 68.5 55.2 64.1
Leach Feed P80 µm 45 45 106 106 106
Design Bond Work Index kWhr/t 21.1 21.1 12.8 12.8 12.8
Power kW/hr 778 778 872 872 872
Abrasion Index 0.21 0.18 0.07 0.02 0.05
Leach Reagents NaCN kg/t 0.96 0.96 0.90 1.26 1.79
PFS OPERATING COSTS SWB Ox -Tr SWB Fresh KTW Oxide KTW Trans KTW Fresh
COST AREA $/tonne $/tonne $/tonne $/tonne $/tonne
GENERAL AND ADMINISTRATIVE $0.98 $0.98 $0.38 $0.38 $0.38
TRAVEL AND ACCOMMODATION $0.35 $0.35 $0.13 $0.13 $0.13
PROCESS and MAINTENANCE LABOUR $4.82 $4.82 $1.87 $1.87 $1.87
REAGENTS and OPERATING CONSUMABLES $13.59 $13.13 $9.63 $9.35 $11.67
POWER $11.92 $11.92 $5.17 $5.17 $5.17
MAINTENANCE $3.38 $3.38 $1.31 $1.31 $1.31
TOTAL $35.04 $34.58 $18.49 $18.21 $20.53
The SWB ore requires a fine grind size to liberate gold of 45 micron and a 48 hour leaching time. Consequently SWB ore is processed at rate equivalent to 100,000 tonnes per annum at an average processing cost of A$ 34.75/t.
The increased recoveries from KTW at a coarser, 106 micron grind and 24 hour leaching time allow for a processing rate of up to 250,000 tonnes per annum. Consequently processing costs for KTW are much lower at A$ 18.59/t.
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The processing plant, to be located at Lobo, includes a preliminary Carbon-in-Leach (CIL) circuit designed by Como Engineers (see Figure 4 below). The cost estimates for the CIL processing plant encompass the following:
Primary crushing via jaw crusher
2 stage grind via SAG and Ball mills
Hydro-cyclone classification
Standard CIL circuit comprising 1 leach tank and 6 adsorbers.
48hrs residence time SWB/JT and 24 hours for KTW/KTE
2.0 t pressure Zadra elution circuit including electrowinning and smelting
100kg hr carbon regeneration kiln
Tailings detoxification circuit via the Inco process
Tailings thickener for water recovery
Reagents handling and storage
Air services
Water services
Figure 4: Batangas Gold Project, planned processing plant layout
Process plant residues will be detoxified, thickened then gravity fed to a Residue Storage Facility (RSF) close to the processing plant (See Figure 2).
The estimated capital cost of the processing plant is A$ 11.4 million, including direct costs of A$ 9.6 million and EPCM costs of A$ 1.8 million, as summarized in Table 7 below.
CIL Tanks
Conveyor
2 stage crusher
2 stage grind SAG and Ball mills
ROM bin
Thickener
Offices/admin.
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Table 7: Batangas Gold Project PFS capital cost estimates
SUMMARY
MATERIALS & EQUIPMENT
LABOUR FREIGHT SUB-TOTAL
EPCM $0 $1,758,800 $0 $1,757,800
GENERAL $591,000 $0 $0 $591,000
ELECTRICAL $954,700 $409,200 $5,200 $1,369,100
PRIMARY CRUSHING $847,400 $81,600 $13,100 $942,100
GRINDING $1,854,500 $198,200 $10,000 $2,062,800
LEACHING $1,148,500 $170,100 $21,800 $1,340,300
ELUTION, GOLDROOM, REGENERATION $1,506,600 $70,100 $9,000 $1,585,700
RESIDUE $924,100 $51,900 $4,800 $980,800
REAGENTS $324,100 $56,200 $7,900 $388,200
SERVICES $290,900 $47,100 $10,200 $348,300
TOTAL $8,441,800 $2,842,200 $82,000 $11,366,000
Contingency of 5% is added to all capital costs in the financial model.
Capital and operating cost estimates for the processing plant are to an accuracy of +/-25%.
Civils, Infrastructure and Other Costs
It is anticipated a total of 193 personnel will be employed in the Batangas operation, including all mining, processing and other personnel. This includes 190 personnel from the local area and elsewhere in the Philippines, and 3 senior expatriates.
Accommodation for the workforce will be in the nearby Lobo township, with transport by Company bus to the Lobo mine and processing site within 2km to 3km of Lobo or the Archangel mine site approximately 12km east of the Lobo. Site offices and other administration facilities will be shared with the Lobo processing plant, with the exception of mining related facilities.
Permanent access roads will be established to the Lobo and Archangel sites totaling approximately 9km and the existing roads will be refurbished from Lobo to the Lobo mine and processing plant access and to the Archangel mine access, a total distance by road of 15km.
Power generation for the processing plant and associated infrastructure will be via a leased diesel generating facility with 1.3 megawatt generating capacity.
A residue storage facility (RSF) will be established close to the Lobo processing plant with the initial lift catering for 2 years production then a second lift for the remaining 5 years of the initial production plan. A preliminary design of the RSF and other water diversion and siltation control structures have been completed by ATC Williams and earthworks costings produced and compiled by Crystal Sun Consulting.
The RSF will utilise thickened tailings storage methodology, will be lined (HDPE liner) and built to worlds-best-practice environmental and seismic standards. Discharging tailings will be from two discharge points towards the southeast of the process plant. This presents a short distance for pumping thickened slurry. The direction of discharge will be downhill, resulting in a sloping, water shedding operating and final tailings surface. A decant pond will be established immediately below the RSF and potentially contaminated water will be removed from the RSF and settled in the decant pond. Excess water in the decant pond will be treated in order to exceed (be lower than) Philippines discharge standards. The RSF will be capped and rehabilitated with native and agricultural use vegetation at completion of the project.
In addition to the RSF, other water diversion facilities and siltation control facilities will be established at both Lobo and the Archangel MPSA mining areas. These structures are costed as summarised in table 8 below:
Table 8: Batangas Gold Project civil works estimates for the RSF, other water diversion facilities and siltation control facilities
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CIVIL WORKS PRELIMINARY ESTIMATE AUD USD
LOBO MPSA
SWB ROADS 1,253,100 914,000
SWB DRAINS 430,500 314,000
SWB PLANT PAD / ROM / LAYDOWN 878,800 641,000
SWB RSF EMBANKMENT 1,942,700 1,417,000
SWB DECANT POND 486,700 355,000
SWB WASTE & SILT DAMS 139,800 102,000
SWB PAVEMENT 364,700 266,000
SWB DECANT POND HDPE LINER 756,800 552,000
SUB-TOTAL LOBO/SWB 6,253,000 4,561,000
ARCHANGEL MPSA
KTA ROADS 1,569,800 1,145,000
KTA DRAINS 464,800 339,000
KTA MINE PAD / LAYDOWN / STOCKPILE 111,000 81,000
KTA WASTE & SILT DAMS 163,100 119,000
KTA PAVEMENT 995,300 726,000
SUB-TOTAL ARCHANGEL/KAY TANDA 3,304,000 2,410,000
TOTAL 9,557,000 6,971,000
Figure 5: Batangas Gold Project, Lobo site, planned mining, processing and associated infrastructure
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Capital Costs
The capital expenditure required to first gold production totals A$ 22 million (US$ 16.2 million), including initial land access costs, processing plant contingency, value added taxes (VAT) and duties, net of vendor payments and infrastructure residual value as summarised in table 9 below. Financing costs are not included.
The sustaining capital life of mine totals A$ 6.3 million (US$ 4.6 million), including Archangel roads and earthworks, additional RSF lift and mine closure rehabilitation (FMRDP).
Table 9: Batangas Gold Project PFS pre-production and sustaining capital cost estimates Capital Cost Estimate Pre Production Sustaining Pre Production Sustaining
A$ 000's A$ 000's US$ 000's US$ 000's
Land Access 2,285 1,680 -
Processing Plant inc. Contingency 11,366 In Opex 8,357 In Opex
Site Infrastructure Residue Storage Facility 2,346 1,315 1,725 967
Site Preparation Earthworks 2,542 3,278 1,869 2,410
Building Construction and Fitout 918 - 675 -
Vehicles and Mobile Equipment 978 - 719 -
Power Connection (Diesel, lease) 351 - 258 -
Contingency 1,039 764 -
Mine Rehabilitation (FMRDP) 1,502 - 1,104
Total Development Capex 21,825 6,095 16,048 4,481
VAT and Duties 1,310 127 963 93
Total Project Development and Sustaining Capital 23,135 6,222 17,011 4,575
Net payments and capital cost recovery credits 1,168 859 0
Total Capital 21,967 6,222 16,152 4,575
This capital expenditure estimate assumes that the majority of plant and equipment is purchased new. There is an opportunity of purchasing refurbished second hand equipment and/or the opportunity to carry out a higher proportion of construction locally using the high quality engineering and construction facilities at nearby Batangas.
