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Inde epend dent T Techn nical Repo ort of f S Songj jiago ou Go old Pr roject t S Shand dong Prov vince, the Peo oples s Rep public c of C China a
M Majestic Gold C Corp.
73 30-1130 W West Pende er Street Va ancouver, BC V6E 4A A4 Canada a e-mail: info@ @majesticg gold.net w website: ww ww.majestic cgold.net Te el: +1-604 4-681-4653 3 Fa ax: +1-604 4-568-4902 2
Pet ter Fairfield BEng, FAus sIMM Prin ncipal Consu ultant (Projec ct valuations)
A Authors:
Hong Gao, Qi iongxong Hu u, Yong Hua ang, Changm min Jiang, Yi iwei Wu, Pe engfei Xiao, Anshun Xu, , Nan Xue, and Wanqing Zh hang
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Important Notice
This report was prepared as a technical report in the Canadian NI 43-101 F1 format for Majestic Gold Corp (Majestic) by SRK Consulting (China) Ltd (SRK). The quality of information, conclusions and estimates contained herein is consistent with the level of effort involved in SRKs services, based on: (i) information available at the time of preparation, (ii) data supplied by outside sources, and (iii) the assumptions, conditions and qualifications set forth in this report. This report is intended for use by Majestic subject to the terms and conditions of its agreement with SRK and relevant securities legislation. The agreement permits Majestic to file this report as a Technical Report with the Toronto Stock Exchange (TSX). Any other uses of this report by any third party are at that partys sole risk. The responsibility for this disclosure remains with Majestic. The user of this document should ensure that this is the most recent Technical Report for the property as it is not valid if an updated Technical Report has been issued.
Copyright
This report is protected by copyright vested in SRK Consulting (China) Ltd. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder.
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Executive Summary
Introduction
Yantai Zhongjia Mining Corporation Limited (Zhongjia Mining) own the Songjiagou Gold Mine (Songjiagou mine, the Project or the Mine) which is currently being exploited via both underground and open pit mining. The Project retains a mining license for a production capacity of 135 thousand tonnes (kt), an exploration license, and associated mineral processing plants. The exploration and mining license holder Zhongjia Mining is a 100% share owned subsidiary of Majestic Gold Corp (Majestic), a Canadian company listed and traded under the symbol of MJS on the Toronto Stock Exchange (TSX). This independent technical report (ITR) was prepared by SRK at the request of Majestic, and consists of an independent review of the Projects geology, exploration, mineral resources, mining, mineral processing, capital investment, operating cost, and environmental and social aspects. This report follows the guidelines of the Canadian Securities Administrators National Instrument (NI) 43-101.
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The geomorphology of the Project area is characterized by gently undulating hills, and overall the topography slopes downward from west to east. The highest elevation is 140 m above sea level (ASL) and the lowest is 78 m with a relief of 62 m in the Project area.
History
The exploration license for the Songjiagou Prospect was initially granted to Yantai Muping Gold Mine on 28 October 2003 and renewed on 1 November 2005. On 30 December 2005 ownership of the exploration license was transferred to Zhongjia Mining. Zhongjia Mining renewed the exploration license in 2007, 2009, and 2011. The area has been explored by various China geological teams since the 1960s, and such exploration was carried out according to Chinese national exploration standards.
In February 1998, the Geological Prospecting Report of Songjiaguo Gold Mine, Mouping, Yantai, Shandong was published and approved by the Yantai Bureau of Land and Resources. In 1998 the No. 3 Geological Mineral Resource Prospecting Institute of Shandong Province (No. 3 Geological Institute) conducted prospecting in the Fayunkuang area and estimated a total Mineral Resource in former Chinese Categories D and E Categories (similar to Inferred) of approximately 1.8 million tonnes (Mt) with an average grade of 6.8 grams per tonne (g/t) of gold. The exploration results were summarized in a report titled Fayunkuang Gold Prospect in Muping District, Yantai City, Shandong Province, submitted in October 2012. Between 1999 and 2003, the No. 3 Geological Institute was commissioned by Muping Gold to conduct general exploration in the Songjiagou area. Muping Gold completed 20 shallow drill holes, and carried out 1,600 m of induced polarization (IP) geophysical profiling that resulted in the identification of nine anomalies. Exploration works completed during this period also included geological mapping, magnetic surveying, trenching, and 14 drill holes with a total depth of 1,640 m and 2,860 m of underground workings. Exploratory mining of the deposit by Muping Gold commenced in 1997. Four levels have been developed, at elevations of +9 m, -40 m, -80 m, and -120 m ASL. Two parallel drifts about 300 m in length have been driven on each of the levels within the trend of the mineralization, and crosscuts have been established at 30 60 m intervals. Mining has been intermittent; most stopes were between 5 to 10 m in width. Since 2005, the Project has been exploited by open pit mining.
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The highest grades of gold mineralization are confined to relatively narrow although vertically and horizontally persistent zones. Gold mineralization is associated with sulphides. Mineralized rocks present in grained, in-filling, clastic, or brecciated textures. The boundaries between wall rocks, internal waste, and host rocks are not visually obvious, and must be determined by chemical analysis.
Deposit Types
Gold mineralization occurs in pyrite-sercite altered conglomerates in the Linsishan Formation, which is part of the Cretaceous Laiyang Group. Gold enrichment occurs as veins as well as in disseminated structures and stockwork distributions. Songjiagou gold mine is a moderate temperature hydrothermal filling and metasomatic conglomerate type gold deposit. There is no clear boundary between wall rocks and ore. Therefore, chemical analysis is used.
Exploration
The Songjiagou property has been fully prospected, with completed works including geophysics and geochemical studies, exploration, geological mapping, surveying, trenching, underground channelling, and drilling.
Drilling
A total of 96 diamond drill holes have been completed since 2005, including 19 underground drill holes with a total depth of 2,170.1 m, and 77 surface drill holes with an aggregate depth of 19,943.4 m. Drilling was conducted by the No. 3 Geological Institute, using mostly HQ and some NQ sized drill rods. More than half of the holes were drilled with a dip of approximately -60 or -45 to the northwest, and a few of them were drilled vertically on the ground (dip angle -90). A total of 46 trenches with an aggregate length of 3,628.5 m were excavated by Zhongjia Mining in 2007. Trench sections were trapezoidal with upper width of approximately 1.2 m and bottom width no less than 0.8 m. A total of 85 underground channels have been completed at 9 m, -40 m, -80 m, and -120 m ASL, from which 1,449 channel samples were collected. The data from these underground channel samples were compiled by Zhongjia Mining. Regional geochemical and geophysical investigations have been conducted by various geological brigades and institutes during the reconnaissance stage. SRK has not been provided with such data for review.
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to the core box. The basic length of drill core samples was 1 m. Trench samples were collected using channel method with a sectional size 10 cm 5 cm and a basic sample length of 1 m. Underground channel sampling was conducted by Zhongjia Mining. The samples were taken from cross-cuts as well as from drifts along veins. Sample length varied from 0.5 m to 2.4 m with an average length of 1 m. The channel section size was 10 cm 3 cm. Specific gravity (SG) samples were collected and analyzed by No. 3 Geological Institute. Density, humidity, and gold grade were determined. It is unknown whether there any quality assurance and quality control (QA/QC) program was conducted on the exploration prior to 2007. However, the previous technical report and resource estimation were prepared by Wardrop Engineering Inc. (Wardrop) in accordance with NI 43-101, and as reported by Zhongjia Mining, a QP was responsible for the exploration. In addition, the previous exploration has been summarized in a report prepared in compliance with Chinese exploration standard by No. 3 Geological Institute; in order to comply with such standards an internal laboratory check and an external check with pulp duplicates are obligatory. In the opinion of SRK, the sampling preparation, security, and analytical procedures performed from 2005 2007 for the Songjiagou Property are consistent with generally accepted industry practices and are therefore adequate.
Data Verification
The exploration data used for resource estimation in this Report was compiled by Majestic; most it was previously used by Wardrop in preparation of the preliminary economic analysis (PEA) technical report issued in 2011. Wardrop stated in 2011 that they have verified both drill assays (73%) and trench assays (18%) as received from Majestic against assay reports issued by SGS. SRK has reviewed the geological report prepared by No. 3 Geological Institute issued in 2011 and compared it with the compiled database; furthermore, the assay result datasheet from SGS was partly inspected by SRK. SRK collected a random group of field samples within the current open pit during the site visit; plus three additional samples, one each from feed processing, concentrate, and tailings. The samples randomly collected by SRK were prepared and analyzed by the Intertek Laboratory in Beijing (Intertek). The results of this random check verified that the gold mineralization is distributed broadly within the Linsishan Formation conglomerate with gold (Au) grades varying from 0.1 g/t up to several grams per tonne of gold. A total of 102 coarse rejects (particles sized approximately 1 mm) and 48 pulp duplicates (sized approximately 75 microns or m) were selected by SRK for independent verification purposes. The samples were collected from Zhongjia Minings sample storage located near the Songjiagou Mine; and each sample massed approximately 200 g. The coarse rejects (grain size approximately 1 mm) were further pulverized to 75 microns in the ALS Chemical Assaying Laboratory in Guangzhou, China (ALS). All of the verification samples were analyzed by ALS. The applied method was aqua regia digestion followed by fire assays. In general there are noticeable discrepancies between coarse rejects and the original assays. Approximately half of the comparable results have a relative deviation within a range of -20% to 20%, and remaining 50% show relatively large deviations. Since the Songjiagou gold mineralization is generally greater than 0.3 g/t Au, the discrepancies discovered in the coarse reject assays are considered reasonable overall considering the
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style of mineralization. To further verify this, SRK suggests that consideration is given to revisiting the sample preparation to ensure all processes were compliant with QA/QC protocols.
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Mining Songjiagou Mine is currently in production, with a mining capacity of 5,000 to 10,000 tpd. Mining activities have been outsourced to Dahedong Mineral Processing Co., Ltd (Dahedong), and mining equipment is also being supplied by the contractor. Road development and truck transport are adopted to transport the mining inventory from the mine to the processing plants, a distance of approximately 4 km. Major mining technologies include hole boring, blasting, secondary crushing, and loading and transport. Waste benches are 10 m high, and ore benches are 5 m high. Benches are combined in pairs for mining so the final bench height reaches 10 m. The overall pit slope is 48. The mine is scheduled to operate 330 days per year, 3 shifts per day and 8 hours per shift. SRK was requested to conduct a preliminary economic assessment (PEA) of developing the project. In the assessment, MineSight Economic Planner (Design) was used for pit optimization, using Lerchs-Grossmann (LG) calculations to maximize the net present value (NPV). Five scenarios for the ultimate pit shells were produced and have been studied in the PEA, and described below:
Table ES-1: Scenarios Declaration Scenario Operation Capacity (t/d) Declaration Only indicated resources are considered as mining inventory which will be fed to the plant, and inferred resources are treated as waste; According to Safety Regulations for Blasting Practices, pit limits are constrained by the minimum allowable blast safety distance of 200 m, so that the surrounding villages are not impacted. Mining inventory include both indicated resources and inferred resourcest; According to Safety Regulations for Blasting Practices, pit limits are constrained by the minimum allowable blast safety distance of 200 m, so that the surrounding villages are not impacted. Mining inventory include both indicated resources and inferred resources. The affected villages will be relocated against the target of maximum profits.
7,400
2 2A 3 3A
Scenario 1
In Scenario 1, mining inventory only include Indicated Resources, trying to study the most practical case by using the current resource basis. The ultimate pits maximum length along the east-west axis is 660 m, and the maximum width along the north-south axis is 600 m. The highest elevation of benches is 140 m and the lowest is -125 m. At a bench height of 10 m, there will be a total of 27 benches within the pit. Haulage roads are arranged in a spiral at a gradient of 1:10. The haulage distance from the pit bottom to the pit access is 2,227 m.
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Despite the limitations imposed by the current mining license, as of 31 January 2013, at a cut-off grade of 0.3 g/t Au, the Songjiagou Project contains 17,200 kt of resources at an average gold grade of 1.35 g/t and 57,899 kt of waste (including 10,128 kt of Inferred mineral resources at 1.25 g/t Au), and will have an average stripping ratio of 3.37 tonnes of waste per tonne of mining inventory (t/t), Inferred resource plus waste rock to Indicated resource. According to the preliminary production schedule, the Scenario 1 will have a life of mine (LOM) of seven years of stable production with a capacity of 7,400 tpd.
Scenario 2
In Scenario 2, mining inventory include both Indicated Resources and Inferred Resources, while the removal of the two villages near the mine was not considered, trying to study the maximum potential of the development without the removal of villages. The ultimate pits maximum length along the east-west axis is 730 m, and the maximum width along the north-south axis is 640 m. The highest elevation of benches is 140 m and the lowest is -145 m. At a bench height of 10 m, there will be a total of 29 benches within the pit. Haulage roads are arranged in a zigzag spiral, mainly in the north of the ultimate pit, in order to reduce the amount of inventory locked underground. At a gradient of 1:10, the haulage distance from the pit bottom to the pit access is 2,513 m. The road turns back at an elevation of 5 m. As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, 32,674 kt of resources remain within the Scenario 2 ultimate pit, with an average grade of 1.34 g/t Au. This includes 19,076 kt of Indicated Resources with an average grade of 1.32 g/t Au and 13,598 kt of Inferred resources with an average grade of 1.37 g/t Au, as well as 65,394 kt of waste. The average stripping ratio is 2.00 t/t of the waste rock to mining inventory. According to preliminary production schedule, Scenario 2 will have a LOM of 11 years with a capacity of 10,000 tpd, including one year of construction, nine years of stable production and one year of production reduction.
Scenario 2A
Scenario 2A is developed based on Scenario 2 by adjusting the production capacity from 10,000 tpd to 7,400 tpd. The conditions which affect Scenario 2A and Scenario 2 are consistent. At a production capacity of 7,400 tpd, the life of mine can reach 14 years, with 13 years of stable production, and one year of production reduction.
Scenario 3
In Scenario 3, mining inventory includes both Indicated Resources and Inferred Resources, and the removal of the two villages near the mine was also considered, to estimate the maximum potential of the development with the removal of villages. The ultimate pits maximum length along the east-west axis is 830 m, and the maximum width along the north-south axis is 850 m. The highest elevation of benches is 140 m and the lowest is -190 m. At a bench height of 10 m, there will be a total of 33 benches within the pit. Haulage roads are arranged in a zigzag spiral, mainly in the north of the ultimate pit, in order to reduce the amount of inventory locked underground. At a gradient of 1:10, the haulage distance from the pit bottom to the pit access is 2,983 m. The road turns back at elevations of -25 m and -85 m.
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As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, 49,211 kt of resources remain within the ultimate pit, with an average grade of 1.37 g/t Au. This includes 26,284 kt of Indicated Resources with an average grade of 1.35 g/t Au and 22,927 kt of Inferred Resources with an average grade of 1.40 g/t Au, as well as 147,507 kt of waste. The average stripping ratio is 3.00 t/t of the waste rock to mining inventory. According to preliminary production schedule, Scenario 3 will have a LOM of 13 years with a capacity of 12,000 tpd, including one year of construction, eleven years of stable production, and one year of production reduction.
Scenario 3A
Scenario 3A is developed based on Scenario 3 by adjusting the production capacity from 12,000 tpd to 7,400 tpd. The conditions which affect Scenario 3A and Scenario 3 are consistent. At a production capacity of 7,400 tpd, the life of mine can reach 21 years, with 20 years of stable production, and one year of production reduction.
