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Chaarat Gold Project

 The Chaarat Gold Project is a 7 million ounce high grade resource in the Kyrgyz Republic.  In common with other deposits in the region, the Chaarat deposit contains a combination of free milling and refractory ore.

 
The first stage of development of the Chaarat Gold Project will be the Tulkubash Heap Leach Project.  The Tulkubash Project is based on the free milling ore within the Tulkubash Zone of the deposit which comprises only 13% of the total resource.   
 
Free milling ore is amenable to direct cyanidation either by heap leaching or by milling followed by Carbon in Leach (CIL). These processes are well known and relatively less complex processing methods to extract gold.
 
Tulkubash Project – our route to production
 
A Bankable Feasibility Study for the Tulkubash Project is in preparation and due for completion by the end of June 2017.  Based on our current plans this is based on a processing capacity of 2.8 million tonnes of ore per year which (based on the recovery achieved in previous metallurgical testing) would result in production of 60-70,000 ounces of gold per year with a mine life slightly in excess of five years.
 
We believe that the Tulkubash resource can be increased by further drilling as we have identified that it continues along strike and at depth. Our internal studies, prepared on the basis of the NERIN Feasibility Study work, show that the returns generated within five years from the Tulkubash Project will comfortably exceed the estimated capital investment required for its development.
 
Progress to date:
·         We have completed additional drilling within the Tulkubash Zone to increase the resource and therefore prospective gold production;
·         We have achieved the social licence to operate a heap leach project – the first in the country;
·         We have a mining licence until 2032;
·         All payments to the Government in respect of the delineated resource to obtain the mining licence have been made;
·         A significant portion of the Project infrastructure is in place – roads, bridge, camps, a workshop and a fuel tank farm;
·         The access road has been designed;
·         The land needed to cover the whole footprint of the Project has been identified and the formal allocation is in progress; and
·         The site has been “sterilised” of alluvial gold deposits in preparation for construction of the mine.
 
The Chaarat Project – the whole story and the next stage of development
 
A  Definitive Feasibility Study was completed in 2015 by a Chinese engineering company (NERIN FS) for the whole Chaarat Project which substantiated the value and potential of the Chaarat deposit.  The results of the FS are summarised in the table below together with the results of the optimised FS which was prepared by the Company in April 2016 The NERIN FS was optimised by securing updated quotes for capital equipment, adjusting the input prices to current prices as well as implementing a number of recommendations from other engineering companies. 
 
 
Second stage development
 
87% of the ore in the Chaarat deposit is contained in the Main and Contact zones. At present there are only two main options to process the refractory ore contained in these zones.
 
The first is to process the refractory ore in order to produce concentrate which requires a smelter to produce gold from the concentrate. In order to generate revenue in country from processing gold, the Kyrgyz government is pushing for the construction of a smelter not far from Chaarat. The option of processing concentrates of refractory ore could soon therefore be a more feasible and economic option which will both considerably reduce the capital cost of the project and its technological complexity.
 
The second processing option is to build an oxidation unit for the pre-treatment of the ore prior to cyanidation. The type of oxidation unit needed to achieve the highest recoveries from the Chaarat refractory ore would require a very high capital cost based on current technologies.
 
Given the technical developments which are being made to achieve more efficient processing of refractory ore, we consider that the economics of the second stage development of the Chaarat Project could become significantly more attractive in the short term. In the meantime we have the prospect of extending the production life of the Tulkubash Project.
 
Key findings of NERIN FS are:
 
·         NERIN (via NFC) was contracted to provide a Feasibility Study for the Chaarat Project in compliance with Chinese bankable feasibility study requirements.  The FS is not JORC compliant but has been based in part on studies from other consultants which are JORC compliant.
·         The mining method has been determined by dividing the Chaarat deposit into four sections.  The Tulkubash free milling section will be mined by open pit only.  Two sections of the refractory sulphide ore will be mined first by open pit and then underground.  The remaining section will be mined from underground only.
·         The FS assumes production at 8,000 tpd from the open pit sections until this ore has been exhausted and 4,000 tpd from the underground only section.  Underground production will increase to 8,000 tpd once underground mining has commenced in the former open pit sections. 
·         The peak capacity of the mine based on current reserves is therefore 12,000 tpd or 4 million tonnes per year between years 4 -11.   
·         In year 2-3 and 12-18 the plant will operate at approximately 8000 tpd.
·         The free milling ore will be processed by heap leaching.  The refractory ore will be milled, concentrated and oxidised by bacterial oxidation (BIOX) to extract the gold.   
·         The total capital expenditure over the Project life has been estimated at USD 776 million.