Operating Costs
A breakdown of the C1 operating cost estimate, totaling A$ 999 per recovered ounce (US$ 735 /oz) (incl. Ag credits) for the Batangas Gold Project life of mine, are presented below:
Table 10: Batangas Gold Project PFS operating costs summary
Life of Mine Operating Costs per Tonne A$/t processed US$/t processed
Mining and Rehandle 49.83 36.64
Plant and Processing 20.81 15.30
Technical & Administration 6.16 4.53
Total 76.79 56.46
Life of Mine Operating Costs per Ounce Recovered A$ / Oz equ. US$ / Au equ.
Mining and Rehandle $621 $456
Plant and Processing $259 $191
Technical & Administration $77 $56
Total Site Costs/oz $957 $703
Additional costs including royalties, refining and net silver credits $43 $31
Total C1 Costs / oz (incl. silver credits) $999 $735
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Permitting
The key permitting requirements to allow development of the Batangas Gold Project are the grant of the Environmental Compliance Certificate (ECC) by the Environmental Management Bureau (EMB) and approval of the Declaration of Mining project Feasibility (DMF) by the Secretary of the Department of Environment and Natural Resources (DENR) of the Philippines government. The key steps to complete permitting of the Batangas Gold Project are as follows:
i) Environmental Compliance Certificate (ECC) – final review of the Environmental Impact Statement (EIS) submitted 10 June 2016, by the EMB Review Committee then approval of the ECC by the EMB.
ii) Re-endorsement of the Project by the Lobo Municipal Council, to go with the maintained endorsement of the 10 Barangay (township) councils. Also seek Provincial government endorsement.
iii) Declaration of Mining project Feasibility (DMF) – additional technical work including geotechnical drilling during 2016 then re-submit DMF to Mines and Geosciences Bureau (MGB), for final technical review and recommendation to be signed by the Secretary of the DENR.
iv) Secure land agreements (costed in PFS).
v) Regional and other local permits.
vi) Final approval (DMF signed, all local permits, landholder agreements).
The Company has concluded that it has a reasonable basis for concluding that given the stage of development of the Batangas Gold Project, that the granting of the ECC is a question of due process and timing, rather than of substance. Following the issue of the ECC and two of the three LGU endorsements, the DMF will be elevated from the regional office of the MGB where it was submitted with supporting documentation in March 2014, to the central office of the MGB for final assessment and approval and signing by the Secretary of the DENR.
Conclusions and Next Steps
Based on the PFS demonstrating a potential low-cost, viable Batangas Gold Project development, the BJV will now seek to complete the additional technical work required to finalise the Definitive Feasibility Study (DFS).
In parallel with completion of the DFS, the BJV will seek to complete all final permits and approvals to allow development of the Project.
The BJV partners will continue financing discussions with identified debt providers that have already expressed interest in funding development of the Project.
The opportunity exists to increase reserves and confirm an expanded 10 year mining plan through drilling (subject to the approval of the MGB) and conversion of Inferred Resources in the vicinity of optimised open-pits and to also test immediate high-grade gold targets within the 14 km of identified epithermal structures on the Lobo MPSA.
______________________________________________________________________________________ For further information about Red Mountain please visit www.redmm.com.au or contact: Company Investors Media Jon Dugdale Matt Birney Managing Director Birney Corporate (+61) 402 298 026 (+61) 419 217 090 (+61) 8 9226 5668 (+61)8 9226 5668 E : [email protected] E : [email protected] _______________________________________________________________________________________________
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About Red Mountain Mining Limited and the Batangas Gold Project
Red Mountain Mining Ltd (ASX:RMX) is a gold exploration and development company which listed on the ASX in September 2011. The Company’s strategy is to unlock the potential of ‘under-developed’ gold and polymetallic projects in the greater Asian region by introducing Australian exploration and mining methods and improving efficiencies to gain significant exploration and production upside.
The Company holds a direct and indirect contractual right interest in tenements in the Philippines that contain significant gold resources totalling Indicated and Inferred 6.19 million tonnes at 2.2 g/t Au for 444,000oz Au (JORC 2012, see ASX announcement 30 June 2014).
The Company’s objectives include development of gold production at the Batangas Gold Project, while continuing to focus on increasing the mineral resource base.
The Company announced a new Strategic Financing Agreement (the Agreement) with Bluebird Merchant Ventures Ltd (BMV) on 15 October 2015. The Agreement includes a two stage funding arrangement totaling up to USD5.5M, that will earn BMV up to 50.1% of wholly owned subsidiary, Red Mountain Mining Singapore Ltd (RMMS), that holds the Company’s interests in the Batangas Gold Project in the Philippines, with the project to operate under an Incorporated Joint Venture (Batangas JV).
Stage 1 funding of USD1.7M under the Agreement has earned BMV 25% of RMMS and has allowed the JV to complete a Pre-Feasibility Study (PFS) (see this ASX release, 15 June 2016). Based on the results of the PFS confirming low capital and operating costs and recovery of over 116,000 ounces of gold during the initial 7 years of a 10 year production plan, the JV will now proceed to complete a Definitive Feasibility Study (DFS) on the project.
Final permitting to allow development of the Batangas Gold Project is being progressed through the Philippines Government approval process.
The Company is also on the lookout for other advanced gold development and exploration opportunities, with a particular focus on Australia, which will be reviewed on a continuous basis.
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APPENDIX 1: Forward Looking and Cautionary Statements, Competent Persons Statements
Cautionary Statement
The Probable Ore Reserves and the production targets in the PFS referred to in this announcement are derived from optimised and designed open pits based on Indicated Resources only. The Probable Ore Reserves provide 100% of the total planned production schedule and financial projections. There is no dependence of the outcomes of the PFS on non‐Ore Reserve material contained within the optimised and designed open pits. All cash flows are undiscounted, unless otherwise stated, and are not subject to inflation/escalation factors. The PFS has been prepared to an overall level of accuracy of approximately +/- 25%. The production targets referred to in this announcement are preliminary and there is no certainty that the production targets or the forecast financial information derived from the production targets, will be realised. All material assumptions underpinning production targets or forecast financial information derived from production targets continue to apply and have not materially changed. The Company has concluded that it has a reasonable basis for providing forward looking statements included in this announcement, including with respect to any production targets and financial estimates, based on the information provided in this announcement .
Competent Person Statement
The information in this report relating to Ore Reserves is based on information compiled by Dallas Cox of Crystal Sun Consulting, Mr Cox is a Member of The Australasian Institute of Mining and Metallurgy. Mr Cox has sufficient experience that is relevant to the style of mineralisation and type of deposits under consideration and to the activity currently being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code or Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Cox consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.
The historic information in this report relating to Mineral Resources is based on information compiled by Mr Jon Dugdale who is a Fellow of the Australasian Institute of Mining and Metallurgy and has sufficient exploration experience which is relevant to the various styles of mineralisation under consideration to qualify as a Competent Person as defined in 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Dugdale is a full time employee and Managing Director of Red Mountain Mining Ltd. The Company confirms that the form and context in which the information is presented has not been materially modified and it is not aware of any new information or data that materially affects the information included in the relevant market announcements, as detailed in the body of this announcement. All material assumptions and technical parameters underpinning the Mineral Resource estimates continue to apply and have not materially changed.
Forward Looking Statements
This announcement contains certain forward looking statements. These forward looking statements are not historical facts but rather are based on Red Mountain Mining’s current expectations, estimates and projections about the industry in which Red Mountain Mining operates, and beliefs and assumptions regarding Red Mountain Mining’s future performance. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “potential” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of Red Mountain Mining, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Red Mountain Mining cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of Red Mountain Mining only as of the date of this report. The forward looking statements made in this report relate only to events as of the date on which the statements are made. Red Mountain Mining will not undertake any obligation to release publicly any revisions or updates to these forward looking statements to reflect events, circumstances or unanticipated events occurring after the date of this report except as required by law or by any appropriate regulatory authority.
This announcement has been prepared in compliance with the JORC code (2012) and the current ASX listing rules.
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APPENDIX 2: JORC Code 2012 Table 1 Appendix 1: JORC Code, 2012 Edition – Table 1 Section 1a – Lobo Sampling Techniques and Data (Criteria in this section apply to succeeding sections 2a, 3a and 4)
Criteria JORC Code explanation Commentary
Sampling techniques
Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.
Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.
Aspects of the determination of mineralisation that are Material to the Public Report.
In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.
The nature of samples from the Lobo Deposit are diamond drillhole core and trench (Costean) samples.