Project Infrastructure
Yantai city, which hosts a railway station, port, and airport, is less than 50 km straight line distance from the Project area. The Project is also about 40 km northeast of the downtown Muping District, 8 km north of the Provincial Road 304, 11 km south of State Highway 309, and 1.5 km east of a county road which connects the mine with the nearby cities. The Project area is easily accessible via currently developed roads, which are generally in good condition. Electrical power for the mine is supplied by a local 10 kV electrical line and standby 120 kW diesel generators. Power for the processing plants is sourced from the 35 kV/10.5 kV substation in Dahedong Village, Wanggezhuang Town, 5 km away from the mine, over dedicated lines km. Water for industrial and domestic use in the mine is supplied by the Rushanhe River, which passes 10 km east of the Project area. A large well (6 m diameter and 8 m deep) on the bank of Songjiaohe River in Jincheng Village, which is about 2 km west of the processing plant, supplies water for the plants production demands. Water for domestic use is sourced from a local ground water. The Project area enjoys a well-developed communications system; a wireless network, cable network, and fixed-line telephone network already in operation. Infrastructure at the Songjiagou Project is in good condition. A new office building was constructed in 2012 and has already been put into use.
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The environmental impact assessment (EIA) report for Yantai Zhongjia Mining Co., Ltds Songjiagou Gold Mine Project (0.135 Mtpa); and The water and soil conservation plan (WSCP) report for Yantai City Muping District Songjiagou Mining and Processing Project.
No EIA reports or approval for the 1,200 tpd or 6,000 tpd processing plants have been sighted as part of this review. No Environmental Final Check and Acceptance (FCA) Approvals for the Songjiagou Project have been sighted at the time of this site visit. SRK has sighted the Safety Final Check and Acceptance Assessment Report for the Songjiagou Gold Mine Open Pit Project, which was produced by Shandong Shengtaian Safety Assessment Company in October 2012. SRK has not sighted the approval by the relevant safety bureau for the above assessment report. No other safety assessment reports or approvals in relation to the tailings storage facility (TSF) have been sighted as part of this review. At the time of the 2012 site visit, the open pit of Songjiagou Mine was generally being developed and operated in accordance with the Project EIAs approval conditions. It is SRKs opinion that the environmental and social risks for the Project can be generally managed if Chinese environmental standards and regulatory requirements are followed. In summary the most significant environmental risks for the development of the Songjiagou Project, currently identified as part of the project assessment and in this review, are:
Significant land disturbance, and site rehabilitation and site closure requirements; Poor waste rock dump and TSF management; and Poor water management.
The above inherent environmental risks are categorised as moderate/low risks (i.e., requiring risk management measures). SRK has reviewed the Safety Assessment Reports as provided by the Songjiagou Mine and is of the opinion that the reports cover items that are generally in line with recognised Chinese industry practices and Chinese safety regulations. The operational occupational health and safety (OHS) management system/procedures for the Songjiagou Project have been developed. The OHS management system/procedures cover the basic safety production managements for drilling, transportation, boiler management, ventilation, explosives storage, and fire and flood prevention. However, SRK observed that the above OHS management system/procedures were developed based on the previous underground mining operations. The safety assessment report for the Songjiagou Project does provide additional safety management measures including measures related to open pit mining, flood and fire prevention, explosion, and transportation. SRK notes that these proposed safety management measures could be the basis for the operational OHS management system/procedures. SRK has not sighted, as part of this review, any operational OHS records for the current operations of the Songjiagou Project.
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The following parameters in Table ES-3 are used to estimate the operating cost in this preliminary economic analysis (PEA).
Table ES-3: Summary of Operating Cost Item Unit Cost Mining cost RMB/t 11.3 (increase by RMB 0.3/t annually) Stripping cost RMB/t 8.55(increase by RMB 0.3/t annually) Processing cost RMB/t 47.46 Administration cost RMB/t 4.5 Resource tax RMB/t 4.5 Mineral resource compensation fee RMB/year 200,000 Smelting cost RMB/t 100
Note: The processing cost is summarised with the average annual grade.
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The results from the five scenarios are summarised in Table ES-4. Table ES-4: Summary of Scenarios
Item Total Mining Inventory Feed Grade Stripping Ratio Mining Recovery Mining Dilution Dilution Grade Smelting recovery NPV @ 7% NPV @ 10% NPV @ 12% Unit kt g/t Au t/t % % g/t Au % RMB M USD M RMB M USD M RMB M USD M Scenarios 1 17,094 1.36 3.26 95 5 0.12 93 3,163 503 2,998 477 2,899 461 Scenario 2 32,674 1.34 2.0 95 5 0.12 93 5,394 858 4,882 777 4,584 730 Scenario 2A 32,674 1.34 2.0 95 5 0.12 93 4,995 795 4,408 702 4,082 650 Scenario 3 49,211 1.37 3.0 95 5 0.12 93 7,482 1,191 6,637 1,056 6,164 981 Scenario 3A 49,211 1.37 3.0 95 5 0.12 93 5,928 943 4,915 782 4,399 700
Scenario 1
A total of 17,094 kt of mining inventory at average gold grade of 1.36 g/t has been considered in the conceptual design; 55,799 kt of waste is expected to be stripped at an average stripping ratio of 3.26 t/t. The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t Au. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The saleable metal is estimated as 20,441 kg, or about 657 thousand ounces (koz). The pre-tax net present value (NPV) at a discount rate of 10% is estimated as RMB 2,998 M, or about USD 477 M, and the NPVs will be RMB 3,163 M, or about USD 503 M at 7% and RMB 2,899 M or about USD 461 M at 12%.
Scenario 2
A total of 32,674 kt of mining inventory at average gold grade of 1.34 g/t have been considered in the conceptual design; the expected volume of waste stripping is 65,394 kt at an average stripping ratio of 2.00 t/t. The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t Au. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The saleable metal is estimated as 38,584 kg, or about 1,241 koz. The pre-tax net present value (NPV) at a discount rate of 10% is estimated as RMB 4,882 M, or about USD 777 M, and the NPVs will be RMB 5,394 M, or about USD 858 M at 7% and RMB 4,584 M or about USD 730 M at 12%.
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Scenario 2A
The pre-tax net present value (NPV) at a discount rate of 10% is estimated as RMB 4,408 M, or about USD 702 M, and the NPVs will be RMB 4,995 M, or about USD 795 M at 7% and RMB 4,082 M or about USD 650 M at 12%.
Scenario 3
A total of 49,211 kt of mining inventory with an average gold grade of 1.37 g/t have been considered in the conceptual design; the expected volume of waste to be stripped is 147,507 kt, and the average stripping ratio is 3.00 t/t. The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t Au. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold reclamation ratio of the concentrate is 93%. The salable metal is estimated as 59,632 kg, or about 1,917 koz. The pre-tax NPV at a discount rate of 10% is estimated as RMB 6,637 M, or about USD 1,056 M, and the NPVs will be RMB 7,482 M, or about USD 1,191 M at 7% and RMB 6,164 M or about USD 981 M at 12%.
Scenario 3A
The pre-tax net present value (NPV) at a discount rate of 10% is estimated as RMB 4,915 M, or about USD 782 M, and the NPVs will be RMB 5,928 M, or about USD 943 M at 7% and RMB 4,399 M or about USD 700 M at 12%. Sensitive analysis shows that the changes of gold price will affect the NPV of the project most significantly. Table ES-5 summarizes the changes of NPVs at 10% discount rate against the change of gold prices.
Table ES-5: NPVs10 Vs. Changes of Gold Price for Songjiagou Project (RMB Million) Scenario Scenario 1 Scenario 2 Scenario 2A Scenario 3 Scenario 3A -20% US$1,084/oz 2,099 3,421 3,109 4,580 3,383 -10% US$1,220/oz 2,549 4,151 3,758 5,609 4,149 Base Case US$1,355/oz 2,998 4,882 4,408 6,637 4,915 10% US$1,490/oz 3,448 5,612 5,058 7,665 5,680 20% US$1,626/oz 3,897 6,343 5,708 8,694 6,446
Recommendations
Geology The mine is located in the Mouping-Rushan gold belt with good mineralization conditions, and Inferred mineral resources account for approximately 55% of the total resource at a cut-off grade of 0.3 g/t Au. SRK recommends enhancing exploration throughout the production period, by step-out drilling within the exploration licensed area, to upgrade the resource category and reduce mining risk.
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Mining There is insufficient data to support the design of the overall slope and the bench face angle. SRK suggests that slope stability monitoring should be enhanced, and a rock mechanics study should be carried out as soon as possible to finalize these parameters, in order to guarantee production safety. The optimized pit limits are outside the borders of the current mining license. The actual mining capacity is beyond the permitted capacity. The mine is considering apply for a mining license with larger scope and capacity. To ensure that the mine is operated in compliance with related laws and regulations, the mine should appoint a qualified design institute to prepare a feasibility study for large-scale production as soon as possible, and then submit it to the relevant authorities for approval. Applications for a large scope and capacity mining license and other supporting permits in accordance with local laws and regulations should be prepared. All the mining activities have been outsourced and the mining equipment is provided by contractors. It is suggested that equipment types and quantities should be determined in feasibility study stage to match the production capacity for the large-scale production. Daily production fluctuates significantly. SRK recommends optimizing a detailed schedule during the feasibility study stage so it can be used to guide production and mining fleet selection. The existing waste dump associated with small-scale production is not currently in use. According to the mine plan, waste will be transported to the waste dump after the new laboratory construction and grade control improvement. Based on the preliminary ultimate pit design results, the current waste dump is not large enough to accommodate all the waste from the ultimate pit. SRK suggests standardizing sampling, optimizing assay methods, and improving grade control methods. Location selection, land acquisition and design for a large enough dump also should be carried out as soon as possible. As the mine is adjacent to two villages, the open pit blasting work should at all times be designed and carried out in strict compliance with all relevant standards, and safety management procedures. SRK recommends taking all necessary shielding measures to protect the workshop, equipment and residential houses near the blasting site, such as constructing anti-blasting embankments, wave walls and protective barriers. If necessary, the mine should inform all villagers who might be affected prior to blasting, so that they can be evacuated to a safe place. Any issue regarding village relocation and resettlement may have great impact on production schedule and cause certain influence on its profitability. It is recommended that this issue should be carefully studied in feasibility study stage. SRK also recommends improving organizational structure, introducing geology, mining, surveying and processing professionals and technical personnel, strengthening production management and technical services, so that production can be standardized and operating costs can be reduced. Mineral Recovery SRK recommends conducting a mineral processing test and flowsheet optimization to further increase the gold recovery and upgrade gold processing profit. The capacity of the current tailings storage facility (TSF) is insufficient for the current Scenarios. SRK recommends that conducting an optimization study and design of tailings stack pattern; location selection, land acquisition, engineering design and construction of associated facilities for alternative TSF options should be done as soon as possible to ensure effective operation of the mine.
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Mine Rehabilitation SRK recommends conducting detailed land rehabilitation study during feasibility study stage, drawing on the operational experiences of similar and/or nearby mines to determine an appropriate rehabilitation plan and submitting it to the relevant authorities for approval. SRK also recommends setting up a rehabilitation department to implement the plan and collect and allocate the funds. Capital Investment and Operating Cost The unit operating cost is defined by the feed grade in the current contract; SRK recommends breaking down the unit operating cost into inventory mining, waste mining (stripping), mineral processing and administration costs.