Trenches (Costeans) through colluvial cover were excavated to bedrock and sampled at the base of the trench in continuous cut channels with samples aggregated over measured 0.5m to 1.0m intervals. Diamond drillholes are assayed at one to two metre intervals downhole.
Trenching samples, typically weighing less than 3kg, were transported to Intertek Laboratories in Manila, the Philippines, for fire assay.
At least 2kg sample was pulverised and a 50 gram charge fire assayed with AAS finish for Gold (Au) and a range of 37 elements via Multiple determination by ICP-OES (following four acid digest [HCl/HNO3/HClO4/HF] with volumetric finish) assay including Silver (Ag), Copper (Cu), Lead (Pb) and Zinc (Zn).
Drilling techniques
Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).
Diamond core drilling has been undertaken using triple tube, ranging from HQ size to NQ at depth.
Drill sample recovery
Method of recording and assessing core and chip sample recoveries and results assessed.
Measures taken to maximise sample recovery and ensure representative nature of the samples.
Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.
Core sample recoveries are routinely measured and recorded in spreadsheets and the database.
Triple tube drilling has been undertaken in order to maximise core recovery. Samples split half core perpendicular to strike of structures.
Recovery maximised (100%). No sample bias is present.
Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.
Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography.
The total length and percentage of the relevant intersections logged.
Logging of geology, alteration and geotechnical aspects have been recorded in drilling logs for diamond core drilling.
Logging is qualitative. All drill core is photographed.
The entire interval drilled / trenched has been logged.
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Criteria JORC Code explanation Commentary
Sub-sampling techniques and sample preparation
If core, whether cut or sawn and whether quarter, half or all core taken.
If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry.
For all sample types, the nature, quality and appropriateness of the sample preparation technique.
Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.
Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.
Whether sample sizes are appropriate to the grain size of the material being sampled.
Diamond core is half cut, predominantly at one and two metre intervals.
Trenches have been sampled using continuous channel sampling at one metre intervals.
Diamond assays appear to be sampled appropriately according to industry standards.
Field duplicates have been regularly inserted into assay job lots.
Sample sizes at >2kg are well in excess of requirements appropriate to the grain size of gold that has been shown by mineragraphy to be generally less than 50 micron.
Quality of assay data and laboratory tests
The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.
For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.
Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established.
All gold determinations were carried out by standard 50g fire assay at McPhar Geoservices (Philippines) Inc. in Manila from 2003 to 2004, then by Intertek Testing Services Philippines, Inc. in Muntinlupa, Metro Manila from 2011 onwards.
The assaying and laboratory procedures appear to follow standard industry convention.
No geophysical tools have been used.
McPhar laboratory inserts internal blanks and standards every 30th sample. Every tenth sample and samples with "anomalous" results, i.e., samples having abnormally high or low results within a sample batch, are routinely checked. Drill core check samples were also conducted; one sample in every 20 samples from LB 01 to LB 15 was assayed at Intertek Testing Services in Indonesia to ascertain reliability of results from the primary laboratory. For the latter 10 drill holes (LBDD008, LBDD010, and LB58-11 to LB65-11), external blank and certified standard were inserted in every 20-25 samples, or less for batches with <20 samples. Standard results are routinely checked to ensure values are within tolerance and the whole batch submitted for reanalysis if this is exceeded.
Diamond drillholes have a blank and certified standard (CRM) inserted at a rate of 1 per 20 to 25 samples.
Verification of sampling and assaying
The verification of significant intersections by either independent or alternative company personnel.
The use of twinned holes.
Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.
Discuss any adjustment to assay data.
Significant intersections reported by field personnel, verified by competent person.
No twinning of drillholes has been completed at this stage.
Primary data logged on paper then data entered into the database, verified by Chief Geologist and stored in electronically, with regularly back-ups. Data is verified using established company protocols.
Assays have not been adjusted.
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Criteria JORC Code explanation Commentary
Location of data points
Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.
Specification of the grid system used.
Quality and adequacy of topographic control.
Drillholes and Trenches (Costeans) accurately surveyed using Nikon Total Station DTM-332 survey equipment.
Drillhole and Trench (Costean) locations surveyed in UTM WGS84 51N grid, converted to local Lobo grid.
Topographic surveys were completed using Total Station DGPS. Control stations were set by an independent surveyor (McDonald Consultant, Inc.) using 2 DGPS units (one as a base station for correcting diurnal variations) and a total station for where they could not survey with GPS under thick cover. These were tied to known government control stations.
Data spacing and distribution
Data spacing for reporting of Exploration Results.
Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.
Whether sample compositing has been applied.
Drillhole spacing ranges from 12.5m to 50m in both strike and dip extent.
The average drillhole data spacing is 25m by 25m across the Lobo Deposit; however portions of the resource have been drilled to 12.5m by 12.5m.
Trenches (Costeans) excavated every 10m along the strike of identified mineralisation.
Samples have been composited to a length of one metre for use in the resource estimation.
Orientation of data in relation to geological structure
Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.
If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.
Drillholes and trenches (Costeans) are typically orthogonal to the mineralisation.
There is no known bias in the orientation of the drilling compared to the mineralization.
Sample security
The measures taken to ensure sample security. Samples secured by senior personnel on site and transported directly by company vehicle to Intertek Laboratories, Manila, the Philippines.
Audits or reviews
The results of any audits or reviews of sampling techniques and data.
Internal reviews regularly completed but no external audits carried out to date.
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Section 2a – Lobo Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.)
Criteria JORC Code explanation Commentary
Mineral tenement and land tenure status
Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.
The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.
MPSA‐177‐2002‐IV (Mineral Production and Sharing Agreement) is located in the Lobo Municipality, Batangas Province, Philippines. It is held by Egerton Gold Phils Inc. and is managed by MRL Gold Inc, a wholly owned subsidiary of Red Mountain Mining Australia (RMM) through a Technical Services Agreement. MRL Gold Inc also owns 40% of Egerton Gold.
In the way of royalty, MRL Gold Inc is to pay Egerton Gold Phils Inc a one off payment of 1 Million USD at the start of commercial production from a mining operation anywhere within the Egerton Gold Phils Inc tenements in the Batangas Region and a 1% NSR royalty on all metals produced within the Egerton tenements.
Declaration of Mining Feasibility and Environmental Compliance Certificate will be required to be approved by the Philippines Mines and Geosciences Bureau of the Department of Energy and Natural Resources before the company has a license to operate.
Exploration done by other parties
Acknowledgment and appraisal of exploration by other parties.
Previous exploration was conducted by Mindoro Resources Ltd including extensive drilling, surface geochemistry, geophysics, mapping and mineral resource estimation to JORC 2004 and NI 43-101 standards.
Geology Deposit type, geological setting and style of mineralisation.
The gold mineralisation that is the target of the exploration program is porphyry related epithermal gold mineralisation hosted by intermediate to felsic volcanic rocks and intrusions.
The style of intermediate sulphidation epithermal gold mineralisation identified at Lobo Gold Project is the Quartz-Barite-Sulphide vein/lode style.
Drill hole Information
A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:
easting and northing of the drill hole collar
elevation or RL (Reduced Level – elevation above sea level in metres) of the drill hole collar
dip and azimuth of the hole
down hole length and interception depth
hole length.
If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.
See Section 1, Drillhole/Trenching locations, RL, dip and azimuth, length.
Detailed listings of exploration results are not relevant as the deposits have Mineral Resource estimates.
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Criteria JORC Code explanation Commentary
Data aggregation methods
In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated.
Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.
The assumptions used for any reporting of metal equivalent values should be clearly stated.
Exploration results are well presented with length weighted grades.
Higher grade intercepts are highlighted and reported within the aggregate intersection.
No high grade cuts have been applied. A lower grade cut-off of 1g/t Au has typically been applied to significant intersections.
No metal equivalent values have been used.
Relationship between mineralisation widths and intercept lengths
These relationships are particularly important in the reporting of Exploration Results.
If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported.
If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg ‘down hole length, true width not known’).
Drilling and trenches (Costeans) have been drilled/excavated and sampled as close to orthogonal to the strike and dip of the lode structures as possible and, as such, the intersection lengths are a close approximation of true width.
Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.
Not relevant – Mineral Resource generated.
Balanced reporting
Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.
All significant drilling and trench exploration results reported
Other substantive exploration data
Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.
Mineragraphy undertaken on samples from on SWB and Trench 7 indicates that gold is “free milling” or associated with sulphide minerals indicating that there is no significant supergene enrichment.
Metallurgical leaching results (release, 24/01/2014) for diamond core from the Lobo Gold Project indicates that a fine grind size of around 40 microns produces high total gold recoveries of up to 97% (with 48 hours of leaching).
Further work The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large-scale step-out drilling).
Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.
Drilling to be continued to test identified mineralised zones on a 20m x 20m spacing.