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Table of Contents
Important Notice ............................................................................................................................ ii Copyright........................................................................................................................................ ii Executive Summary .......................................................................................................................iii
5 History ........................................................................................................................ 13
5.1 Ownership History .............................................................................................................. 13 5.2 Exploration History ............................................................................................................. 13
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10.1.5 Other Information ............................................................................................................... 26 10.2 Quality Assurance and Quality Control Programs ............................................................. 27 10.3 SRK Comments.................................................................................................................. 28
16 Recovery Methods..................................................................................................... 79
16.1 Introduction ......................................................................................................................... 79
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16.2 Process Flowsheets and Facilities..................................................................................... 79 16.2.1 Flowsheets ......................................................................................................................... 79 16.3 Production Data.................................................................................................................. 82 16.4 Process Control .................................................................................................................. 84 16.5 Water Supply ...................................................................................................................... 84 16.6 Laboratory .......................................................................................................................... 84 16.7 Tailings Storage Facilities .................................................................................................. 85
18 Market Studies and Contracts .................................................................................. 90 19 Environmental, Permit, Social and Community Impact ......................................... 92
19.1 19.2 19.3 19.4 19.5 Environmental, Social, and Health and Safety Review Objective ..................................... 92 ESHS Review Process, Scope and Standards ................................................................. 92 Status of ESHS Approvals and Permits ............................................................................ 92 Environmental Conformance and Compliance .................................................................. 93 Key Environmental, Social, and Health and Safety Aspects ............................................. 93 19.5.1 Land Disturbance ............................................................................................................... 93 19.5.2 Flora and Fauna................................................................................................................. 93 19.5.3 Waste Rock and Tailings Management ............................................................................. 93 19.5.4 Solid Waste Management .................................................................................................. 94 19.5.5 Water Management ........................................................................................................... 94 19.5.6 Air Emissions ..................................................................................................................... 95 19.5.7 Noise Emissions ................................................................................................................ 95 19.5.8 Hazardous Materials Management .................................................................................... 95 19.5.9 Environmental Protection and Management Plan ............................................................. 95 19.5.10 Emergency Response Plan ............................................................................................... 96 19.5.11 Site Closure Planning and Rehabilitation .......................................................................... 96 19.5.12 Occupational Health and Safety ........................................................................................ 97 19.5.13 Social Aspects ................................................................................................................... 98
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21.5.1 Scenario 1 ........................................................................................................................ 110 21.5.2 Scenario 2 ........................................................................................................................ 113 21.5.3 Scenario 2A ..................................................................................................................... 115 21.5.4 Scenario 3 ........................................................................................................................ 117 21.5.5 Scenario 3A ..................................................................................................................... 119 21.6 Sensitivity Analysis ........................................................................................................... 121
22 Adjacent Properties................................................................................................. 124 23 Other Relevant Data and Information .................................................................... 125 24 Interpretation and Conclusions.............................................................................. 126
24.1 24.2 24.3 24.4 Geology ............................................................................................................................ 126 Data Verification ............................................................................................................... 126 Resource Estimation ........................................................................................................ 126 Mining ............................................................................................................................... 126 24.4.1 Scenario 1 ........................................................................................................................ 126 24.4.2 Scenario 2 ........................................................................................................................ 126 24.4.3 Scenario 2A ..................................................................................................................... 127 24.4.4 Scenario 3 ........................................................................................................................ 127 24.4.5 Scenario 3A ..................................................................................................................... 127 24.5 Mineral Recovery ............................................................................................................. 127 24.6 Capital Investment and Operating Cost ........................................................................... 127 24.7 Environmental Issues and occupational health and safety (OHS) ............................... 127 24.8 Preliminary Economic Analysis ........................................................................................ 128 24.8.1 Scenario 1 ........................................................................................................................ 128 24.8.2 Scenario 2 ........................................................................................................................ 129 24.8.3 Scenario 2A ..................................................................................................................... 129 24.8.4 Scenario 3 ........................................................................................................................ 129 24.8.5 Scenario 3A ..................................................................................................................... 129
26 References ............................................................................................................... 132 Appendix A: Operating Licenses ................................................................................. 133 Appendix B: Drilling Information ................................................................................. 139 Appendix C: Basic Statistic and Variogram ................................................................ 145 Appendix D: SRK Independent Sampling and Assay ................................................ 148 Appendix E: Year End Pit of First Three Years of Scenario 1 ................................... 157 Appendix F: Comparison between five Scenarios ..................................................... 161
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Tables
Table 3-1: Songjiagou Mining License Information ............................................................................. 7 Table 3-2: Vertices Coordinates of Songjiagou Mining License Area ................................................. 7 Table 3-3: Songjiagou Exploration License Information...................................................................... 7 Table 3-4: Vertices Coordinates of Songjiagou Exploration License Area ......................................... 8 Table 10-1: Standard Analyses in 2007 as Summarized by Wardrop .............................................. 27 Table 11-1: Random Check Samples Collected by SRK .................................................................. 29 Table 12-1: Close Circuit Test Results .............................................................................................. 33 Table 13-1: Characteristic Value Summary of Original Sample ........................................................ 35 Table 13-2: Sample Outlier Characteristic ......................................................................................... 37 Table 13-3: Statistical Analysis Result of Composites ...................................................................... 38 Table 13-4: Variogram Parameters ................................................................................................... 39 Table 13-5: Limits of the Block Model................................................................................................ 40 Table 13-6: Main Criteria and Attributes of Block Model ................................................................... 40 Table 13-7: Au Grade Comparison between Average Grade of Block Model and Composites ...... 41 Table 13-8: Indicated Mineral Resources Estimated at the Songjiagou Project Area ...................... 43 Table 13-9: Inferred Mineral Resources Estimated at the Songjiagou Project Area ........................ 43 Table 13-10: Indicated Mineral Resource within the Current Mining License as of 31 January 2013 ..................................................................................................................................... 43 Table 13-11: Inferred Mineral Resource within the Current Mining License as of 31 January 2013 ..................................................................................................................................... 44 Table 13-12: Underground Depletion in Songjiagou Mine ................................................................ 44 Table 13-13: Mineral Resources for the Current Songjiagou Mining License as of 31 January 2013 ....................................................................................................................... 44 Table 13-14: Tonnage and Grades under Different Cut-offs ............................................................ 45 Table 15-1: Open Pit Sampling Verification by SRK ......................................................................... 49 Table 15-2: Comparison between Open Pit Sampling and Resource Model ................................... 49 Table 15-3: Modified Unit Operating Cost ......................................................................................... 50 Table 15-4: Relationship between Processing Recovery Rate and Feed Grade ............................. 51 Table 15-5: Gold Price Records and Price Forecast ......................................................................... 52 Table 15-6: Pit Optimization Parameters ........................................................................................... 53 Table 15-7: Scenarios Declaration .................................................................................................... 54 Table 15-7: Minimum Allowable Safety Distances ............................................................................ 54 Table 15-8: Inventories within the Optimized Pit Limits (Scenario 1) ............................................... 55 Table 15-9: Inventories within the Optimized Pit Limits (Scenario 2) ............................................... 56 Table 15-10: Inventories within the Optimized Pit Limits (Scenario 3) ............................................. 58
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Table 15-11: Ultimate Pit Design Parameters ................................................................................... 59 Table 15-12: Inventories within Ultimate Pit of Scenario 1................................................................ 61 Table 15-13: Inventories by Benches within Ultimate Pit of Scenario 1 ........................................... 62 Table 15-14: Inventories within Ultimate Pit of Scenario 2................................................................ 64 Table 15-15: Inventories by Benches within Ultimate Pit of Scenario 2 ........................................... 65 Table 15-16: Inventories within Ultimate Pit (Scenario 3) ................................................................. 67 Table 15-17: Inventories by Benches within Ultimate Pit (Scenario 3) ............................................. 68 Table 15-18: Production Schedule of Scenario 1 .............................................................................. 69 Table 15-19: Production Schedule of Scenario 2 .............................................................................. 70 Table 15-20: Production Schedule of Scenario 2A ........................................................................... 71 Table 15-21: Production Schedule of Scenario 3 .............................................................................. 73 Table 15-22: Production Schedule of Scenario 3A ........................................................................... 74 Table 16-1: Historical Production Figures ......................................................................................... 83 Table 18-1: Contractor Mining and Processing Cost......................................................................... 90 Table 18-2: Gold Recovery Standard ................................................................................................ 91 Table 19-1: Details of EIA Reports and Approvals ............................................................................ 92 Table 19-2: WSCP Reports and Approvals ....................................................................................... 92 Table 19-3Rehabilitation Investment Composition of Songjiagou Gold Mine ............................... 97 Table 20-1: Historical Investment Composition ................................................................................. 99 Table 20-2: Future Investment for Scenario 1 ................................................................................. 100 Table 20-3: Future Investment for Scenario 2 ................................................................................. 100 Table 20-4: Future Investment for Scenario 2A .............................................................................. 101 Table 20-5: Future Investment for Scenario 3 ................................................................................. 101 Table 20-6: Future Investment for Scenario 3A .............................................................................. 102 Table 20-7: Summary of Operating Cost. ....................................................................................... 103 Table 20-9: Annual Operating Costs for Scenario 1 (RMB M) ........................................................ 104 Table 20-10: Annual Operating Costs for Scenario 2 (RMB M) ...................................................... 104 Table 20-11: Annual Operating Costs for Scenario 2A (RMB M) ................................................... 104 Table 20-12: Annual Operating Costs for Scenario 3 (RMB M) ...................................................... 105 Table 20-13: Annual Operating Costs for Scenario 3A (RMB M) ................................................... 105 Table 21-1: Production Schedule of Scenario 1 .............................................................................. 106 Table 21-2: Production Schedule of Scenario 2 .............................................................................. 107 Table 21-3: Production Schedule of Scenario 2A ........................................................................... 107 Table 21-4: Production Scheduleof Scenario 3 ............................................................................... 108 Table 21-5: Production Schedule of Scenario 3A ........................................................................... 108
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Table 21-6: Saleable Metal Estimated in Scenarios 1, 2, 2A, 3 and 3A ......................................... 109 Table 21-7: Summary of Scenarios NPVs ...................................................................................... 110 Table 21-8: Pre-tax NPV Estimation of Scenario 1 ......................................................................... 112 Table 21-9: Pre-tax NPV Estimation of Scenario 2 ......................................................................... 114 Table 21-10: Pre-tax NPV Estimation of Scenario 2A ..................................................................... 116 Table 21-11: Pre-tax NPV Estimation of Scenario 3 ....................................................................... 118 Table 21-12: Pre-tax NPV Estimation of Scenario 3A ..................................................................... 120
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Figures
Figure 3-1: Location and Access of the Project ................................................................................... 6 Figure 3-2: Songjiagou Licensed Area China Xian 1980 Coordinate System ................................ 8 Figure 4-1: Accessibility and Transportation of the Songjiagou Gold Project................................... 10 Figure 4-2: View of Landscape of the Songjiagou Project ................................................................ 12 Figure 6-1: Regional Geology of Shandong Peninsula ..................................................................... 16 Figure 6-2: Simplified Local Geology ................................................................................................. 18 Figure 6-3: Songjiagou Mineralized Zone .......................................................................................... 19 Figure 6-4: Geology of Songjiagou Property ..................................................................................... 20 Figure 6-5: Typical Gold Mineralization Host Rocks at Songjiagou Property ................................... 21 Figure 9-1: Distribution of the Diamond Drilling and Trenching ........................................................ 25 Figure 10-1: Storage of Coarse Rejects, Pulps, and Drill Cores....................................................... 28 Figure 11-1: Performance of Coarse Reject Assays vs. SRK Verification Samples ........................ 30 Figure 11-2: Performance of Pulp Duplicate Assays vs. SRK Verification Samples ........................ 31 Figure 12-1: Primary Grind Size Effects on Gold Recovery .............................................................. 32 Figure 12-2: Close Circuit Flow and Condition .................................................................................. 33 Figure 13-1: Topographic 3D Map (Azimuth: 0, Dip: -90) .............................................................. 36 Figure 13-2: Original Sample Length Probability Distribution Histogram.......................................... 37 Figure 13-3: Solid Model of Mineralized Conglomerate .................................................................... 41 Figure 13-4: Mineral Resource Classification .................................................................................... 42 Figure 13-5: Grade Tonnage Curve................................................................................................ 45 Figure 15-1: Trends of Exchange Rates of USD/CNY and CAD /CNY ............................................ 50 Figure 15-2: Gold Price Trends over the Past Five Years ................................................................ 52 Figure 15-3: Pit Optimization of Scenario 1 (Azimuth: 0, Dip: -90) ................................................ 55 Figure 15-4: Pit Optimization of Scenario 2 (Azimuth: 0, Dip: -90) ................................................ 57 Figure 15-5: Pit Optimization of Scenario 3 (Azimuth: 0, Dip: -90) ................................................ 58 Figure 15-6: Ultimate Pit Design of Scenario 1 (Azimuth: 0; Dip: -90) ........................................... 60 Figure 15-7: Ultimate Pit Design of Scenario 1 (Azimuth: 330; Dip: -60) ....................................... 61 Figure 15-8: Ultimate Pit Design of Scenario 2 (Azimuth: 0; Dip: -90) ........................................... 64 Figure 15-9: Ultimate Pit Design of Scenario 2 (Azimuth: 330; Dip: -60) ....................................... 64 Figure 15-10: Ultimate Pit Design of Scenario 3 (Azimuth: 0; Dip: -90) ......................................... 66 Figure 15-11: Ultimate Pit Design of Scenario 3 (Azimuth: 330; Dip: -65)..................................... 67 Figure 15-12: Production Schedule of Scenario 1............................................................................. 70 Figure 15-13: Production Schedule of Scenario 2............................................................................. 71
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Figure 15-14: Production Schedule of Scenario 2A .......................................................................... 72 Figure 15-15: Production Schedule of Scenario 3............................................................................. 74 Figure 15-16: Production Schedule of Scenario 3A .......................................................................... 75 Figure 15-17: Mining Production ........................................................................................................ 76 Figure 16-1: Flowsheet Adopted in 1,200 tpd Plant .......................................................................... 80 Figure 16-2: Flowsheet Adopted in 6,000 tpd Plant .......................................................................... 81 Figure 16-3: Correlation of ROM Grade and Concentrate Grade ..................................................... 83 Figure 16-4: Correlation of ROM Grade and Recovery Rate ............................................................ 84 Figure 17-1: Concrete Paved Road Connecting Mining Area and Processing Plant ....................... 86 Figure 17-2: Mine Industrial Sites Lay-out ......................................................................................... 87 Figure 17-3: Well for Processing Production ..................................................................................... 88 Figure 17-4: New Office Building ....................................................................................................... 89 Figure 21-1: Pre-tax Net Cash Flow of Scenario 1.......................................................................... 111 Figure 21-2: Pre-tax Net Cash Flow of Scenario 2.......................................................................... 113 Figure 21-3: Pre-tax Net Cash Flow of Scenario 2A ....................................................................... 115 Figure 21-4: Pre-tax Net Cash Flow of Scenario 3.......................................................................... 117 Figure 21-5: Pre-tax Net Cash Flow of Scenario 3A ...................................................................... 119 Figure 21-6: Sensitivity Analysis of NPV for Scenario 1 (7,400 tpd) ............................................... 121 Figure 21-7: Sensitivity Analysis of NPV for Scenario 2 (10,000 tpd) ............................................. 122 Figure 21-8: Sensitivity Analysis of NPV for Scenario 2A (7,400 tpd) ............................................ 122 Figure 21-9: Sensitivity Analysis of NPV for Scenario 3 (12,000 tpd) ............................................. 123 Figure 21-10: Sensitivity Analysis of NPV for Scenario 3A (7,400 tpd) .......................................... 123
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Regional, local and mine geology; Exploration history, quality and independent data verification; Geological modelling, mineral resource estimation and validation; Mining; Processing and mineral recovery; Environmental and social; Operating and capital costs; and Preliminary economic analysis.
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guidelines. This technical report was prepared following the guidelines of the Canadian Securities Administrators National Instrument 43-101 and Form 43-101F1. The ITR was jointly compiled by SRKs Beijing and Nanchang offices from October 2012 to May 2013.
Discussions with Majestic personnel; Inspection of the Songjiagou Project area, including outcrops, drill cores, open pit, pit benches, waste dump, processing plant, and tailings storage facilities; Review of exploration and geological data provided by Majestic; Data verification, including re-sampling and re-assaying of duplicates and verification drilling; and Additional information from public domain sources.
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Anshun Xu (Anson), PhD (Geology), FAusIMM, is a Principal Consultant (Geology) who specializes in the exploration of mineral deposits. He has more than 20 years experience in exploration and development of various types of mineral deposits including Cu-Ni sulphide deposits related to ultra basic rocks, tungsten and tin deposits, diamond deposits, and especially deep expertise in various types of gold deposits, including vein-type, fracture-breccia zone type, alteration type, and carlin type. He was responsible for the resource estimations of several diamond deposits, and for reviews of resource estimations of several gold deposits. He recently completed several due diligence jobs for clients from both China and overseas including technical review projects such as Canadian NI43-101 reports and HKEx IPO technical reports. Peter Fairfield, B.Eng, FAusIMM, is a Principal Consultant (Mining) with SRK Australasia. He is a mining engineer with over 23 years experience in operations management and providing technical and operational service and support. He has a strong technical background, having worked in underground metal mines throughout Australia and the United States. Peter has a demonstrated ability to build and manage crossfunctional teams to deliver project outcomes, with extensive experience in project evaluation across all levels of the project pipeline. He has held positions including General Manager Technical Services for an Australian gold producer, Manager Mining for a major Australian mining company and Senior Mining Engineer for an Australian mining consultancy.
1.6 Acknowledgement
SRK would like to acknowledge the support and collaboration provided by Majestic personnel for this assignment. Their collaboration was greatly appreciated and instrumental to the success of this project.
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1.7 Declaration
SRKs opinion, contained herein and effective 31 January 2013, is based on information collected by SRK throughout the course of SRKs investigations, which in turn reflect various technical and economic conditions at the time of writing. Given the nature of the mining business, these conditions can change significantly over relatively short periods of time. Consequently, actual results may be significantly more or less favourable. This report may include technical information that requires subsequent calculations to derive sub-totals, totals, and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, SRK does not consider them to be material. SRK is not an insider, associate, or an affiliate of Majestic, and neither SRK nor any affiliate has acted as advisor to Majestic, its subsidiaries or its affiliates in connection with this project. The results of the technical review by SRK are not dependent on any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings.
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he two licens ses is solely held by Zho ongjia Mining, a wholly-owned subsi idiary of Ma ajestic. Other r Title to th than the sh hared ownership, there ar re no known n financial en ncumbrances relating to t the Project; a and SRK has s been advis sed that there e are no exter rnal disputes regarding Zhongjia Minings mining g and explora ation licenses s. The SJG P Projects pro oduction orig ginates from m an open pit t, which is currently c in operation o at a nominally y permitted production rate of 135,000 tonnes per annum (tpa), ass sociated with h a processi ing plant of f correspond ding capacity y. With atwo o additional processing p p plants, the tot tal processing plant capacity is 7,200 0 tpd, and th he application n for a minin ng license wit th a much lar rger producti ion rate is in progress.
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Table 3-1: Songjiagou Mining License Information Item Mining License Number Ownership Address Property Name Economic Type Minerals Mining Method Production Capacity Area of Mine Duration of Validity Mining Depth Issued by Description C3700002009044110010983 Yantai Zhongjia Mining Company Limited Qiansongjiao Village, Wanggezhuang Town, Muping District, Yantai City Songjiagou Mine, Zhongjia Mining Liability Limited Company Gold, sulphur Open pit/underground 135,000 tpa 0.3421 km2 Five years, from 10 February 2012 to 10 February 2017 from 140 m ASL to 300 m below sea level Shandong Province Bureau of Land and Resources
SRK notes that China adopts the revised Yellow Sea datum plane to calculate elevations, as has been obligatory since 1985, and therefore the permitted depth range for mining, in metres above sea level (ASL), is specified in the Yellow Sea Elevation System. The mining license also provides a legal mining area with vertices as shown in Table 3-2.