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Section 3a – Lobo Estimation and Reporting of Mineral Resources (Criteria listed in section 1, also apply to this section.)
Criteria JORC Code explanation Commentary
Database integrity
Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.
Data validation procedures used.
To ensure correctness/accuracy of data, random checking of certain intervals is done wherein the physical and electronic data are compared. Also, data is plotted in spreadsheets, Mapinfo and Surpac to check for inconsistency errors.
After the data is key-punched, the assigned geologist reviews the file before submitting to the database section for compilation. The database staff likewise check the data and correlate it to existing data, i.e. – plotting on cross sections.
Site visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
If no site visits have been undertaken indicate why this is the case.
The resource estimate has been compiled on behalf of RMM by resource consultant Optiro, supervised by the RMM Competent Person, Mr Jon Dugdale. Mr Dugdale is a Director of RMM and has visited the Lobo Project many times. Mr Dugdale has examined drillcore and trench and drill core sampling techniques. The Intertek assay laboratory has also been visited.
Geological interpretation
Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.
Nature of the data used and of any assumptions made.
The effect, if any, of alternative interpretations on Mineral Resource estimation.
The use of geology in guiding and controlling Mineral Resource estimation.
The factors affecting continuity both of grade and geology.
The confidence in the geological interpretation of the Lobo Gold Project is considered good. The global geological setting is a high-level expression of a copper-gold porphyry system, cross-cut by large extensional faults and overlaid by andesitic tuff and limestone.
Geological controls and relationships were used to define sub-domains. Key features are the presence of quartz breccia veins for the main mineralisation zones, and argillic alteration for low grade halos.
Wireframes were created for each of the separate lodes based on lithology and grade (1 g/t nominal cutoff).
Dimensions The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.
The Lobo Gold Project is sub-divided into three areas, Southwest Breccia (SWB), Japanese Tunnels (JT) and Western Drift (WD). SWB has an approximate strike length of 150m, approximate width of 60m and vertical extent of 220m. JT has an approximate strike length of 150m, approximate width of 65m and vertical extent of 100m. WD has an approximate strike length of 450m, approximate width of 40m and vertical extent of 270m.
Estimation and modelling techniques
The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.
The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.
The assumptions made regarding recovery of by-products.
Grade estimation using Localised Uniform Conditioning (LUC) was undertaken at the Lobo Gold Project. LUC is a “change of support” estimation method which provides a realistic interpretation of the actual grades and tonnes which will be achieved by mining at a minimum Selective Mining Unit (SMU) size of 2mY x 2mX x 2.5mZ. This SMU size is selected by RMM as being representative of the small equipment size which is anticipated to be used during mining.
The average grade of the LUC models were compared to average grades of Ordinary Kriged (OK) models at a cutoff of zero ppm Au. There was near
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Criteria JORC Code explanation Commentary
Estimation of deleterious elements or other non-grade variables of economic significance (eg sulphur for acid mine drainage characterisation).
In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.
Any assumptions behind modelling of selective mining units.
Any assumptions about correlation between variables.
Description of how the geological interpretation was used to control the resource estimates.
Discussion of basis for using or not using grade cutting or capping.
The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available.
perfect correlation between the OK and LUC models in terms of tonnes, grade, and total contained metal.
Surpac software was used to estimate three elements; Au, Ag, Cu. Drillhole sample data was flagged using lode codes generated from three dimensional mineralisation wireframes and oxidation surfaces. Sample data was composited per element to a one metre downhole length using a best-fit method. Intervals with no assays were excluded from the compositing process. The influence of extreme sample outliers was reduced by top-cutting where required. The top-cut levels were determined using a combination of top-cut analysis tools (grade histograms, log probability plots and CVs). Top-cuts were reviewed and applied on a domain basis. All lodes were estimated using hard boundaries.
Variography was undertaken on all elements. Variogram orientations were controlled by the plunge of mineralisation within the plane of the lodes. Variograms were of reasonable quality for the main domains, but poor in domains with few samples. These domains which had low numbers of samples have been appropriately flagged as inferred.
No assumptions have been made regarding recovery of any by-products. No estimation of deleterious elements or non-grade variables was carried out.
For the ore domains, a minimum of 16 samples were required for a single block estimate and a maximum of 32 samples to limit grade smoothing.
There was poor correlation between all of the three elements modelled (Au, Ag, or Cu). Each element has been estimated in isolation.
Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.
Tonnages have been estimated on a wet basis. No dry tonnage conversions have been undertaken.
Cut-off parameters
The basis of the adopted cut-off grade(s) or quality parameters applied.
Wireframes were constructed at 1g/t Au in the high grade vein zones and 0.5g/t Au in the argillic altered haloes.
Mining factors or assumptions
Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.
No assumptions have been applied regarding mining method, possible mining method or possible mining cut-off.
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Criteria JORC Code explanation Commentary
Metallurgical factors or assumptions
The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.
No metallurgical assumptions or factors have been applied to the Mineral Resource or the informing data.
Environmental factors or assumptions
Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.
No environmental assumptions or factors have been applied to the Mineral Resource or the informing data.
Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit.
Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.
Bulk density determinations have been undertaken by McPhar Geoservices (Philippines) Inc. in Manila, using wet determination methods. Analysis of the bulk density results were applied to the Mineral Resource estimate.
Classification The basis for the classification of the Mineral Resources into varying confidence categories.
Whether appropriate account has been taken of all relevant factors (ie relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).
Whether the result appropriately reflects the Competent Person’s view of the deposit.
Classification of the Mineral Resource was primarily based on confidence in assayed grade, geological continuity, and the quality of the resulting kriged estimates. Geological confidence is supported by extensive trench exposures and drillhole logging.
Confidence in the kriged estimate is associated with drillhole coverage, analytical data integrity, and kriging efficiency. Specifically, kriging efficiencies above 50% were considered appropriate for an Indicated Mineral Resource category of classification.
Regarding drillhole spacing, an Indicated Mineral Resource category was considered appropriate where there was a drill spacing of about 12.5 m to 25 m along drill lines and a line spacing of approximately 25 m. An Inferred Mineral Resource category was considered where there was a drill spacing of about 25 m to 50 m along drill lines and
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Criteria JORC Code explanation Commentary
where the line spacing was around 50 to 100m.
The Inferred Resources are extrapolated to a maximum of 50 m below drilling. The amount of Inferred Resource that is extrapolated below the drilling consists of less than 25% of the total Inferred Resource.
The input data is comprehensive in its coverage of the mineralisation and does not favour or misrepresent in-situ mineralisation. The definition of the mineralised zones is based on geological and mineralisation continuity, producing a robust model of mineralised domains. Infill drilling supports the interpretation.
The validation of the block model shows good correlation of the input data to the estimated grades.
The Mineral Resource estimate appropriately reflects the view of the Competent Persons.
Audits or reviews
The results of any audits or reviews of Mineral Resource estimates.
No external audit has been carried out on the most recent Lobo Mineral Resource estimate; however, Optiro did collaborate and seek sign-off from RMM.
Discussion of relative accuracy/ confidence
Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.
The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.
These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.
The relative accuracy of the Mineral Resource estimate is reflected in the reporting of the Mineral Resource as per the guidelines of the 2012 JORC Code.
The statement relates to global estimates of tonnes and grade.
No production data is available.
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Section 1b – Archangel Sampling Techniques and Data (Criteria in this section apply to succeeding sections 2b, 3b and 4.)
Criteria JORC Code explanation Commentary
Sampling techniques
Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.
The nature of samples from the Archangel Deposit are reverse circulation (RC) chips and diamond drillhole core. A total of 53 diamond drillholes provided a total of 10464.2m of core. RC drilling 160 holes produced a total of 18,294m. Diamond drilling accounts for 36% of the drillhole data in the deposit.
Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used
RC chips are routinely bagged at one or two metre intervals throughout the whole hole. Diamond drillholes are assayed at one to two metre intervals throughout the whole hole.
Aspects of the determination of mineralisation that are Material to the Public Report. In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information
Reverse circulation and diamond drillholes were used to obtain one and two metre samples that were reduced down to a 50g fire assay with AAS finish according to normal industry standard.
Drilling techniques Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).
Reverse circulation drillholes are of five and a quarter inch in diameter. Diamond drillholes commence at PQ size then reduce to HQ and NQ at depth.