Table 3-2: Vertices Coordinates of Songjiagou Mining License Area Vertex 1 2 3 4 Northing 4110998.85 4110718.83 4110126.85 4110438.86 Easting 40621569.40 40621914.39 40621433.36 40621086.38
Note: Coordinates above are given in the Chinese Xian 1980 System.
In addition, Zhongjia Mining currently holds a license for gold mineral exploration adjacent to the mine, covering an area of 3.15 km2. The detailed information for the exploration license is listed in Table 3-3, and the geographic coordinates for the vertices are shown in Table 3-4.
Table 3-3: Songjiagou Exploration License Information Item Exploration License Number Ownership Owner Address Exploration Project Name Project Location Regional Map Number Area of Mine Duration of Validity Issued by Description T37220090902034373 Yantai Zhongjia Mining Company Limited Qiansongjiao Village, Wanggezhuang Town, Muping District, Yantai City Songjiagou Deep Zone and Surrounding Area Exploration Muping District, Yantai City J51E018006 3.15 km2 from 7 December 2011 to 30 June 2013 Shandong Province Bureau of Land and Resources
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Table 3-4: Vertices s Coordinat tes of Songjiagou Explo oration Licen nse Area V Vertex 1 2 3 4 5 6 7 8 Latitude 370 0731 370 0731 370 0746 370 0746 370 0731 370 0731 370 0716 370 0716 Long gitude 1212128 1212143 1212143 1212228 1212228 1212243 1212243 1212258 Ver rtex 9 10 0 11 12 2 13 3 14 4 15 5 16 6 Latitude 370701 0 370701 0 370646 4 370646 4 370655 5 370655 5 370646 4 370646 4 Longit tude 12122 258 12122 243 12122 243 12122 228 12122 228 12122 213 12122 213 1212128
es that the g geographic coordinates presented in n Table 3-4 4 are conver rted from G Gauss-Kruger r SRK note projected c coordinates w with a Xi'an 1980 ellipsoi id, and there is about 1 2 seconds () of drift from the World d Geodetic System 1984 4 (WGS-84 4) in this ca ase. The exploration and mining licensed areas are a shown in n 2. Figure 3-2
Figure 3-2: Songjiag gou Licensed d Area China Xian 19 980 Coordina ate System
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Business License; Exploration License; Mining License; Safety Production License; Water Use Permit; and Gold Exploitation Permit.
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4 Accessib bility, Climate, C , Local Resou urces, cture and Phy ysiogra aphy Infrastruc
4.1 Ac ccessibility
The Songj jiagou Mine e is located approximatel a ly 50 km sou uth of down ntown Yanta ai, which wa as previously y known to the West as Chefoo, an importan nt coastal ci ity in China s well deve eloped easter rn Shandong g Peninsula. . The Project t is easily acc cessible by m means of road d, railway, sea and air (Fig gure 4-1).
Figure 4 4-1: Accessibility and Tr ransportatio on of the Son ngjiagou Go old Project
l Highway S304 is appro oximately 8 k km north of the mine, an nd National E Expressway G G309 passes s Provincial 11 km sou uth of the m mine. The western and ea astern areas o of the Projec ct are connec cted to Provi incial Roads s S208 and S207, respec ctively. Road ds in the regio on are genera ally paved wi ith asphalt an nd maintained well. est railway st tation is at Yazi Y Town, about 10 km m southwest of o the Projec ct. The railw way joins the e The neare Laiyang-Y Yantai rail lin ne and provid des a link to C Chinas natio onal railway network. The Yello ow Sea surro ounds the Sh handong Pen ninsula to th he northeast, , east, and s south, and th he Project is s approxima ately 50 km f from the shor reline. y 45 km dire Yantai La aishan Interna ational Airpo ort, located approximatel a ectly north o of the Project t, hosts daily y flights to a and from man ny cities incl luding Beijin ng, Shanghai, , and Jinan, th he capital cit ty of Shandong Province, , as well as s weekly flig ghts to Japan n, South Kor rea, Hong Ko ong, and Tai iwan. It take es approxima ately one (1) ) hour to dri ive from the airport to the e mine site.
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Within the licensed area, transportation is by flat gravel and dirt roads. The open pit, processing plant, and office building are readily accessible.
4.2 Climate
The mine area has a warm and semi-humid monsoon climate with displays marine characteristics; generally there are no drastic seasonal changes. Overall humid year round with average annual relative humidity of 68%; recorded statistics shows the yearly precipitation is around 650 mm. The annual average temperature is about 12 degrees Celsius (C), with about 210 frost-free days per year. The highest temperatures reach 30C and the lowest drops to 5C below zero (minus 5C, or -5C). Generally there is no extreme cold or hot weather to hinder the mining and processing operations. The prevailing winds are southerly and predominantly occur in spring and summer; and secondary prevailing winds come from the north and mainly occur in winter.
4.4 Physiography
The geomorphology of the Project area is characterized by gently undulating hills, and overall topography slopes downward from west to east. The highest elevation is 140 m ASL and the lowest is 78 m ASL, with a relief of 62 m in the Project area. A view of the project area is presented in Figure 4-2. The main local water system is the Rushan River east of the mine, a seasonal river flowing south through Longjiaoshan Reservoir into the Yellow Sea.
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5 History
5.1 Ownership History
The mining license for the Songjiagou Mine was initially issued by the Shandong BLR in 2006, based on the Geological General Exploration Report of Songjiagou Gold Prospect in Muping District, Yantai City, Shandong Province, submitted in December 2002 by No. 3 Geological Mineral Resource Prospecting Institute of Shandong Province (No. 3 Geological Institute). Mine construction commenced in December 2002. The mining license holder at the time was Yantai Muping Gold Mine (Muping Gold). On 2 August 2010, ownership of the Songjiagou Projects mining license was transferred to Zhongjia Mining, the current owner of the Project. The exploration license of Songjiagou Prospect was initially granted to Yantai Muping Gold Mine on 28 October 2003 and then renewed on 1 November 2005. On 30 December 2005 the ownership of the exploration license was transferred to Zhongjia Mining. Zhongjia Mining renewed the exploration license in 2007, 2009, and 2011.
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During 1999 and 2003, the No. 3 Geological Institute was commissioned by Muping Gold to conduct general exploration in the Songjiagou Project area. Muping Gold completed 20 shallow drill holes, and carried out 1,600 m of induced polarization (IP) geophysical profiling which resulted in the identification of nine anomalies. The completed exploration during the period also included geological mapping, magnetic surveying, trenching, 14 drill holes with a total depth of 1,640 m, and 2,860 m of underground workings. Exploratory mining of the deposit by Muping Gold commenced in 1997. Four levels were developed, at elevations of +9 m, -40 m, -80 m, and -120 m ASL. Two parallel drifts about 300 m in length have been driven on each of the levels within the trend of mineralization, and crosscuts have been established at 30 60 m intervals. Mining has been intermittent; most stopes were between 5 and 10 m in width. Since 2005, the surface expressions of the zones being mined underground have been mined by open pit. Mineralization had been identified here both by historical near-surface workings, and by drilling conducted by Muping Gold. The preceding historical exploration and resource estimate is disclosed using the original terminology, and is considered relevant, although its reliability is unknown. SRK has not performed a detailed review of the historical exploration and resource estimation completed prior to 2005. Zhongjia Mining has not treated the historical resource estimate completed before 2005 as a qualified mineral resource as defined in the NI 43101 report prepared by Wardrop Engineering Inc. (Wardrop) and issued on 1 March 2011, or as presented in this Report by SRK.
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Project area. A ductile shear zone and ductile brittle fault zone are major geological structures in the area. Major magmatic activity is represented by monzonite granite. Other veins include diabase, diorite, hornblende porphyrite, and lamprophyre. Palaeoproterozoic metamorphic rocks of the Jingshan Group are mainly distributed to the north of the Project area near Tanjia village, and are comprised of biotite granulite, graphite-bearing gneiss, leucogranulite, and marble. These strata generally dip southeast with angles varying from 15 to 50. Cretaceous-age rocks are predominately represented by the Lisishan Formation, part of the Laiyang Group and comprised of conglomerate and sandstone. The Lisishan Formation in the Project area has an overall northeast strike and dips southeast with an angle of 20 to 40. The formation is dividable into two conformably contacted sections according to the clast size. The first section of Lisishan Formation consists of relatively larger clasts with grain sizes of about 3 cm 20 cm and is predominately composed of monzonitic granite and quartz; marble, gneiss, schist and granulite are occasionally visible in this section. The second section is characterized by more fine grained and rounded clasts made of sandstone and siltstone. The Songjiagou Projects gold mineralization is mainly hosted within the conglomerate in first section of the Laiyang Group Lisishan Formation. Quaternary sediments in the property area are classified as Linyi Formation, represented by alluvial deposits distributed to the lower terrain near Tanjia, Fayunkuang, and Songjiagou villages. Local structure features two major fault zones, the northeasterly striking Yazi Fault Zone and the northwesterly orientated Tanjia Fault Zone. The two major fault zones mark the margin of the Songjiagou Projects mineralization and lie at or near the contact between metamorphic Proterozoic rocks and the overlying Laiyang Group conglomerate. Alteration minerals associated with the fault zone include sericite, silica, pyrite, carbonate, chlorite, and potassium feldspar, which present in a large halo around the fault zone and its contained mineralization. Dykes are developed in the property area and represent intrusive activities during the Proterozoic and Mesozoic periods; they are composed of diabase, diorite, granite, and lamprophyre.
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5 had been p primarily foc cusing on mi ineralization with gold grade g greater r Historical exploration before 2005 than 1 g/t. . Although th he previous underground d workings suggest s that m most minera alization was s confined to o es, there wa relatively narrow zone as also evide ence, by way y of room-a and-pillar sto opes, that in some areas s mineraliza ation extende ed laterally a away from th he controllin ng structures for 10 m or more. The u underground d sampling carried out b by Majestic s substantially confirmed t that the highest grades of f gold miner ralization are e to relatively n narrow altho ough verticall ly and horizo ontally persis stent zones. A Away from t those higherconfined t grade corr ridors, gold g grades droppe ed to 0.5 g/t or o less, with rare, interspe ersed higher values. The open cast mining operation begun in 2005 indicates tha at the zones o of Linsishan Formation c conglomerate e are genera ized. There is also evid ally minerali dence that la amprophyre dykes intrud ded into the e Cretaceous s conglomer rate and inter rrupted the gold g enriched d bodies (see Figure 6-4). Gold mine eralization is associated w with sulphide es that include electrum, pyrite, p chalco opyrite, galen na, sphalerite e, and bornit te. Gold is most m abundan ntly associate ed with elect trum and pyr rite. The seco ondary meta allic minerals s
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include sp phalerite, ga alena, chalco opyrite, mag gnetite, and limonite. The T associate ed gangue m minerals are e represente ed by feldspa ar, quartz, mu uscovite, calc cite, and clay y minerals.
Sulphide ( (S) grades vary from 1 1.1% to 7.8% % according t to tests done e on 13 samp ples by No. 3 Geological l Institute, w with an avera age grade of 3.7%. Silver r (Ag) grad des have been n analyzed w within a range e of 0.5 g/t 8.5 g/t. Th he harmful element arseni ic (As) was s found to oc ccur with gra ades ranging f from 40 g/t t to 302 g/t.
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Based on observation as well as on n the phase a analysis resul lts, the types s of gold min neralized zon nes present at t the Songji iagou Projec ct include ox xidized, mix xed, and prim mary sulphid de (Figure 6-5); primary sulphide or r accounts f for the larges st proportion. . The minera alized rocks p present in gra ained, in-filli ing, clastic, o or brecciated d textures.
Figure 6 6-5: Typical Gold Minera alization Ho ost Rocks at Songjiagou u Property
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7 Deposit Types
Gold mineralization of Songjiagou Project is hosted within the Cretaceous-age pyritic-sericitic conglomerate of the Laiyang Group Linsishan Formation. Gold enrichment occurs as veins as well as in disseminated and stockwork distributions. The vein-type mineralization is appropriately described as mesothermal; the disseminated and stockwork mineralizations have some aspects of epithermal mineralization but are both spatially and genetically associated with the vein-type, and so can be considered a variant of that type. The Songjiagou Projects conglomerate type gold deposit is believed to be associated with mesothermal filling activities and followed by alterations and metasomatism. Wall rocks are generally consistent with the host rocks, comprised of conglomerate and occasional lamprophyre. Wall rocks and internal waste contain small quantities of gold, usually less than 0.10 g/t. The boundaries between wall rock, internal waste, and the host rocks are not visually obvious, and must be determined by chemical analysis.
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8 Exploration
8.1 Geological Mapping
Geological mapping has been successively conducted by previous explorers as described in Section 5 of this Report. The geological report prepared by No. 3 Geological Institute in January 2011 provided geological maps at 1:10,000 and 1:2000 scales. Other than cross section information, no updated surface geological mapping has been conducted since 2011.
8.2 Survey
Topographic and engineering surveys have been conducted mainly by No. 3 Geological Institute, and Muping Gold carried out previous underground surveys. Local control points were set up and utilized in these surveys. Handheld global positioning system (GPS) and real-time kinematic (RTK) instruments were used. Topography for the Project area, locations of all borehole and trench collars, and surface samples were surveyed and mapped at scales of 1:2,000 and 1:1,000. Zhongjia Mining used its own professionally-equipped surveying team to meet the requirements for frequent surveys during the normal production cycle of open pit mining, such as blasting, stripping, and grade-control sampling. The mining areas topography is surveyed and updated regularly for mine planning purposes. SRK notes that the previous survey was conducted and reported using different coordinate system; Zhongjia Mining recently reconciled all the survey results and converted all coordinates to China Xian 1980 system. SRKs resource estimation as stated in this Report used the topography map dated 31 January 2013 and provided to SRK by Zhongjia Mining.
8.3 Other
Regional geochemical and geophysical investigations have been conducted by various geological brigades and institutes during the reconnaissance stage. SRK has not been provided with such data for review. Inventory density determination was based on tests using a total of 81 samples collected from the deposit over various periods: seven (7) samples were taken in 1998, 35 samples were taken in 2002, 32 samples in 2007, and seven (7) in 2010.
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9.3 Drilling
A total of 96 diamond drill holes have been completed since 2005, including 19 underground drill holes with a total length of 2,170 m and 77 surface drill holes with an aggregate length of 19,943 m. Drilling was conducted by No. 3 Geological Institute. A total of 1,524 samples were collected from the underground drilling and 13,316 samples were collected from the surface drilling. Drilling was performed using mostly HQ and a few NQ sized drill rods. More than half of the holes were drilled with dips of -60 or -45 to the northwest, and a few were drilled vertically (dip angle -90). Core recoveries generally averaged above 94% and recoveries of mineralized intersections were greater than 96%. The statistics and calculations were performed by No. 3 Geological Institute.
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F Figure 9-1: D Distribution o of the Diamo ond Drilling and Trench hing
oration genera ally followed d a sectional layout, desi igned with a number of exploration e li ines oriented d The explo northwest-southeast. T The designed d exploration n lines cross-cut the go old enriched mineralized d veins with h overall northeasterly st trikes. The e exploration li ines were spa aced about 60 0 m apart an nd drill holes on a 60 m 80 m grid were supple emented by surface s trench hing spaced about 30 m to 60 m apar rt. The vertic cal extension n of the gold d mineraliza ation was ver rified by und derground cro oss-cuts spac ced about 30 m apart on the levels of f +9 m, -40 m, -80 m, an nd -120 m AS SL.
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that since no QP was responsible for the sampling and sample preparation process in 2008, these samples were not reviewed for a technical report under NI 43-101 guidelines.
The high failure rate for analyses of standard CDN-GS15A is noteworthy: 58% for the drill program and 78% for the trench program. Failures include both over and under-estimations. These results suggest that high assay values may be inaccurate, either positively or negatively, and such a high failure rate could potentially compromise the quality of the dataset, except for the fact that only 18 of the nearly 5,000 assays exceed 10 g/t, so the potential impact is considered to be negligible. The accuracy of analyses for the remaining standards is considerably better and improves markedly at the lower analytical levels. This suggests that the majority of assay values obtained from the 2007 exploration programs are accurate.
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It is not kn nown what, if any, remed dial action w was taken by Majestic wit th respect to the out-of-bo ound values. Wardrop considers c tha at the assays s are suitable e for use in the resource e estimation that t is the su ubject of this s report. is of the opin nion that samp mple preparat tion, analyses s and security ty are accept table. Wardrop i SRK notes s that SGS has h its own pr rotocols for q quality contr rol applying s standards, blanks and rep peated assays s as well. rned the sam mple pulps an nd coarse rej ejects to Zho ongjia Mining. The samp ple rejects an nd pulps are e SGS retur stored toge ether with dr rill cores in a security faci ility near Zho ongjia Minin ngs office bu uilding.
F Figure 10-1: Storage of C Coarse Reje ects, Pulps, a and Drill Co ores
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11 Data Verification
11.1 Verifications by Majestic and Wardrop
The exploration data used for resource estimation in this Report was compiled by Majestic; a majority of it was previously used by Wardrop in preparation of the PEA report issued in 2011. Wardrop stated in 2011 that they have digitally verified both drill assays (73%) and trench assays (18%) as received from Majestic against assay reports issued by SGS. No errors or discrepancies were found in either dataset.
The random check results verified that the gold mineralization is distributed broadly within the Linsishan Formation conglomerate with gold grades varying from about 0.1 g/t up to several grams per tonne. A total of 102 coarse rejects (1 mm sized) and 48 pulp duplicates (75 microns sized) were selected by SRK for an independent verification purpose. The samples were collected from Zhongjia Minings sample storage located near Songjiagou Mine; each sample was approximately bout 200 g in weight. The coarse rejects with about 1 mm grain size were further pulverized to 75 microns (m) in the ALS Chemical Assaying Laboratory in Guangzhou, China (ALS). All of the verification samples were analyzed by ALS. The applied method was aqua regia digestion followed by fire assay.
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The verification sample results were compared with their counterparts amongst the original assays. A detailed log of the verification samples is provided in Appendix D. The performances of coarse reject and pulp duplicate assays are illustrated in Figure 11-1 and Figure 11-2, respectively. In general there are notable discrepancies between coarse rejects and the original assays. About half of the comparable results show relative deviations within a range from -20% to 20%, but the rest (about 50%) show relatively large deviations. These discrepancies may be generated by the nugget effect, uneven splitting and reduction during sample preparation, and/or different chemical analysis approaches, as well as improper sample handling. Since the gold mineralization at Songjiagou Project is generally greater than 0.3 g/t Au, the discrepancies arisen in the coarse reject assays are considered reasonable overall for the style of mineralization under consideration, although SRK is of the opinion that the Songjiagou Mines sample preparation might be revisited to that ensure all processes were compliant with QA/QC protocols. Comparatively, the pulp duplicate assays returned acceptable results considering a cut-off grade of 0.3 g/t Au.
4.50 4.00 3.50 3.00
VerificationAu g/t
0.50
1.00
1.50
3.00
3.50
4.00
4.50
samples
linear trendline
20%deviation
20%deviation
Figure 11-1: Performance of Coarse Reject Assays vs. SRK Verification Samples
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0.50
1.00
1.50
3.00
3.50
4.00
4.50
samples
linear trendline
20%deviation
20%deviation
Figure 11-2: Performance of Pulp Duplicate Assays vs. SRK Verification Samples
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The gold recovery rates of both the roughed concentrate and the roughed-plus-scavenged concentrate improve as the primary grind size fineness increases. Results also indicate that the gold-bearing mineral is easily separated from gangue. The laboratory suggested that the optimum primary grind size should be 50% passing 74 m. From SRKs point of view, based on the results presented above, the appropriate grind size is 60% passing 0.074 mm.
Test indicators show that the inventorys characteristics are simple and the inventory is easy to process.
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Database compilation and verification; Data preparation (compositing and capping) for geostatistical analysis and variography; Construction of the block model and grade interpolation; Resource classification and validation; and Preparation of the Mineral Resource Statement.
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Please note that there is a lack of sample analysis results in the database. SRK was told by Majestic that some samples were not collected. According to Majestics reply, the missing samples will not participate in grade estimation. If conditions permit, it is suggested that missing samples should be collected to guarantee full sets of samples being collected from the entire bore hole. The drill holes distribution is shown in Figure 13-1, overlaid on the topographic 3D model converted from the file provided by Majestic. The topographic map uses the Xian 1980 coordinates system on a scale of 1:1,000 and contour intervals of 1 m.
Table 13-1: Characteristic Value Summary of Original Sample Au g/t Uncapped 20,836 Num Samples 0.00 Minimum 263.09 Maximum 0.54 Mean 0.07 Median Standard 4.49 Deviation 20.12 Variance Coefficient of 8.30 Variance 34.72 Skewness 1,605.11 Kurtosis All Data Au g/t Uncapped 3,221 Num Samples 0.00 Minimum 35.80 Maximum 0.32 Mean 0.11 Median Standard 1.19 Deviation 1.43 Variance Coefficient of 3.73 Variance 15.73 Skewness 345.51 Kurtosis Trench Data Au g/t Length Capped 20,836 20,836 0.00 0.02 40.00 476.90 0.47 1.29 0.07 1.00 2.30 5.28 4.91 12.57 186.67 4.08 16.66 3.16 79.05 8,880.95 Drill Hole Data Num Samples Minimum Maximum Mean Median Standard Deviation Variance Coefficient of Variance Skewness Kurtosis Underground Data Num Samples Minimum Maximum Mean Median Standard Deviation Variance Coefficient of Variance Skewness Kurtosis Au g/t Au g/t Length Uncapped Capped 13,316 13,316 13,316 0.00 0.00 0.06 263.09 40.00 476.90 0.37 0.33 1.41 0.06 0.06 1.00 3.65 13.35 9.93 48.51 3,075.98 1.86 3.47 5.73 5.09 25.95 3.61
Au g/t Length Capped 3,221 3,221 0.00 0.30 35.80 2.00 0.32 1.01 0.11 1.00 1.19 1.43 3.73 15.73 345.51 0.07 0.01 0.07 5.22 70.69
Au g/t Au g/t Length Uncapped Capped 4,299 4,299 4,299 0.00 0.00 0.02 237.80 40.00 16.60 1.24 1.02 1.13 0.12 0.12 1.00 7.38 54.46 5.95 19.27 481.91 3.66 13.40 3.58 7.91 72.06 0.49 0.24 0.43 15.36 406.25
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13.4 Co ompositin ng
SRK comp mposited the s sample prior r to grade int terpolation; as a the statist tics of the or riginal sampl les indicated d that 75% o of samples w were 1 m long g (shown in Figure F 13-2), SRK chose 1 m as the le ength for com mpositing.
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Figure e 13-2: Origi inal Sample Length Pro obability Dist tribution His stogram
Len ngth 1.00 0 0.50 1.00 0 0.20 1.00 1.00 1.00 1.02
Uncap pped Gra ade (g/t A Au) 5 55.34 4 47.38 5 53.12 26 63.09 4 41.48 6 66.23 4 41.51 4 48.70
Capped Gra ade (g/t Au) 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00
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Sample Units ZK1 ZK1 ZK13 ZK19 ZK19 ZK19 ZK52 1_CM0_3B 1_YM2N_3B 2_CM4_1_3B 2_CM4_1_3B 2_YM1_3B 2_YM1_3B 2_YM1_3B 2_YM3_3B 3_CM1S_3B 3_YM2N_3B 3_YM2N_3B 3_YM2Nn_3B 3_YM2Sn_3B 4_CM1_3B 4_YM2N_3B 4_YM2Nn_3B 4_YM2Nn_3B L3A L4A
From 22.00 107.20 209.40 224.52 226.53 240.19 192.63 314.61 9.81 3.62 4.77 179.35 281.22 325.63 83.51 19.04 20.02 23.66 20.33 33.72 17.82 10.92 10.77 165.06 161.00 139.50
To 23.10 108.20 210.40 225.52 227.53 240.99 193.03 315.61 10.81 4.62 5.77 180.01 282.22 326.63 84.51 19.99 21.02 24.66 21.33 34.72 18.69 11.92 11.77 166.06 162.50 141.00
Length 1.10 1.00 1.00 1.00 1.00 0.80 0.40 1.00 1.00 1.00 1.00 0.66 1.00 1.00 1.00 0.95 1.00 1.00 1.00 1.00 0.87 1.00 1.00 1.00 1.50 1.50
Uncapped Grade (g/t Au) 41.66 65.56 221.99 42.37 46.43 70.44 64.60 49.07 73.62 47.84 63.44 140.19 207.75 56.62 61.09 47.58 89.79 51.83 139.89 49.30 47.58 117.68 78.03 41.65 237.80 98.05
Capped Grade (g/t Au) 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00
Uncapped Grade (g/t Au) 27,108 0.00 237.80 0.42 0.01 0.05 0.17 3.56 12.71 8.43 36.83 1,859.95
Capped Grade (g/t Au) 27,108 0.00 40.00 0.37 0.01 0.05 0.17 1.91 3.65 5.16 14.09 242.27
Length 27,108 0.10 1.00 0.99 1.00 1.00 1.00 0.07 0.00 0.07 -10.19 110.42
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Item Length Weighted Mean Length Weighted SD Length Weighted Variance Length Weighted CV
Length -
After grade capping, samples with grades less than 0.1 g/t Au account for approximate 63% of total samples, those with grades less than 0.3 g/t Au account for 83%, and those with grades less than 1.2 g/t Au account for 95%. Based on the existing analysis of drillhole data, and from the point of view of spatial distribution of the sample grades, the high and low grade boundaries are not obvious; hence, SRK did not set any such boundary for the resource estimation.
13.6.2 Variograms
During the process of variogram modelling, a lag distance of 2 m was assigned along the downhole, and 10 m in all other directions. Variograms were modelled with nuggets and double spherical structures. Nugget and sill values adopted the modelled results along the downhole. The simulated variogram parameters are shown in Table 13-4, and details are provided in Appendix C. In general, gold has good correlation along the direction of azimuth 90 and dip angle 0 . The modelled range along the downhole is 30 m. horizontally; ranges along east-west direction and south-north axes are 110 m and 80 m respectively. Therefore, the major axis of search ellipsoid is in direction of azimuth 90 and dip angle 0. The ellipsoid has a size of 110 m 80 m 30 m (X Y Z).
Table 13-4: Variogram Parameters Direction Along the downhole 90,0 0,0 0,-90 2.8418 0.4914 Nugget Sill 1 Variation Range 1 3 40 40 10 0.3181 Sill 2 Variation Range 2 30 110 80 30
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Table 13-5: Limits of the Block Model Axis X (Easting) Y (Northing) Z (Elevation) X (Easting) Y (Northing) Z (Elevation) Min. 620,600 4,109,710 -400 Max. 622,509.19 4,111,619.25 150 Block Size 10 10 5 Block Counts 140 130 110
The main criteria and attributes of the block model are shown in Table 13-6.
Table 13-6: Main Criteria and Attributes of Block Model Criteria TOPO KAUUN KAUCA BD DIST ADIST DH# SAM# ZONE CAT Attributes The volume percentage of block unit under surface (as of January 2013) Au Uncapped grade, ordinary kriging interpolation Au Capped grade, ordinary kriging interpolation Bulk density Distance from block unit to nearest sample Average distance from block unit to sample Drill hole counts Sample counts Litho encoding, 1 for conglomerate Resource category encoding, 2 for Indicated, 3 for Inferred
The grade interpolation used ordinary kriging based on the statistical and variogram analysis of the composited samples. The variogram criteria shown in Table 13-4 were used. Quartered circles were used for grade estimation. SRK converted the solid model and imported it into MineSight (see Figure 13-3) for use in creating solid constraints for the grade interpolation.
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Blocks fo or which composite sam mples from no less than n four (4) drill d holes w were used in the grade e interpolati ion were cla assified as In ndicated Min neral Resourc ces. After id dentifying all l Indicated resources, all l remaining g blocks with gold grade v value were cl lassified as In nferred Mine eral Resource es.
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Table 13-8: Indicated Mineral Resources Estimated at the Songjiagou Project Area Cut-off Grade (g/t Au) 0.2 0.3 0.4 0.5 1.0 2.0 3.0 Indicated Resource (kt) 36,815 29,059 24,085 20,163 9,814 5,199 3,466 Gold Grade Uncapped (g/t) 1.28 1.56 1.81 2.07 3.51 5.39 6.87 Gold Grade Capped (g/t) 1.13 1.37 1.58 1.80 2.96 4.36 5.33
Note: The historical depletion has not been considered in this table.
Table 13-9: Inferred Mineral Resources Estimated at the Songjiagou Project Area Cut-off Grade (g/t Au) 0.2 0.3 0.4 0.5 1.0 2.0 3.0 Inferred Resource (kt) 47,521 35,309 28,022 23,084 11,655 6,417 4,086 Gold Grade Uncapped (g/t) 1.18 1.50 1.80 2.09 3.45 5.07 6.44 Gold Grade Capped (g/t) 1.12 1.43 1.71 1.98 3.22 4.74 6.05
Note: The historical depletion has not been considered in this table.
The current mining license covers an area of 0.3421 km2 with an approved mining elevation range from +140 m to -300 m ASL. Therefore parts of the estimated resources shown in Table 13-8 and Table 13-9 are outside of current Songjiagou mining license. Table 13-8 and Table 13-9 show the Indicated and Inferred mineral resources estimated within the current mining license area at various cut-off grades.
Table 13-10: Indicated Mineral Resource within the Current Mining License as of 31 January 2013 Cut-off Grade (g/t Au) 0.2 0.3 0.4 0.5 1.0 2.0 3.0 Indicated Resource (kt) 33,428 26,379 21,964 18,513 9,042 4,997 3,393 Gold Grade Uncapped (g/t) 1.33 1.62 1.87 2.14 3.64 5.47 6.89 Gold Grade Capped (g/t) 1.17 1.41 1.63 1.85 3.05 4.39 5.32
Note: The historical depletion has not been considered in this table.
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Table 13-11: Inferred Mineral Resource within the Current Mining License as of 31 January 2013 Cut-off Grade (g/t Au) 0.2 0.3 0.4 0.5 1.0 2.0 3.0 Indicated Resource (kt) 39,119 28,690 22,592 18,449 9,035 4,542 2,974 Gold Grade Uncapped (g/t) 1.13 1.45 1.75 2.04 3.42 5.33 6.70 Gold Grade Capped (g/t) 1.06 1.35 1.62 1.89 3.12 4.86 6.16
Note: The historical depletion has not been considered in this table.
Songjiagou mine has commenced production since 2006 with underground mining. Related depletion models have not been built due to a lack of 3D data for the underground mined-out area. According to the historical production records provided by Zhongjia Mining, from 1 January 2006 to 31 January 2013, the total underground mining inventory has depleted a total of 444 kt with average grade of 0.85 g/t Au, as shown in Table 13-12.