Drill sample recovery
Method of recording and assessing core and chip sample recoveries and results assessed
Core recovery measured in the opened split tube and later recorded in a spreadsheet. Previous RC percussion drilling at Kay Tanda, has a calculated average recovery across all depths of 77.06%. The average core recovery of the 2006-2007 diamond drill program was 97.91%. Some 88.2% of the core runs had 100% recovery. Average recoveries of all diamond holes are above 90%, with only 4 drillholes with recoveries of just under 95%. Recovery data of Avocet shows an average core recovery of 98%. All drillholes have recoveries above 90% and are thus considered very good. Core recovery for the 10 Red Mountain Mining Limited (RMM) drillholes drilled in 2012 was at 92-99% per hole or 96.87% across all holes. Recovery is highest in the HQ core recorded at 98.79% average and lowest in NQ at 92.97%.Overall recovery rate for all 53 diamond drillholes is 10,174.07m out of 10,431.85m equivalent to 97.92%
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Criteria JORC Code explanation Commentary
Measures taken to maximise sample recovery and ensure representative nature of the samples
The drilling Contractor takes all steps to ensure that it produces and collects a percentage of core as the rock mass will allow, using for that purpose internationally accepted drilling methods and the best tools available. For each core drilling run, of a maximum of 1.5m in P.Q., 1.5m in HQ and 3.0m in NQ. Recovery must exceed 95% of the interval to be considered acceptable, otherwise, the length of the subsequent drilling run is to be reduced by at least 50% until 95% core recovery is re-established. If at least 90% recovery is not re-established after 2 reduced drilling runs the Contractor will put the rig on standby and report the problem to the Company’s representative. Both parties will then discuss the core recovery problems and decide whether or not better recovery can be realistically expected or obtained.
Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.
None. Recovery is good across all lithologies or alteration type.
Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.
RC Drilling - Preliminary field logs for the RC percussion drillholes were conducted on site using washed and sieved RC chips to monitor lithologies as an aid to determining when to continue or terminate each drillhole. The data captured in the preliminary logs includes depth (from and to), lithology and comments. Detailed RC logging is done at the camp using the RC chip trays.
Diamond Drilling - The same format of geological logging sheets is used for the logging of diamond drill core. A detailed graphical log of each diamond drillhole is drawn. In addition to detailed geological logging of the core, each core box is photographed as a permanent record of the core before it is sampled. During the logging of diamond drill core, intervals of core which had undergone spear orientations were oriented to enable measurement of the orientation of faults, veins and fractures. The structural data for various types of veins were entered into an Excel spreadsheet. Core logging by RMM gathers physical data from the core recovered during drilling. Quick logging is done simultaneously with drilling for updating and daily reporting purposes. It also aims to monitor the progress of the drillholes during drilling. Logging standards are in accordance with best internationally accepted protocols.
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Criteria JORC Code explanation Commentary
Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography.
Logging includes both qualitative and quantitative descriptions of drill cores or RC chips. Logging includes setting of lithological boundaries, determining physical characteristics of the core (colour, grain size, oxidation, etc.), alteration determination, mineralisation determination, type of structures present and providing useful remarks that will aid in the accurate description of the rocks. All drill core is photographed before it is split/sampled.
The total length and percentage of the relevant intersections logged
100 % of core and rock chips have been logged.
Sub-sampling techniques and sample preparation
If core, whether cut or sawn and whether quarter, half or all core taken.
Diamond core is cut in half, predominantly at one and two metre intervals.
If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry.
The RC samples were split down to 1/8 volume by a Jones splitter, with the reduced samples bagged for analysis into pre-labelled, high density, polyethylene plastic bags.
For all sample types, the nature, quality and appropriateness of the sample preparation technique.
Both the RC and diamond samples appear to be sampled appropriately according to industry standards.
Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.
Trained employees were involved at all stages of the sampling, sample packaging and sample transportation process. All sampling conducted was supervised by a geologist who has logged the core in detail. The geologist marks the core as a guide to splitting to ensure that both halves are almost identical to each other. Sampling intervals are mostly at 1 metre to capture variability across the drillhole. During the cutting of core, where intersections of high grade or visible gold were known to occur, each individual piece of core was initially wrapped in plastic or foil and sealed with tape prior to cutting on the core saw to prevent breakage or contamination, and to prevent parts of the sample being washed away during core cutting. Broken or soft sections of the core were sampled by the geologists.
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Criteria JORC Code explanation Commentary
Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.
121 field duplicates were sampled by MNPI for the 2006-2007 drill program at Kay Tanda. The correlations of determination (R2) values for Au and Ag in the sets of field duplicates for RC samples were 0.92 and 0.93 respectively, and for Au in core samples was 0.94. The correlations for arsenic and the base-metals were better in the RC chips with R2 values of As (0.988), Cu (0.970), Zn (0.9955) and Pb (0.997). These correlations are considered good. QAQC reviews of the field duplicate data indicates that there has been no significant deviation in the McPhar Laboratories ability to precisely determine Au over the passage of time between the start of the drilling program and the end of the drilling program.
Whether sample sizes are appropriate to the grain size of the material being sampled.
No details of any study have been provided.
Quality of assay data and laboratory tests
The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.
The assaying and laboratory procedures appear to follow standard industry convention.
For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.
No geophysical tools have been used.
Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established.
For both RC and diamond drilling, a blank and certified standard were inserted in every lab job submission every 20-25 samples.
Verification of sampling and assaying
The verification of significant intersections by either independent or alternative company personnel.
Drillholes have been drilled in a number of directions and some intersections have been twinned.
The use of twinned holes. See above – some twinning has occurred.
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Criteria JORC Code explanation Commentary
Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.
All of the physical data are stored either at the head office or the Lobo field office. Electronic data entry is completed on site and backed-up on a regular basis with copies at the head office and a safety deposit box in a nominated bank. Data verification was done by Bailey in 2003 and 2005, by Groome in 2012, by Coupland in 2012 and 2013. A comprehensive review of previous exploration data was conducted through APEX Geoscience Australia Pty Ltd. Wes Groome, PhD, MAusIMM, of APEX visited the Lobo project site on October 18-22, 2012 to conduct site verification. Key outcrops and drill core intervals from 14 drillholes were investigated in this period. Datasets available include soil and rock chip geochemistry, detailed surface geology mapping, aeromagnetic, radiometric, topographic data, drillhole lithology and alteration logs, and drillhole assays. Results of verifications signify that the datasets and related information used to estimate mineral resources are considered adequate to meet industry standards.
Discuss any adjustment to assay data. Assay have not been adjusted except for values below detection limits, which were changed to negative values (e.g.; <0.05 = -0.05)
Location of data points
Accuracy and quality of surveys used to locate drillholes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.
Drillhole collar locations ad elevation are surveyed. Diamond drillholes are surveyed down hole using an Eastman single-shot survey camera and more recently a Camteq Proshot Dual digital multi-shot surveying instrument.
Specification of the grid system used. There is a local grid orientated NNE.
Quality and adequacy of topographic control. Topography is available in the form of Surpac digital terrain model or string file.
Data spacing and distribution
Data spacing for reporting of Exploration Results. Drillholes have been drilled on an approximate 50m grid with samples typically collected at 1m or 2m downhole intervals.
Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.
The average data spacing is 50m by 50m throughout the Archangel deposit. The Mineral Resource is only classified as Indicated where drill spacing is 40m by 40m or less. The remainder of the resource is classified as Inferred.
Whether sample compositing has been applied. Samples are composited to two metres for resource estimation.
Orientation of data in relation to geological structure
Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.
Drillholes are generally well orientated with regards to the nature of the mineralisation. Several orientations exist.
If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.
There is no known bias in the orientation of the drilling compared to the mineralisation. Several drilling orientations exist.
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Criteria JORC Code explanation Commentary
Sample security
The measures taken to ensure sample security. During drilling, a site supervisor was assigned permanently on site for each day and night shift. The site-supervisor over-saw the retrieval of the drill core from the core tubes, placement in core boxes, security strapping of the core boxes and transport to the field office. Core boxes at the drill rig were sealed by heavy-duty polyurethane plastic packing bands then transported to the Archangel Camp located some 1.5 to 2.0 km from the drill pad and then a further 17 km to the logging facility in the Lobo office. The officers and geologists assisted in ensuring the safety and security of the core boxes, especially those from mineralised zones during transport from the drill rig to the core storage area. The core storage and logging facility was under the supervision of a geologist at all times. This facility is within the grounds that house the office and personnel quarters, thus samples are not left unattended. Sample transport to analytical lab is always accompanied by a Company representative.
Audits or reviews The results of any audits or reviews of sampling techniques and data.
Several reviews have been carried out, most recently by Cube Consulting in 2013 and by Optiro in 2014.
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Section 2b – Archangel Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.)
Criteria JORC Code explanation Commentary
Mineral tenement and land tenure status
Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.
MPSA‐177‐2002‐IV (Mineral Production and Sharing Agreement) is located in Lobo Municipality, Batangas Province, Philippines. It is held by Egerton Gold Phils Inc. and is managed by MRL Gold Inc, a wholly owned subsidiary of RMM through a Technical Services Agreement. MRL Gold Inc also owns 40% of Egerton Gold. In the way of royalty, MRL Gold Inc is to pay Egerton Gold Phils Inc a one time payment of 1 Million USD on the start of commercial production from a mining operation anywhere within the Egerton Gold Phils Inc tenements in the Batangas Region and a 1% NSR royalty on all metals produced within the Egerton tenements.