Table 13-12: Underground Depletion in Songjiagou Mine Period 2006.1 - 2007.12 2008.1 - 2011.3 2011.4 - 2013.1 Total Tonnes (t) 24,756 234,987 183,815 443,555 Mined Grade (g/t Au) 0.88 0.87 0.83 0.85
As of 31 January 2013, at a cut-off grade of 0.3 g/t Au, within the mining area (mining license and exploration permit), Songjiagou Project contains 28,615 kt of Indicated Mineral Resources at an average gold grade of 1.38 g/t and 35,309 kt of Inferred Mineral Resources at an average gold grade of 1.43 g/t. As of 31 January 2013, at a cut-off grade of 0.3 g/t Au, within the current mining license, Songjiagou Project contains 25,935 kt of Indicated Mineral Resources at an average gold grade of 1.42 g/t and 28,690 kt of Indicated Mineral Resources at an average gold grade of 1.35 g/t (Table 13-13).
Table 13-13: Mineral Resources for the Current Songjiagou Mining License as of 31 January 2013 Resource Category Indicated Inferred Tonnes (kt) 25,935 28,690 Gold Grade (g/t) 1.42 1.35
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Table 13 3-14: Tonnag ge and Grad des under Different Cut-offs Cut-off G Grade (g/t A Au) 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 3.0 Tonn nes (kt t) 230,145 120,809 84,3 335 64,3 367 52,1 106 43,2 246 36,7 726 27,3 361 21,4 469 18,2 210 15,7 731 13,8 829 12,5 586 11,6 616 7,552 Percentage (% %) 10 00 52 37 28 23 19 16 12 9 8 7 6 5 5 3 Cap pped Grade (g/t Au) 0.46 0.83 1.13 1.40 1.65 1.89 2.13 2.63 3.10 3.46 3.81 4.12 4.36 4.57 5.72
Note: This tab ble is only intend ded to demonstra ate the impact o of grade sensitiv vity on mineral re esource tonnage e, and does not t represe ent a mineral res source estimate. In this table, m mined-out inventory has not bee en excluded.
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15 Mining
15.1 Current Status
Songjiagou mine is currently in production from the Open Pit and Underground operation.
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SRK summarized the gold grade of the global blocks intersecting with the topography in the resource model. The major features of these blocks are compared with the random sampling results in Table 15-2. The minimum and maximum values of randomly collected samples are within the minimum and maximum scopes of the resource model, indicating that the resource model is reliable. Therefore, pit optimization was carried out based on this resource model.
Table 15-2: Comparison between Open Pit Sampling and Resource Model Item Min. Max. Average SRK Randomly Collected Sample Grade (g/t Au) 0.121 6.340 1.312 SRK Resource Model Grade* (g/t Au) 0.004 7.894 0.257
Note: Only blocks intersecting the topography in the model are included.
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In order to o effectively y control the grade and m match excava ator capacitie es, block size es in the resource model l were set a at 10 m 10 0 m 5 m. T Two benches s were comb bined into on ne during op ptimization, a and the final l bench heig ght is 10 m.
15.3.3 To opography y
The topog graphic data ( (new topo.dtm m) used in pi it optimizatio on was surveyed at the en nd of January y 2013.
15.4.2.1
In this report, the base date of exch hange rate and d price are as ssumed to be e 30 March 2 2013. een US Dolla ars (USD), Chinese Y Yuan (RMB or CNY ), and Canadian Dollars s Exchange rates betwe (CAD) are fixed at USD 1 to R RMB 6.2834 and CAD 1 to RMB 6.2 2789. These conversion r rates are the e averages of o the past ye ear (from 31 M March 2012 to 30 March h 2013) as sho own in Figur re 15-1.
Figu ure 15-1: Tre ends of Exc change Rates s of USD/CN NY and CAD D /CNY
15.4.2.2
All minin ng activities are outsourc ced to Dahe edong. Acco ording to the e contract si igned between Zhongjia a Mining an nd Dahedong g, the modified unit operating cost is dependent o on the feed g grade, as sho own in Table e 15-3.
Ta able 15-3: Modified Unit Operating C Cost
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Feed Grade (g/t) From 0.00 0.30 0.35 0.40 0.45 0.50 To 0.30 0.35 0.40 0.45 0.50 >0.50
Note: When mining occurs below 80 m, both stripping costs and mining costs increase by 0.15 RMB/t every 10 m lower.
15.4.2.3
During pit optimization, the mining recovery rate is 95%, and the dilution rate is 5%. The No. 3 Geological Institute conducted various geological exploration works on the Songjiagou Project, and published the Resource and Reserve Verification Report for the Songjiagou Gold Mine in Mouping District, Yantai, Shandong Province in January 2011. The report states that gold contents in wall rocks and internal waste are generally lower than 0.10 g/t, with occasion maxima reaching 0.50 g/t, and an average of 0.12 g/t. There are no clear boundaries between wall rocks/waste and the ore body, which merge into each other via gradual change and transition. SRK assumed the dilution material has a grade of 0.12 g/t Au. The processing recovery rate is related to the feed grade, as shown in Table 15-4. When the feed grade is no lower than 1.00 g/t Au, the processing recovery rate is 95%.
Table 15-4: Relationship between Processing Recovery Rate and Feed Grade Feed Grade (g/t) 0.20 - 0.30 0.30 - 0.35 0.35 - 1.00 1.00 Gold Recovery Rate (%) 80 85.3 7.0325ln(feed grade, g/t)+93.907 95
15.4.2.4
Management Costs
As the Canadian dollar has weakened against the RMB in recent years, in concert with price inflation and other factors, the management cost is determined at RMB 4.50/t.
15.4.2.5
Gold concentrate is the final product. Production of this concentrate is outsourced to Shandong Humon Smelting Co., Ltd (Humon Smelting). According to the contract signed between Zhongjia Mining and Humon Smelting, the processing charges are RMB 100 per tonne of dry gold concentrate.
15.4.2.6
Resource Tax
15.4.2.7
Gold Price
SRK reviewed the trend of gold prices (shown in Figure 15-2) over the last five years (31 March 2008 - 30 March 2013). Though the gold price has fluctuated during the last few years, it shows a general upward trend.. The economic crisis resulted in a fall in gold prices from the end of 2008 to the beginning of 2009, but
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prices reco overed in 200 09 and peake ed at USD 1,9 900.30 per (t troy) ounce (oz; ( 1 oz = 31.1035 g) i in 2011. Last t year (from m March 2012 2 to March 2013), 2 gold pr rice fluctuate ed between U USD 1,564.3/ /oz and USD D 1,781.3/oz. Based on prices report ted by the W World Bank on 15 January y 2013 (Table 15-5), the price forecas st from 2013 3 to 2025 is USD 1,300 - 1,600/oz.
Table 1 15-5: Gold Price Record ds and Price Forecast Unit USD/oz Unit USD/oz Reco ords 1980 608 2013 1,600 19 990 383 20 014 1,5 550 2000 279 2015 1,500 2010 1,225 2016 1,479 20 011 1,5 569 Fore ecast 20 017 1,4 458 2018 1,437 2019 1,417 202 20 1,3 396 2025 1,300 2012 1,670 -
No ote: Data above are quoted from m the World Ban nk, Development Prospects Gro oup, released 15 5 January, 2013.
SRK selec cted the aver rage gold pr rice over the e last five ye ears, USD 1,355/oz or R RMB 273.89/g gram, as the e price used d for the pit optimization. As a speci ial commodit ty, the price of gold is gre eatly influenced by extern nal factors. SRK S suggests conducting g a detailed study on its demand and supply as we ell as the pric ce during the e feasibility study stage.
Figure 15-2: Gold Pric ce Trends over o the Past t Five Years s
15.4.2.8
Based on the t data supp plied by Maje estic, the ove erall slope is set at 48. The overa all slope recom mmended in the Develop pment and Ut tilization Plan n is no steepe er than 47. nsufficient da ata to suppor rt the design of the overa all slope, and d the bench face f angle, SRK suggests s There is in that slope stability mon nitoring shou uld be enhanc ced, and a ro ock mechanic cs study shou uld be carried d out as soon n as possible e to finalize these t parame eters, in order r to guarante ee production n safety.
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See Table 15-3 RMB/t 4.50 RMB/t 100 % 93.00 % 95.00 % 5.00 g/t Au 0.12 See Table 15-4 RMB/t 5.00 RMB/g % USD:CNY 273.89 48.00 10.00 6.2834 Average of last five years (from 31 March 2008 to 30 March 2013) Empirical value is selected by SRK. Average of the last year (31 March 2012 to 30 March 2013) Average of the last year (31 March 2012 to 30 March 2013)
Five scenarios for the ultimate pit shells were produced and have been studied in the PEA, and described in Error! Not a valid bookmark self-reference.
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Table 15-7: Scenarios Declaration Scenario Operation Capacity (tpd) Declaration Only indicated resources are considered as mining inventory which will be fed to the plant, and inferred resources are treated as waste; According to Safety Regulations for Blasting Practices, pit limits are constrained by the minimum allowable blast safety distance of 200 m, so that the surrounding villages are not impacted. Mining inventory include both indicated resources and inferred resources; According to Safety Regulations for Blasting Practices, pit limits are constrained by the minimum allowable blast safety distance of 200 m, so that the surrounding villages are not impacted. Mining inventory include both indicated resources and inferred resources; The affected villages will be relocated against the target of maximum profits.
7,400
2 2A 3 3A
Scenario 2A is developed based on Scenario 2 by adjusting the operation capacity from 10,000 tpd to 7,400 tpd. The pit optimization and design of Scenario 2A and Scenario 2 are consistent. Scenario 3A is developed based on Scenario 3 by adjusting the operation capacity from 12,000 tpd to 7,400 tpd. The pit optimization and design of Scenario 3A and Scenario 3 are consistent.
15.4.3.1
Scenario 1
Mining inventory only include Indicated Resources for Scenario 1. Pit limits are constrained by the minimum allowable blast safety distance, so that the surrounding villages are not impacted. Chapter 13.6 of Safety Regulations for Blasting Practices (GB6722-2011) defines the allowable safety distance for individual blasting methods; relevant details are provided in Table 15-8.
Table 15-8: Minimum Allowable Safety Distances Blasting Type and Method Minimum Allowable Safety Distance (m) Chunk breaking by adobe blasting 400 m Chunk breaking by short-hole blasting 300 m 200 m (No less than 300 m when the geological conditions are Short-hole bench blasting complex or when no bench working face has been formed) Deep-hole bench blasting As designed, no less than 200 m Chamber blasting As designed, no less than 300 m
Note: When blasting along the slope is conducted, the allowable minimum safety distance down this slope should be increased by 50%.
Short-hole bench blasting is the major method used at the Songjiagou Project. An allowable minimum safety distance of 200 m is selected to constrain pit limits during optimization. Please note that Zhongjia Mining is currently in the process of applying for an enlargement of the mining area. Therefore, the optimized pit limits in Scenario 1 are not constrained by the current approved mining area. A plan view of the optimize shell is presented in Figure 15-3. Its maximum length along the east-west axis is 650 m and its maximum width along the north-south axis is 600 m, with a vertical height of 300 m. The elevation of the lowest pit bottom is -160 m.
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The quant tity of inven ntories within n the optimized pit limit ts are summ marized in Ta able 15-9 (in ncluding the e inventory recovered by y underground mining). Figure 15-4 shows tha at the optimized pit limit ts are outside e the approve ed mining sc cope. SRK n notes that the e actual min ning scope a also exceeds the approve ed mining scope during t the site visit. It is suggested that the e application n for minin ng scope enlargement sh hould be co ompleted as soon as po ossible to g guarantee its s sustainable production n in accordanc ce with the la aw.
Tab ble 15-9: Inve entories within the Optimized Pit Li imits (Scena ario 1) Cut-off f Grade (g/t) 0.3 0.4 0.5 1.0 Ind dicated Tonnes s (kt) 18,35 51 15,62 29 13,25 54 6,59 99 Au (g/t) 1.34 4 1.52 2 1.71 2.75 5 Infe erred Tonnes (kt) 9,217 7,342 6,244 3,125 Au (g/t) 1.25 1.49 1.67 2.66 Waste (kt) 43,079 47,676 51,149 60,923 Stripping Ratio (S.R.) (t/t) 2.85 3.52 4.33 9.71
Notes: *Cu ut-off grade: 0.3 30 g/t Au; dilution materials grad de: 0.12 g/t Au; **M Mining recovery y rate: 95%, dilution rate: 5%; *** *Quantities of m materials recover red by undergro ound mining met thod are not ded ducted.
Fig gure 15-3: Pit Optimization of Scena ario 1 (Azimu uth: 0, Dip: -90)
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15.4.3.2
Scenario 2
Mining inventory include both Indicated Resources and Inferred Resources for scenario 2. Pit optimization is constrained by the minimum allowable blast safety distance of 200 m, so that the surrounding villages are not influenced. According to NI 43-101 guidelines, Inferred Resources generally cannot be converted into Reserves. In the preliminary economic analysis (PEA) stage, Inferred Resources are considered into mining inventory in this optimization. This should not be taken to imply that Inferred Resources can be necessarily converted into Reserves and then mined out. A plan view of the optimized shell is presented in Figure 15-4.Its maximum length along the east-west axis is about 700 m and its maximum width along the north-south axis is about 650 m, with a vertical height of 320 m. The elevation of the lowest pit bottom is -180 m. The quantity of inventories within the optimized pit limits are summarized in Table 15-10 (including the materials recovered by underground mining). Figure 15-4 shows that the optimized pit limits are outside the approved mining scope. SRK noticed that the actual mining scope also exceeds the approved mining scope during the site visit. It is suggested that application for mining scope enlargement should be conducted as soon as possible to guarantee its sustainable production in accordance with the law.
Table 15-10: Inventories within the Optimized Pit Limits (Scenario 2) Cut-off Grade (g/t) 0.3 0.4 0.5 1.0 Indicated Tonnes (kt) 19,938 16,840 14,138 6,963 Au (g/t) 1.30 1.48 1.68 2.73 Inferred Tonnes (kt) 14,718 12,088 10,290 5,274 Au (g/t) 1.42 1.66 1.87 3.00 Indicated +Inferred Tonnes (kt) 34,656 28,928 24,428 12,237 Au (g/t) 1.35 1.56 1.76 2.85 Waste (kt) 63,422 69,150 73,650 85,841 S.R. (t/t) 1.83 2.39 3.01 7.01
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Quantities of materials recovered by underground mining method are not deducted.
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Fig gure 15-4: Pit Optimization of Scena ario 2 (Azimu uth: 0, Dip: -90)
15.4.3.3
Scen nario 3
Mining in nventory incl lude both In ndicated Resources and I Inferred Res sources for s scenario 3. T The affected d villages will w be relocat ted against th he target of maximum m pro ofits. According g to NI 43-1 101 guideline es, Inferred Resources g generally can nnot be converted into Reserves. R In n the PEA s stage, Inferre ed Resources s are conside ered into min ning invento ory in this op ptimization, t this does not t mean that t the Inferred d Resources can be neces ssarily conve erted into Re eserves and t then mined out. o Optimized d pit limits ar re shown in Figure 15-5. . Its maximu um length alo ong the east-w west axis is about 830 m and its ma aximum wid dth along the e north-south h axis is abo out 850 m, w with a vertical height of f 330 m. The e elevation of o the lowest t pit bottom i is -190 m. The quant tity of inven ntories within n the optimiz zed pit limits s are summa arized in Tab ble 15-11 (in ncluding the e materials recovered by y undergroun nd mining). -5 shows tha at the optimiz zed pit limits s are outside the approved d mining sco ope. SRK not ticed that the e Figure 15actual min ning scope a also exceeds s the approv ved mining scope during g the site vi isit. It is su uggested that t application n for minin ng scope enlargement sh hould be co onducted as soon as po ossible to g guarantee its s sustainable production n in accordanc ce with the la aw.
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Tabl le 15-11: Inv ventories wit thin the Opt timized Pit L Limits (Scenario 3) Cut-off C G Grade (g/t) 0.3 0.4 0.5 1.0 Indicated d Tonnes T (kt) 26,568 22,400 18,874 9,365 Au (g/t) 1.36 1.55 1.75 2.85 Inferred To onnes (kt) 23,814 19,565 16,444 8,491 A Au (g/ /t) 1. .45 1. .69 1. .93 3. .11 Indi icated + Inf ferred Tonne es (kt) 50,3 382 41,9 965 35,3 318 17,8 856 Au (g/t) 1.40 1.61 1.84 2.97 Waste (kt) 136,492 144,909 151,556 169,018 S.R. (t/t) 2.71 3.45 4.29 9.47
No ote: *Cut-off grad de: 0.30 g/t Au; dilution materia als grade: 0.12 g/t g Au; **Mining rec covery rate: 95% %, dilution rate: 5 5%; ***Quantities s of materials re ecovered by und derground mining g are not deduc cted.
Fig gure 15-5: Pit Optimization of Scena ario 3 (Azimu uth: 0, Dip: -90)
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Table 15-12: Ultimate Pit Design Parameters Item Bench height Bench face angle Overall slope Safety/cleaning berm width Road width Road gradient Minimum turning radius Unit m m m % m Value 10 65 48 4 - 10 18/12 10 35 Remark
15.4.4.1
Scenario 1
The ultimate pit design results are shown in Figure 15-6 and Figure 15-7. The ultimate pits maximum length along the east-west axis is about 660 m, and the maximum width along the north-south axis is 600 m. The highest elevation of benches is 140 m and the lowest is -125 m. At a bench height of 10 m, there will be a total of 27 benches within the pit. In order to fully utilize the existing road infrastructure, main accesses to the mine are connected with these roads. Haulage roads are arranged in a spiral to reduce the amount of inventory locked underground. The haulage distance from the pit bottom to the pit access is 2,227 m. Although SRK considered the minimum allowable safety distance for blasting, as the boundaries of the pit are quite near the two villages, the following measures are recommended when mining occurs in the upper benches on the sides near the villages.
Select small diameter drills, reduce the blasthole spacing (along the row) and burden (between rows); Strictly control and adjust the charge quantity used in each blasthole based on rock and inventory properties; and Do not break up lump inventory by secondary blasting.
Additionally, shielding measures, such as blast-resistant embankments, wave resistant walls, and protective barriers, should also be constructed to protect nearby plants, equipment, and residential houses. Village residents who may be subjected to potential danger should be informed prior to blasting and evacuated to a safe location. All these measures should be considered for safety production. The existing waste dump associated with small-scale production is located to the southeast of the pit. The dump is not in use currently as all recovered materials are transported directly to the processing plant. According to the mine plan, waste will be separated and transported to the waste dump once a grade control has been in place with the completion of a new laboratory. Based on the preliminary ultimate pit design results, the current waste dump is too small to accommodate all the waste within the ultimate pit. SRK recommends standardizing sampling, optimizing assay methods, and improving grade control. Location selection, land acquisition and design for a large enough dump should also be carried out as soon as possible.
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Figure 15-6: Ultim mate Pit Des sign of Scen nario 1 (Azim muth: 0; Dip p: -90)
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Figure e 15-7: Ultim mate Pit Design of Scena ario 1 (Azim muth: 330; Dip: D -60)
The quant tity of inven ntories within n the ultimat te pit after c considering loss and dilu ution are list ted in Table e 15-13 and d Table 15-14 4(including the th inventory y recovered by b undergrou und mining).
Table 15-1 13: Inventori ies within Ultimate Pit o of Scenario 1 Cut-off G Grade (g/t) ) 0.3 0.4 0.5 1.0 Indicated Tonnes (kt) 17,644 14,961 12,635 6,317 Au u (g/t) 1.34 1.52 1.72 2.77 Inferred Ton nnes (kt) 10,128 8,031 6,810 3,303 A Au (g/t) 1.25 1.49 1.68 2.74 Was ste (k kt) 47,7 771 52,5 551 56,0 098 65,9 923 S.R. (t/t) 3.28 4.05 4.98 10.96
No ote: *Cut-off grad de: 0.30 g/t Au; dilution materia als grade: 0.12 g/t g Au; **Mining recovery rate: 95% %, dilution rate: 5%; ***Inferred resources are re egarded as was ste when calcula ating stripping ra atio; ies of materials recovered by un nderground mining are not dedu ucted. ****Quantiti
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Table 15-14: Inventories by Benches within Ultimate Pit of Scenario 1 Indicated Bench (m) 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 -100 -110 -120 -130 Total Tonnes (kt) 1 16 94 216 324 521 459 351 267 275 1,743 2,003 1,982 1,748 1,441 1,338 1,130 1,086 872 663 324 251 228 180 78 39 15 17,645 Au (g/t) 0.34 0.46 0.93 1.05 0.90 0.92 0.88 0.87 0.78 0.77 1.48 1.42 1.46 1.28 1.16 1.49 1.42 1.66 1.68 1.59 1.07 0.98 1.06 1.36 1.57 1.61 1.68 1.34 Inferred Tonnes (kt) 22 92 255 267 504 600 544 540 628 698 804 880 860 722 547 562 459 394 217 152 118 68 69 74 42 8 10,126 Au (g/t) 0.61 0.84 1.29 0.85 0.97 0.91 0.85 0.76 0.69 1.41 1.53 1.49 1.32 1.26 1.40 1.65 1.67 1.48 1.31 1.12 1.11 1.29 1.23 2.07 2.37 3.24 1.25 Waste (kt) 17 533 1,438 2,341 3,107 3,984 5,040 5,433 5,128 4,759 4,222 2,256 1,477 1,020 894 972 896 666 469 448 543 684 541 378 232 167 100 25 47,770 S.R. (t/t) 533.00 91.25 25.88 15.56 13.12 10.64 13.14 16.16 19.85 17.64 1.69 1.14 0.96 1.00 1.18 1.08 1.09 0.85 0.97 1.15 2.58 2.63 1.96 1.67 3.09 3.64 2.20 3.28
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Inferred resources are regarded as waste when calculating stripping ratio; ****Quantities of materials recovered by underground mining are not deducted.
At a cut-off grade of 0.30 g/t Au, as of 31 January 2013, 17,200 kt of Resources with an average grade of 1.35 g/t Au remain within the ultimate pit, as well as 57,899 kt of waste (include 10,128 kt of Inferred Resources), it has an average stripping ratio of 3.37 t/t.
15.4.4.2
Scenario 2
Results of the ultimate pit design for Scenario 2 are shown in Figure 15-8 and Figure 15-9. The ultimate pits maximum length along the east-west axis is about 730 m, and the maximum width along the north-south axis is 640 m. The highest elevation of benches is 140 m and the lowest is -145 m. At a bench height of 10 m, there will be a total of 29 benches within the limits. In order to fully utilize the existing road infrastructure, main accesses to the mine are connected with these roads. Haulage roads are arranged in a zigzag spiral, mainly in the north of the ultimate pit, in order to reduce the amount of inventory locked underground. At a gradient of 1:10, he haulage distance from the pit bottom to the pit access is about 2,513 m. The road turns back at an elevation of 5 m.
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Although SRK has con nsidered the minimum al llowable safe ety distance for f blasting, boundaries o of the pit are e quite near r the two vill lages, so the e following m measures are recommend ded when min ning occurs in the upper r benches on n the side near the village es.
all diameter d drills, reduce e the spacing between bla astholes along g the row an nd the burden n Select sma (spacing b between rows s); Strictly co ontrol and adj just the charg ge quantity u used in each b blasthole based on rock an nd inventory y properties; ; and Do not bre eak up lump inventory by y secondary blasting. b
Additionally, shielding g measures s such as blast t-resistant em mbankments, wave resista ant walls, an nd protective e barriers, s should be co onstructed to o protect the e nearby pla ants, equipm ment and res sidential hou uses. Village e residents w who may be subject to po otential dange er should be informed pri ior to blasting g and evacua ated to a safe e location. All A these mea asures should d be consider red to manage risks assoc ciated with bl lasting. The existi ing waste du ump associated with sma all-scale prod duction is loc cated to the southeast of f the pit; the e dump is n not currently y in use as a all recovered d materials are a transporte ed directly t to the proces ssing plants. . According g to the mine e plan, waste will be sepa arated and tra ansported to the waste du ump once a grade g control l has been in place with h the completion of a new laborator ry. Based on n the prelimi inary ultimat te pit design n results, the e current wa aste dump is too small to accommoda ate all the wa aste within th he pit. SRK r recommends s standardiz zing sampling g, optimizing assay meth hods, and im mproving gra ade control. Location sel lection, land d acquisition n and design for a large e enough dump p should also be carried ou ut as soon as s possible.
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Figure 15-8: Ultim mate Pit Des sign of Scen nario 2 (Azim muth: 0; Dip p: -90)
e 15-9: Ultim mate Pit Design of Scena ario 2 (Azim muth: 330; Dip: D -60) Figure
The quant tities of inve entories with hin the ultima ate pit after considering loss and dil lution are lis sted in Table e 15-15 and d Table 15-16 6 (including t the materials ls recovered by b undergrou und mining) ).
Table 15-1 15: Inventori ies within Ultimate Pit o of Scenario 2 Cut-off Grade (g/t) 0.3 0.4 0.5 1.0 Indicated d T Tonnes (kt) 19,520 16,480 13,849 6,756 Au ( (g/t) 1.31 1.48 1.69 2.75 Inferred Ton nnes (k kt) 13,598 10,949 9,237 4,533 Au u (g/t t) 1.3 37 1.6 62 1.8 84 3.0 04 Indi icated +Inf ferred Tonnes s (kt) 33,11 18 27,42 29 23,08 86 11,28 89 Au (g/t) 1.33 1.54 1.75 2.87 Waste (kt) 65,394 71,083 75,426 87,223 S. .R. (t t/t) 1. .97 2. .59 3. .27 7. .73
No ote: *Cut-off grad de: 0.30 g/t Au; dilution materia als grade: 0.12 g/t g Au; **Mining recovery rate: 95% %, dilution rate: 5%; es of materials r recovered by underground minin ng method are n not deducted. ***Quantitie
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Table 15-16: Inventories by Benches within Ultimate Pit of Scenario 2 Bench (m) 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 -100 -110 -120 -130 -140 -150 Total Indicated Tonnes (kt) 1 16 94 216 327 526 460 355 269 281 1,768 2,091 2,145 1,935 1,623 1,471 1,242 1,225 1,074 831 412 304 271 237 130 81 63 52 19 19,519 Au (g/t) 0.34 0.46 0.93 1.05 0.90 0.92 0.88 0.87 0.78 0.76 1.49 1.41 1.41 1.22 1.15 1.43 1.38 1.57 1.53 1.54 1.02 0.91 0.98 1.19 1.37 1.38 1.68 1.74 1.28 1.31 Inferred Tonnes (kt) 22 94 258 276 512 622 545 560 677 863 1,163 1,335 1,315 1,109 812 740 649 552 316 236 210 174 143 140 102 88 59 26 13,598 Au (g/t) 0.61 0.84 1.30 0.85 0.97 0.90 0.85 0.75 0.68 1.56 1.77 1.78 1.67 1.66 1.43 1.45 1.43 1.30 1.17 0.93 0.85 0.81 1.01 2.22 2.12 1.96 1.21 0.89 1.37 Indicated +Inferred Tonnes (kt) 1 38 188 474 603 1,038 1,082 900 829 958 2,631 3,254 3,480 3,250 2,732 2,283 1,982 1,874 1,626 1,147 648 514 445 380 270 183 151 111 45 33,117 Au (g/t) 0.34 0.55 0.88 1.19 0.88 0.94 0.89 0.86 0.76 0.70 1.51 1.54 1.55 1.41 1.36 1.43 1.41 1.52 1.45 1.44 0.99 0.89 0.91 1.12 1.81 1.79 1.84 1.46 1.05 1.33 Waste (kt) 57 752 1,824 2,975 3,910 4,807 6,101 6,844 6,504 6,070 5,448 3,296 2,208 1,532 1,271 1,308 1,354 1,250 974 867 1,011 1,202 1,044 838 652 523 403 232 116 21 65,394 S.R. (t/t) 752.00 48.00 15.82 8.25 7.97 5.88 6.33 7.23 7.32 5.69 1.25 0.68 0.44 0.39 0.48 0.59 0.63 0.52 0.53 0.88 1.85 2.03 1.88 1.72 1.94 2.20 1.54 1.05 0.47 1.97
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Quantities of materials recovered by underground mining are not deducted.
At a cut-off grade of 0.30 g/t Au, as of 31 January 2013, 32,674 kt of resources with an average grade of 1.34 g/t Au remain within the ultimate pit. This includes 19,076 kt of Indicated Resources with an average grade of 1.32 g/t Au, and 13,598 kt of Inferred Resources with an average grade of 1.37 g/t Au. The pit also contains 65,394 kt of waste, and the average stripping ratio is 2.00 t/t.
15.4.4.3
Scenario 3
Results of the ultimate pit design for Scenario 3 are shown in Figure 15-10 and Figure 15-11. The ultimate pits maximum length along the east-west axis is 830 m, and the maximum width along the north-south axis is about 850 m. The highest elevation of benches is 140 m and the lowest is -190 m. At a bench height of 10 m, there will be a total of 33 benches within the pit.
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In order to o fully utilize e the existing g road infras structure, ma ain accesses t to the mine a are connecte ed with these e roads. Hau ulage roads a are arranged i in a zigzag sp piral, mainly y in the north of the ultima ate pit, in ord der to reduce e the amoun nt of invento ory locked un nderground. The haulage distance fro om the pit bo ottom to the pit access is s about 2,98 83 m. The roa ad turns back k at elevation ns of -25 m an nd -85 m. The existi ing waste du ump associated with sma all-scare prod duction is located to the southeast of f the pit, the e ed directly t dump is n not in use cu urrently as a all recovered d materials a are transporte to the proces ssing plants. . According g to the mine e plan, waste will be sepa arated and tra ansported to the waste du ump once a grade g control l has been in place with h the completion of a new laborator ry. Based on n the prelimi inary ultimat te pit design n results, th he current wa aste dump is s too small to accommo odate all the waste withi in the ultima ate pit. SRK K recommen nds standardizing sampli ing, optimizing assay m methods, and d improving grade contr rol. Location n selection, land acquisit tion and design for a large e enough dum mp should al lso be carried d out as soon n as possible.
Figur re 15-10: Ultimate Pit De esign of Sce enario 3 (Azimuth: 0; Di ip: -90)
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Figure e 15-11: Ultim mate Pit Des sign of Scen nario 3 (Azim muth: 330; D Dip: -65)
The quant tity of invent tories within the ultimate e pit are listed in Table 15-17 and Tab ble 15-18 (in ncluding the e materials recovered by y undergroun nd mining), after conside ering loss and d dilution.