The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.
The Archangel Project is covered by an approved MPSA which is in good standing. This has reached the completion of its final exploration period, wherein a “Final Exploration Report” has been submitted on March 30, 2014 to the Philippine Mines & Geosciences Bureau. This is currently under review.
Exploration done by other parties
Acknowledgment and appraisal of exploration by other parties.
There has been extensive exploration at Archangel by other parties, most recently by Avocet.
Geology Deposit type, geological setting and style of mineralisation.
The Archangel deposit occurs as a stockwork of quartz and quartz-carbonate-base metal veins and hydrothermal breccias hosted by andesitic volcanics and volcanoclastics generally overlying and intruding by dacitic and dioritic intrusions and dykes. Higher gold grades are associated with discrete steeply dipping veins within the hydrothermal breccia’s and close to the intrusive-volcanic contact. Some supergene enrichment occurs in the more oxidised zones near surface. Mineralisation is open to the northeast.
Drill hole Information
A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:
easting and northing of the drill hole collar
elevation or RL (Reduced Level – elevation above sea level in metres) of the drill hole collar
dip and azimuth of the hole
down hole length and interception depth
hole length.
Not relevant – deposit is at Mineral Resource status.
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Criteria JORC Code explanation Commentary
Data aggregation methods
In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually Material and should be stated.
Exploration results are well presented with length weighted grades.
Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.
Higher grade intercepts are highlighted and reported within the aggregate intersection.
The assumptions used for any reporting of metal equivalent values should be clearly stated.
No metal equivalent values have been used.
Relationship between mineralisation widths and intercept lengths
These relationships are particularly important in the reporting of Exploration Results.
If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported.
If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. ‘down hole length, true width not known’).
Exploration results commonly indicate they are measured as down hole length rather than true width.
Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.
Maps in plan view and cross sections are often used for presenting exploration results.
Balanced reporting Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.
Low grade intersections are reported along with high grades demonstrated well balanced reporting practices.
Other substantive exploration data
Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.
All meaningful data appears to be included on maps and plans such as soil and rock geochemistry.
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Criteria JORC Code explanation Commentary
Further work The nature and scale of planned further work (e.g. tests for lateral extensions or depth extensions or large-scale step-out drilling).
Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive
Areas of interest are clearly indicated on maps, along with current Mineral Resource tonnes and grade where relevant. Major geological units are also included.
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Section 3b - Estimation and Reporting of Mineral Resources (Criteria listed in section 1, and where relevant in section 2, also apply to this section.)
Criteria JORC Code explanation Commentary
Database integrity Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.
To ensure correctness/accuracy of data, random checking of certain intervals is undertaken routinely, whereby the physical and electronic data are compared. Data is also plotted in a spreadsheet, in Mapinfo and Surpac to check for inconsistencies. After the data is key-punched, the assigned geologist reviews the file before submitting to the database section for compilation. The database staff likewise checks the data as it correlates them to existing data, i.e. – plotting on cross sections.
Data validation procedures used. Similar to above.
Site visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
The resource estimate was originally prepared by Mr Ted Coupland, MAusIMM (CP), Director and Principal Geostatistician of Cube. No site visit was conducted. The resource estimate has been reviewed on behalf of RMM by Ian Glacken, a Director of minerals industry consulting firm Optiro, supervised by RMM Competent Person Mr Jon Dugdale, a Director of RMM. Mr Dugdale has visited the Lobo Project many times. Mr Dugdale has examined drillcore and trench and drill core sampling techniques. The Intertek assay laboratory has also been visited.
If no site visits have been undertaken indicate why this is the case.
Site visits have been carried out by the Competent Person.
Geological interpretation
Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.
The confidence levels in the geological interpretation is appropriate for the classification categories of this deposit.
Nature of the data used and of any assumptions made.
Domaining is based on assay and logging produced from RC and diamond drilling. Two mineralised domains encapsulate all potentially mineralised materials at a low grade cut-off of 0.1-0.2 g/t Au.
The effect, if any, of alternative interpretations on Mineral Resource estimation.
The previous interpretation by Avocet implies a high degree of lateral and vertical continuity and a high level of confidence in zone orientation which is not necessarily assured by the current drill density. In May 2012 Cube Consulting performed a resource estimate for the purpose of due diligence. This estimate tried to account for the multiple plausible scenarios that could be adopted through multiple simulations. The result was an estimate with slightly lower tonnes with varying grades. Cube recommended further drilling which was completed late in 2012.
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Criteria JORC Code explanation Commentary
The use of geology in guiding and controlling Mineral Resource estimation.
Geological interpretation guided the construction of the mineralised domains.
The factors affecting continuity both of grade and geology.
The system is a large scale epithermal deposit with mineralisation distribution a function of alteration and structure.
Dimensions The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource
The Mineral Resource covers an area approximately one kilometre in strike by one kilometre wide and up to 350m deep.
Estimation and modelling techniques
The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.
The Archangel resource was modelled and estimated using conventional 3D wireframing and block modelling using Surpac and Isatis. Drillhole samples were coded within mineralised wireframes and composited to 2m. Indicator variography was carried out for ten grade thresholds. Categorical indicator simulation was used to estimate gold grades into SMU sized blocks of 4m x 4m x 2.5m. Background grades were estimated by uniform conditioning into 20m x 20m x 5m panels within the individual domains, followed by localised post-processing into SMU blocks using the LUC formalism. The high grade and low grade models were combined using the categorical indicator probability. Silver is estimated using Ordinary Kriging (OK) directly into SMUs
The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.
Cube’s resource estimate from mid-2012 reports in total lower tonnes and with lower grade for Inferred material and slightly higher grade Indicated resource (at 0.3g/t cut-off).
The assumptions made regarding recovery of by-products.
No recovery factor has been applied for silver or gold.
Estimation of deleterious elements or other non-grade variables of economic significance (e.g. sulphur for acid mine drainage characterisation).
No other elements have been estimated.
In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.
Drill spacing averages 50m x 50m where the panel used for UC is 20m x 20m x 5m.
Any assumptions behind modelling of selective mining units.
The SMU size is 4m x 4m x 2.5m, based upon a reasonably selective open pit mining operation.
Any assumptions about correlation between variables.
The correlation between gold and silver (which is variable) has not been built into the estimation method
Description of how the geological interpretation was used to control the resource estimates.
3D wireframes encapsulate all material above 0.1 - 0.2g/t cut-off which then control the resource estimate.
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Criteria JORC Code explanation Commentary
Discussion of basis for using or not using grade cutting or capping.
No grade capping was applied to the gold assays, while a modest top cut was applied to the silver composites.
The process of validation, the checking process used, the comparison of model data to drillhole data, and use of reconciliation data if available.
Industry-standard methods of model validation have been applied.
Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.
All tonnages are estimated on a dry basis.
Cut-off parameters The basis of the adopted cut-off grade(s) or quality parameters applied
Archangel is reported at a cut-off of 0.85g/t as material above this grade has reasonable prospects of economic extraction.
Mining factors or assumptions
Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.
It has been assumed that economic extraction will occur through open pit mining and carbon in pulp (CIP) cyanide leach processing, potentially with a heap leach operation as well.
Metallurgical factors or assumptions
The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.
Previous owners conducted metallurgical test work that resulted in recoveries around 86%. RMM has carried out preliminary metallurgical testing during 2011-2013 that suggests that oxide and transition ore have recoveries of 90% and fresh ore has recovery of 83%.
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Criteria JORC Code explanation Commentary
Environmental factors or assumptions
Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made
Suitable storage facilities have been identified and are in the process of undergoing environment compliance certificate. No issues with waste or tailings storage are seen.
Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
Densities were derived from a database of specific gravity measurements.
The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit,
Bulk density measurements have been generated using a water-displacement method, with no allowance for potential vugs. The bulk density factors used in the modeling are based on the results of 591 bulk density measurements from the 14 due diligence diamond drillholes (KTD174 – 187).
Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.
Densities used in the evaluation are based upon measurements as described above.
Classification The basis for the classification of the Mineral Resources into varying confidence categories
Indicated material was restricted to areas where drilling is 40m by 40m or closer.
Whether appropriate account has been taken of all relevant factors (i.e. relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).
The level of confidence in the deposit reflected by the classification is appropriate for the amount of data, the geological setting and the continuity of grade.
Whether the result appropriately reflects the Competent Person’s view of the deposit.
The classification reflects the Competent Person’s view of the deposit.
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Criteria JORC Code explanation Commentary
Audits or reviews The results of any audits or reviews of Mineral Resource estimates.
A due diligence review and re-estimation of the Archangel resource was carried out by Cube Consulting in 2012.
Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate
The Indicated portion of the Mineral Resource is believed to have a confidence allowing for annual production scheduling.
The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used
The statement was accompanied by documentation summarising all key information pertaining to the Mineral Resource estimate.
These statements of relative accuracy and confidence of the estimate should be compared with production data, where available
Not relevant to this deposit as there is no production.
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Section 4: Estimation and Reporting of Ore Reserves Criteria listed in section 1a and 1b, and where relevant in sections 2a, 2b, 3a and 3b, also apply to this section.
Criteria JORC Code (2012) explanation Commentary
Mineral Resource
estimate for
conversion to Ore
Reserves
Description of the Mineral Resource estimate used as a basis for the conversion to an Ore Reserve.
The Mineral Resource estimate used as a basis for the conversion to an Ore Reserve was released 30 June 2014 by RMX and includes Table 1, Sections 1,2 and 3 that summarise the criteria applied to the Mineral Resource estimate.
Confidence in the kriged estimate is associated with drillhole coverage, analytical data integrity, and kriging efficiency. Specifically, kriging efficiencies above 50% were considered appropriate for an Indicated Mineral Resource category of classification.
The block models that form the basis of the kriged Mineral Resource estimates for South West Breccia, Japanese Tunnels and Kay Tanda (West and East), developed/endorsed by Optiro were used as a basis for the ore reserve determination.
The Mineral Resource estimate appropriately reflects the view of the Competent Persons.
Clear statement as to whether the Mineral Resources are reported additional to, or inclusive of, the Ore Reserves.
The Mineral Resources are reported inclusive of the Ore Reserve.
Site visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
If no site visits have been undertaken indicate why this is the case.
The Ore Reserve estimate has been compiled by Competent Person, Mr Dallas Cox of Crystal Sun Consulting.
Mr Cox has visited the South West Breccia site on 5 occasions between 2010 and 2015. Mr Cox has visited the Kay Tanda site on 7 occasions between 2007 and 2015 for the purpose of assessing physical constraints and practical considerations required for mine design, evaluation and cost estimation aspects.
Study status The type and level of study undertaken to enable Mineral Resources to be converted to Ore Reserves.
Pre-Feasibility Study (PFS) completed by RMX 15 June 2016.
Cut‐off parameters The basis of the cut‐off grade(s) or quality parameters applied.
Cutoff grades derived and applied to South West Breccia reserve for Oxide/Transitional and Fresh ore were 1.15 and 1.20 Au g/t respectively.
Cutoff grades derived and applied to Kay Tanda reserve for Oxide/Transitional and Fresh ore were 0.90 and 0.95 Au g/t respectively.
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Criteria JORC Code explanation Commentary
Mining factors or
assumptions
The method and assumptions used as reported in the Pre‐Feasibility or Feasibility Study to convert the Mineral Resource to an Ore Reserve (i.e. either by application of appropriate factors by optimisation or by preliminary or detailed design).
The choice, nature and appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre‐strip, access, etc.
Pit optimisation, mine design, Road design, Dump design, and Mine Operating costs used in this study were were carried out or derived by Dallas Cox of Crystal Sun Consulting
The Batangas Gold Project will involve conventional open pits, selective mining method, using mining, drilling, blasting and ore haulage contractors. The initial mine development to South West Breccia pit will involve the construction of access roads using small excavators and dozers.
Mining will be carried out on 2.5 metre benches. The mining fleet will consist of 40-50 tonne excavators in backhoe configuration, loading 35-40 tonne payload articulated dump trucks, an hydraulic drill rig and ancillary fleet for dump management and road maintenance.
Ore and waste will be blasted using ammonium nitrate explosives or packaged explosives depending on wet ground conditions. Some free digging is anticipated in the upper zones of the topographic profile.
Drilling and blasting will be performed on 5 metre high benches, with blasted material excavated in two 2.5 metre flitches
The assumptions made regarding geotechnical parameters (e.g. pit slopes, stope sizes, etc), grade control and pre‐production drilling.
The pit slope assumptions used for pit optimisation and pit design were provided or endorsed by RDCL consultants.
The major assumptions made and Mineral Resource model used for pit and stope optimisation (if appropriate).
The mining dilution factors used. The mining recovery factors used. Any minimum mining widths used.
Overall pit slopes at South West Breccia and Japanese Tunnels varied between 43 and 55 degrees. Overall pit slopes at Kay Tanda varied between 44 and 49 degrees.
Mining dilution of 15% has been applied to South West Breccia ore due to the geometry of the orebody. At Kay Tanda, mining dilution of 5% has been applied to ore. Dilution grade of 0.5 Au g/t has been applied to dilution material at both deposits
Mining factors or
assumptions
The manner in which Inferred Mineral Resources are utilized in mining studies and the sensitivity of the outcome to their inclusion.
No Inferred Resource material has been included in the mining study, mining schedule, processing schedule or the Ore reserve.
The infrastructure requirements of the selected mining methods.
All equipment utilised in the mining fleet is diesel powered.
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Criteria JORC Code explanation Commentary
Metallurgical
factors or
assumptions
The metallurgical process proposed and the appropriateness of that process to the style of mineralisation.
Whether the metallurgical process is well‐tested technology or novel in nature.
The nature, amount and representativeness of metallurgical test work undertaken, the nature of the metallurgical domaining applied and the corresponding metallurgical recovery factors applied.
Any assumptions or allowances made for deleterious elements.
The existence of any bulk sample or pilot scale test work and the degree to which such samples are considered representative of the orebody as a whole.
For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications?
The Carbon in Leach (CIL) processing method has been proposed based on extensive metallurgical testing results completed to date, and in particular testing by ALS as part of this PFS.
The processing and metallurgical assumptions were provided by Como Engineers following extensive metallurgical test work. Gold and silver recovery equations were applied to the respective block model grade items for use in the pit optimisation procedures and the processing schedule.
Large (50kg) composite samples utilised for variability work. No pilot scale test work.
Environmental The status of studies of potential environmental impacts of the mining and processing operation.
Extensive Environmental Impact Statement (EIS) submitted to the Philippines government for approval.
During the ECC baseline studies and PFS environmental study program, potential acid rock drainage (ARD) has been identified as a consideration during waste disposal. Environmental analysis of drill core carried out during the metallurgical and environmental investigation programs for the PFS have determined non acid generating (NAG) and potentially acid forming (PAF) regions of rock in each pit. NAG-ph testing of blasthole samples will allow correct assignment of waste according to the agreed ARD waste dump formation protocols; and as to whether particular parcels of waste rock will be suitable for use as encapsulating material, or if they need to be encapsulated to prevent ARD.
Rainfall and smaller catchment size were considerations in locating the RSF at Lobo rather than at Kay Tanda.
Clean water runoff from mine operations will be diverted and collected in sedimentation traps and catch dams for decanting. Some of this water will be used in mine operations for process makeup water and dust suppression. The sedimentation pond will be used to buffer rainfall and release. It will take up heavy rainfall events preventing downstream floods and will then release the stored water after decanting of silt to provide a constant outflow. All water released will be released in a controlled fashion and will be compliant with Philippines water discharge standards.
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Criteria JORC Code explanation Commentary
Mine water will be pumped to the Residue Storage facility, process ponds or decanting ponds. All water from the Residue Storage Facility will pass through the decanting pond where all remaining silt will be settled and the water will be checked for compliance with chemical requirements, and treated if necessary, before controlled release in compliance with Philippines water discharge standards.
The mine plan including water management, waste management and ARD considerations is currently undergoing permitting as part of the ECC process. These plans will later be defended as part of the DMPF permitting process.
Details of waste rock characterisation and the consideration of potential sites, status of design options considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported.
Waste rock characterization including Acid Mine Drainage potential completed by Terrachem consulting group.
Waste and residues properties testing by ATC Williams for the RSF design.
The EIS that has been submitted includes detailed assessment of the residue storage, waste dumps sites and water and waste management plan. The final EIS has been submitted for approval of the Environmental Compliance Certificate (ECC).
Infrastructure The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed.
Land is classified as “Tax paid land” owned by the Philippines government and occupied by local land holders. Access agreements are established for exploration. However purchase and/or lease and compensation agreements will be required to establish infrastructure and are in the process of negotiation and will be finalised in parallel with completion of the permitting process.
Accommodation for the workforce will be in the nearby Lobo township, with transport by Company bus to the Lobo mine and processing site within 2km to 3km of Lobo or the Archangel mine site approximately 12km east of the Lobo. Site offices and other administration facilities will be shared with the Lobo processing plant, with the exception of mining related facilities.
Permanent access roads will be established to the Lobo and Archangel sites totaling approximately 9km and the existing roads will be refurbished from Lobo to the Lobo mine and processing plant access and to the Archangel mine access, a total distance by road of 15km.
Power generation for the processing plant and associated infrastructure will be via a leased diesel generating facility with 1.3 megawatt
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Criteria JORC Code explanation Commentary
generating capacity and operating costs of US$0.24 (A$0.27) per kw hour. There is an opportunity to utilise grid power from Batangas by extending high voltage facilities within 30km’s of the processing plant site.
Costs The derivation of, or assumptions made, regarding projected capital costs in the study
All capital costs are based on market rates at the time of the study and assume that all equipment is purchased new.
Process engineering design capital costs provided by Como Engineers. The capital cost estimate including all direct and indirect costs. The Pre-Feasibility Study capital and operating costs are to an accuracy of +/- 25%.
Waste, residue and water storage design and earthworks capital costs derived by ATC Williams and Crystal Sun Consulting. Civil Capital costs were developed using current estimates for locally supplied consumables, materials and equipment. These were used in conjunction with physical quantity estimates developed by Crystal Sun Consulting and ATC Williams for site access roads, drains, siltation dams, ponds and staged embankments. The preliminary quotations from suppliers were current as of May 2016.
Other cost inputs e.g. power, administration and accommodation by owners team and based on quotes from local suppliers.
Contingency of 5% applied to all capital costs in the study.
The methodology used to estimate operating costs.
Process engineering design operating costs provided by Como Engineers. Detailed cost estimates were completed for a processing plant facility capable of treating both ore deposits.
The operating costs were derived using the design criteria, the equipment list, vendor quotations and historical data from Como Engineers’ database. The operating costs for processing have been calculated from the ROM bin to gold dore´ to detox tailings discharge. The Pre-Feasibility Study capital and operating costs are to an accuracy of +/- 25%.
General and Administration Costs were estimated using a matrix of similar costs experienced in similar mines within the Philippines that have started or carried out feasibility studies in recent years. Some costs were derived directly from potential suppliers by requesting 2 or 3 quotations. The preliminary supplier quotations were current as of May 2016.
Mining operating costs were estimated based on provision of preliminary quotations by local equipment suppliers, explosives supplier, fuel
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Criteria JORC Code explanation Commentary
supplier, drilling, mining and haulage contractors. The cost estimates were derived from first principles by Crystal Sun Consulting using operating hours and physical quantities that were generated from the PFS mining schedule. The preliminary supplier quotations were current as of May 2016.
Allowances made for the content of deleterious
elements.
N/A
Costs The source of exchange rates used in the study. Exchange rate prevailing at the time of release of the study, 15 June 2016.
The derivation of, or assumptions made, regarding projected capital costs in the study.
Derivation of transportation charges.
The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.
The allowances made for royalties payable, both Government and private.
Ore transportation costs derived from on-site trucking trials.
Gold transport and refining charges based on quote from refinery (Hong Kong).
Government royalties and local taxes based on the requirements under Philippines regulations, including the 2% excise tax as well as other local and regional and central royalties, fees and taxes.
In addition a 1% royalty is payable on all metals produced to the vendors (Egerton Gold Philippines Inc.) original shareholders.
Revenue factors The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc.
The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co‐products.
Revenue factors:
- Head grade: derived from mining schedule with dilution factors applied.
- Gold and silver spot prices applied to the PFS financial model discounted to the price prevailing at the time of release of the study (15 June 2016), from Kitco.com. A gold price of A$ 1,700 / US$ 1,250 has been applied to the PFS financial model.
- Exchange rates applied to the PFS financial model as prevailing at the time of release of the study (15 June 2016).
Conversion rates vs USD
AUD 0.74
USD 1.00
EUR 1.13
PHP 0.0216
GBP 1.44
- Gold transport and refining charges based on quote from refinery (Hong Kong).
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Criteria JORC Code explanation Commentary
Market
assessment
The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future.
A customer and competitor analysis along with the identification of likely market windows for the product.
Price and volume forecasts and the basis for these forecasts.
For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.
There is a transparent market for the sale of gold and silver by product.
Economic The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc.
NPV ranges and sensitivity to variations in the significant assumptions and inputs.
Cash flow modeling including discounted and undiscounted, non-escalated, and sensitivity analysis completed to evaluate economic potential of the mining and processing of the Ore Reserve.
Key economic inputs including prevailing gold price, exchange rate and cost inputs derived from current market rates. Discount rate of 5% applied to NPV calculation derived from market rates applying to investments in the Philippines and reflecting market practice for gold mining operations.
The sensitivity to gold price assumptions shows a reduction of 6% reduces the NPV by 36% or an increase of 6% increases the NPV by 36%.
Social The status of agreements with key stakeholders and matters leading to social licence to operate.
The Batangas Gold Project has been endorsed by the ten Barungay (township) councils in the vicinity of the proposed project and reflects the support of the local communities and the social licence to moderate developed over 15 years of continual presence and community relations activities by the Company’s subsidiaries.
The company has dealt with 2 local landowner groups on a lease and payment for access basis for 15 years.
Land is classified as “Tax paid land” owned by the Philippines government and occupied by local land holders. Access agreements are established for exploration. However purchase and/or lease and compensation agreements will be required to establish infrastructure and are in the process of negotiation and will be finalised in parallel with completion of the permitting process.
Other To the extent relevant, the impact of the following on the project and/or on the estimation and classification of the Ore Reserves:
Any identified material naturally occurring risks.
The status of material legal agreements and
The impact of the following on the project and/or on the estimation and classification of the Ore Reserves:
- Identified naturally occurring risks considered in design, e.g. seismic and typhoon.
- The status of material legal agreements and
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Criteria JORC Code explanation Commentary
marketing arrangements.
The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre‐Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent.
marketing arrangements: original vendor agreements, share sale agreement from Mindoro to RMX and new JV agreement with Bluebird are in good standing with no warranty breaches.
- The status of governmental agreements and approvals critical to the viability of the project: The Ore Reserves lie within granted MPSA’s (equivalent to Mining Leases), granted in 2002 for a 25 year term.
- Government and statutory approvals: The Company has concluded that it has a reasonable basis for concluding that given the stage of development of the Batangas Gold Project that the granting of the ECC is a question of due process and timing, rather than of substance. Following the issue of the ECC and two of the three LGU endorsements, the DMF will be elevated from the regional office of the MGB where it was submitted with supporting documentation in March 2014, to the central office of the MGB for final assessment and approval and signing by the Secretary of the DENR
- The materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent: The Company has endorsement from the group of ten key Barangay Councils (ASX release 23 January 2015), and had also received Lobo Municipal Council endorsement (ASX release 20 May 2015). The Company has been notified that the Lobo Municipal Council had withdrawn its previous endorsement for the Project in July 2015 citing some environmental and “social acceptability” concerns. The Company is addressing these concerns and will re-submit to the new Lobo Municipal Council for endorsement, immediately following taking office 1 July 2016. The Company believes that achievement of the ECC will significantly assist in re-gaining endorsement from the Lobo Municipal Council and also the support of the Batangas Provincial Government.
Classification The basis for the classification of the Ore Reserves into varying confidence categories. Whether the result appropriately reflects the Competent Person’s view of the deposit.
The proportion of Probable Ore Reserves that have been derived from Measured Mineral Resources (if any).
Probable Ore Reserve based on 100% Indicated resources that lie within the optimised and designed open-pit boundaries, optimised on the basis of Indicated Resources. No Inferred Resources included.
The result appropriately reflects the Competent Person’s view of the deposit.
Audits or reviews The results of any audits or reviews of Ore Reserve estimates.
Independent sign-off by Competent Person Dallas Cox.
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Criteria JORC Code explanation Commentary
Discussion of
relative accuracy/
confidence
Where appropriate a statement of the relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person.
The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.
The relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person is + or – 15%. Applicable to all local and global Ore Reserve estimates.
In the opinion of the Competent Person the economic, metallurgical and geotechnical assumptions applied in the procedures associated with estimating the Probable Ore Reserve are reasonable
Gold price and exchange rate assumptions are subject to market forces and are an area of uncertainty
There are reasonable prospects to anticipate that relevant legal, environmental and statutory approvals will be granted
The impact of ore transport from Kay Tanda and social approval to operate are areas of uncertainty.
Discussion of
relative accuracy/
confidence
Accuracy and confidence discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage.
Accuracy and confidence discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage. Modifying factors such as dilution and ore-loss assumptions have been considered in determining the accuracy and level of confidence as well as mining method and metallurgical recovery and processing inputs.
Additional geotechnical drilling is required to accurately determine pit slope assumptions for the DFS.
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