Table 15-17: Inventor ries within U Ultimate Pit ( (Scenario 3) ) Cut-off Grad C de (g/t) 0.3 0.4 0.5 1.0 Indica ated Tonnes s (kt) 26,728 8 22,407 7 18,828 8 9,299 9 Au (g/t) 1.34 1.54 1.75 2.85 Inferred Ton nnes ( (kt) 22 2,927 18 8,465 15 5,316 7 7,793 Au (g/t) 1.40 1.66 1.91 3.10 Indica ated +Infer rred Tonnes (kt) 49,655 40,872 34,144 17,092 Au (g/t) 1.37 1.59 1.82 2.96 W Waste (kt) 14 47,507 15 56,290 16 63,018 18 80,070 S.R R. (t/t t) 2. .97 3. .82 4. .77 10. .54
No ote: *Cut-off grad de: 0.30 g/t Au; dilution materia als grade: 0.12 g/t g Au; **Mining recovery rate: 95% %, dilution rate: 5%; es of materials r recovered by underground minin ng method are n not deducted. ***Quantitie
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Table 15-18: Inventories by Benches within Ultimate Pit (Scenario 3) Bench (m) 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 -100 -110 -120 -130 -140 -150 -160 -170 -180 -190 Total Indicated Tonnes (kt) 1 16 94 221 343 546 500 402 322 324 1,799 2,174 2,207 2,044 1,791 1,637 1,447 1,549 1,405 1,338 1,034 986 908 894 730 499 487 446 355 101 86 38 2 26,726 Au (g/t) 0.34 0.46 0.93 1.05 0.92 0.97 0.90 0.87 0.79 0.74 1.48 1.38 1.40 1.20 1.14 1.38 1.34 1.47 1.44 1.46 1.67 1.47 1.46 1.85 1.56 1.27 1.24 1.31 1.21 0.85 1.08 0.70 0.51 1.34 Inferred Tonnes (kt) 22 98 275 317 552 711 598 732 911 1,112 1,510 1,692 1,735 1,578 1,253 1,193 1,305 1,110 1,110 891 822 753 542 610 210 226 156 325 284 150 109 34 22,926 Au (g/t) 0.61 0.82 1.25 0.91 1.03 0.91 0.87 0.67 0.64 1.42 1.63 1.68 1.57 1.55 1.37 1.31 1.35 1.23 1.67 1.91 1.72 1.62 2.10 1.41 2.10 1.93 1.77 0.82 0.86 0.74 0.58 0.49 1.40 Indicated +Inferred Tonnes (kt) 1 38 192 496 660 1,098 1,211 1,000 1,054 1,235 2,911 3,684 3,899 3,779 3,369 2,890 2,640 2,854 2,515 2,448 1,925 1,808 1,661 1,436 1,340 709 713 602 680 385 236 147 36 49,652 Au (g/t) 0.34 0.55 0.87 1.16 0.91 1.00 0.90 0.87 0.71 0.67 1.46 1.48 1.52 1.37 1.33 1.38 1.33 1.42 1.34 1.55 1.78 1.58 1.53 1.95 1.49 1.51 1.46 1.43 1.02 0.86 0.86 0.62 0.50 1.37 Waste (kt) 57 836 2,416 4,453 6,592 8,553 10,748 12,138 11,712 11,014 10,205 7,914 6,542 5,740 5,288 5,141 5,076 4,736 3,786 3,620 3,199 3,139 2,617 2,190 1,845 1,448 1,663 1,236 1,006 634 664 560 406 334 147,508 S.R. (t/t) 836.00 63.58 23.19 13.29 12.96 9.79 10.02 11.71 10.45 8.26 2.72 1.78 1.47 1.40 1.53 1.76 1.79 1.33 1.44 1.31 1.63 1.45 1.32 1.28 1.08 2.35 1.73 1.67 0.93 1.72 2.37 2.76 9.28 2.97
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Quantities of materials recovered by underground mining method are not deducted.
As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, 49,211 kt of resources with an average grade of 1.37 g/t Au remain within the ultimate pit. This includes 26,284 kt of Indicated Resources with an average grade of 1.35 g/t Au, and 22,927 kt of Inferred Resources with an average grade of 1.40 g/t Au. The pit also contains 147,507 kt of waste, and the average stripping ratio is 3.00 t/t.
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SRK used the MineSight Economic Planner (Evaluate) to complete the preliminary production schedule, which is based on the following assumptions:
Mining inventory only include Indicated Resources for Scenario 1; Mining inventory include both Inferred Resources and Indicated Resources for Scenarios 2, 2A, 3 and 3A; Under the premise of material stable supply, high grade resources should be mined first to maximize the NPV; The mine is planned to operate 330 days per year; Power and water supplies can meet the needs of the increased production; A solution to the waste dump constraints will be found; All mining inventory are extracted from the designed ultimate pit; inventory outside the pit are not considered; Constraints of the current approved mining scope and capacity are not considered during scheduling; Dahedong will be able to provide all necessary related mining facilities to meet the requirements of the capacity enlargement project; After one year of construction, the new processing plant will be commissioned; A stockpile will be maintained at the processing plant to balance annual production; A new tailing storage facility which can store all the tailings from processing plants will be in place; Villages which may be affected will be relocated successfully, causing no impact on normal production; and All licenses and permits can be issued to Zhongjia Mining in a timely manner so that production is sustained in accordance with law.
15.5.1.1
Scenario 1
After deducting inventory recovered by underground mining, 106 kt of resources and 2,100 kt of waste (including 985 kt of Inferred Resources) remain within the ultimate pit. At a production capacity of 2,442 ktpa this equates to seven years of mine production. In order to maximize NPV, the remaining resources are temporarily not planned to be mined in the preliminary production schedule. The preliminary production scheduling results are shown in Table 15-19 and Figure 15-12.
Table 15-19: Production Schedule of Scenario 1 Indicated Resources (kt) 2,442 2,442 2,442 2,442 2,442 2,442 2,442 17,094 Mined Grade (g/t Au) 1.77 2.21 1.20 1.14 1.19 1.05 0.94 1.36 Inferred Resources (kt) 1,446 1,123 1,281 1,316 1,083 1,057 1,837 9,143 Mined Grade (g/t Au) 1.09 1.68 1.22 1.28 1.35 1.01 1.28 1.27 Waste (kt) 8,996 6,252 6,150 6,512 5,910 6,351 6,485 46,656 S.R. (t/t) 4.28 3.02 3.04 3.21 2.86 3.03 3.41 3.26
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Inferred resources are regarded as waste when calculating stripping ratio; ****Quantities of materials recovered by underground mining have been deducted.
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The prelim minary prod duction sche eduling is op ptimized base ed on a seri ies of nested d push-backs ks within the e ultimate p pit. It is one o of technicall ly feasible ca ases and may y differ from m the actual s situation. It is suggested d that the pr roduction sch hedule be op ptimized duri ing the feasi ibility study s stage. SRK comp pleted year e end views of the first thre ee years based on the prel liminary prod duction schedule. Details s can be fou und in Appen ndix E.
15.5.1.2
Scen nario 2
The prelim minary produ uction schedu ule can be se een in At a production ca apacity of 3,3 300 ktpa, the life of mine e can reach h 11 years, w with one ye ear for const truction, nin ne years of stable produ uction, and one year of f production n reduction. Table 15-2 20 and Figure 15-13. At a produ uction capac city of 3,300 ktpa, the life e of mine ca an reach 11 years, y with one year for c construction, , nine years s of stable pro oduction, and d one year of f production r reduction.
Table e 15-20: Prod duction Schedule of Sce enario 2 Year 2013 2014 2015 2016 2017 2018 2019 2020
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Mining Inventory Tonnage ( (kt) 2,4 442 3,3 300 3,3 300 3,3 300 3,3 300 3,3 300 3,3 300 3,3 300 Au (g/t t) 1.16 6 1.24 4 2.22 2 1.77 7 1.46 6 1.44 4 1.21 1 1.17 7
Waste (k kt) 8,15 51 9,14 48 6,04 46 6,24 47 6,12 25 5,81 10 5,91 14 5,95 59
S.R. (t/t) 3.34 2.77 1.83 1.89 1.86 1.76 1.79 1.81
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N Note: *Cut-off gra ade: 0.30 g/t Au u; dilution materials grade: 0.12 2 g/t Au; **Mining re ecovery rate: 95 5%, dilution rate: : 5%; ***Quantities of materials recovered by un nderground mining method have e been deducted.
According g to NI 43-10 01 guidelines s, Inferred R Resources ca annot be con nverted into M Mineral Rese erves. In the e PEA stage e, Inferred R Resources ar re considered d into mining g inventory d during prelim minary sche eduling. This s does not m mean that Inf ferred Resou urces can be e necessarily converted in nto Reserves and then mi ined out. The prelim minary prod duction sche eduling is op ptimized bas sed on a ser ries of neste ed pushbacks s within the e ultimate p pit. It is one o of technicall ly feasible ca ases and may y differ from m the actual s situation. It is suggested d that the pr roduction sch hedule be op ptimized duri ing the feasi ibility study s stage.
15.5.1.3
Scen nario 2A
The prelim minary produ uction schedu uling results a are shown in Table 15-21 1 and Figure 15-14. At a prod duction capa acity of 2,44 42 ktpa, the life of mine can reach h 14 years, w with 13 yea ars of stable e production n, and one ye ear of produc ction reductio on.
Table 15-21: Production Sche edule of Sce enario 2A
Mining Inve entory To onnage (kt) Au (g/t) 2,442 1.20 2,442 1.33 2,442 1.90 2,442 1.86 2,442 1.65
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2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
2,442 2,442 2,442 2,442 2,442 2,442 2,442 2,442 928 32,674
1.42 1.38 0.93 0.95 1.21 1.40 1.42 0.91 0.88 1.34
5,099 5,181 4,517 4,741 4,572 4,441 4,276 4,105 1,866 65,39 94
2.09 9 2.12 2 1.85 5 1.94 4 1.87 7 1.82 2 1.75 5 1.68 8 2.01 2.00 0
No ote: *Cut-off gra ade: 0.30 g/t Au; dilution materia als grade: 0.12 g/t Au; **Mining rec covery rate: 95% %, dilution rate: 5 5%; ***Quantities of materials re ecovered by und derground minin ng have been de educted.
According g to NI 43-10 01 guidelines s, Inferred R Resources ca annot be con nverted into M Mineral Rese erves. In the e PEA stage e, Inferred R Resources ar re considered d into mining g inventory d during prelim minary sche eduling. This s does not m mean that Inf ferred Resou urces can be e necessarily converted in nto Reserves and then mi ined out. The prelim minary prod duction sche eduling is op ptimized bas sed on a ser ries of neste ed pushbacks s within the e ultimate p pit. It is one o of technicall ly feasible ca ases and may y differ from m the actual s situation. It is suggested d that the pr roduction sch hedule be op ptimized duri ing the feasi ibility study s stage.
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15.5.1.4
Scenario 3
The preliminary production schedule can be seen in At a production capacity of 3,960 ktpa, the life of mine will be 13 years, with one year for construction, 11 years of stable production and one year of production reduction. Table 15-22 and Figure 15-15. At a production capacity of 3,960 ktpa, the life of mine will be 13 years, with one year for construction, 11 years of stable production and one year of production reduction.
Table 15-22: Production Schedule of Scenario 3 Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total Mining Inventory Tonnage(kt) 2,442 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,209 49,211 Au (g/t) 1.16 2.13 2.19 1.53 1.33 1.12 1.10 1.15 1.16 1.20 1.95 1.13 0.45 1.37 Waste (kt) 8,650 12,315 12,130 12,663 12,042 12,002 12,151 12,242 12,017 12,414 13,483 13,015 2,383 147,507 S.R.(t/t) 3.54 3.11 3.06 3.20 3.04 3.03 3.07 3.09 3.03 3.13 3.40 3.29 0.74 3.00
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%; ***Quantities of materials recovered by underground mining have been deducted
According to NI 43-101 guidelines, Inferred Resources cannot be converted into Mineral Reserves. In the PEA stage, Inferred Resources are considered into mining inventory during preliminary scheduling. This does not mean that Inferred Resources can be necessarily converted into Reserves and then mined out. The preliminary production scheduling is optimized based on a series of nested push-backs within the ultimate pit. It is one of technically feasible cases and may differ from the actual situation. It is suggested that the production schedule be optimized during the feasibility study stage.
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15.5.1.5
Scen nario 3A
The prelim minary produ uction schedu uling results a are shown in Table 15-23 3 and Figure 15-16. At a prod duction capa acity of 2,44 42 ktpa, the life of mine can reach h 21 years, w with 20 yea ars of stable e production n, and one ye ear of produc ction reductio on.
Table 15-23: Production Sche edule of Sce enario 3A
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
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Mining Inventory To onnage (kt) Au (g/t) 2,442 1.24 2,442 1.04 2,442 1.96 2,442 1.73 2,442 1.65 2,442 1.41 2,442 1.28 2,442 1.18 2,442 1.00 2,442 0.95 2,442 1.13 2,442 1.07 2,442 1.55 2,442 1.55 2,442 1.79 2,442 1.42 2,442 1.76
Waste (kt) ) 6,34 48 7,43 36 7,16 66 7,07 78 7,04 47 7,04 41 7,10 00 7,09 90 7,19 91 7,07 73 7,13 33 7,08 82 7,11 14 7,21 16 7,16 68 8,07 73 8,31 12
S.R. (t/t t) 2.6 60 3.0 05 2.9 93 2.9 90 2.8 89 2.8 88 2.9 91 2.9 90 2.9 94 2.9 90 2.9 92 2.9 90 2.9 91 2.9 96 2.9 94 3.31 3.4 40
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Mining Inventory To onnage (kt) Au (g/t) 2,442 1.34 2,442 0.97 2,442 1.61 371 0.49 49,211 1.37
No ote: *Cut-off gra ade: 0.30 g/t Au; dilution materia als grade: 0.12 g/t Au; **Mining rec covery rate: 95% %, dilution rate: 5 5%; ***Quantities of materials re ecovered by und derground minin ng have been de educted.
According g to NI 43-10 01 guidelines s, Inferred R Resources ca annot be con nverted into M Mineral Rese erves. In the e PEA stage e, Inferred R Resources ar re considered d into mining g inventory d during prelim minary sche eduling. This s does not m mean that Inf ferred Resou urces can be e necessarily converted in nto Reserves and then mi ined out. The prelim minary prod duction sche eduling is op ptimized bas sed on a ser ries of neste ed pushbacks s within the e ultimate p pit. It is one o of technicall ly feasible ca ases and may y differ from m the actual s situation. It is suggested d that the pr roduction sch hedule be op ptimized duri ing the feasi ibility study s stage.
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Waste ben nches are 10 m high; ore e benches are e 5 m tall. Benches are c combined in pairs for min ning and the e final bench h height is 10 0 m. The ove erall pit slope e is 48. Track-mou unted drills a are used to bl last holes. Th he blast holes s are 115 mm m in diameter r and 12 - 13 m long. The e blasting pa attern is 4 m spacing and 4 m burden, and emulsio on explosives s are used for r blasting. Mining in nventory is lo oaded by exc cavator and t then transported to the p processing pl lant by truck k (see Figure e 15-17). Dahedong ow wns six DOO OSAN DH30 00LC-7 type excavators w with a bucke et capacity o of 1 m3, and d ght (28) 40 t SHANQI he eavy truck 31 ar trucks. Ea ach truck can n transport ab bout 400 t of f twenty-eig 10 and simila mining inv ventory per day. d The dista ance from m mine to proces ssing plant is about 4 km.
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seamless steel pipes are designed, one in use and the other standby. The pipes are laid from the water sump at the pit bottom to surface. Water from a tank is used to lay the dust on the stopes and roads.
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As the mine is adjacent to two villages, the open pit blasting work should be designed in strict compliant with all relevant standards; and safety management procedures should be carried out at all times. SRK recommends taking all necessary shielding measures to protect the workshop, equipment, and residential houses near the blasting site, such as constructing anti-blasting embankments, wave walls, and protective barriers. If necessary, the mine should inform all villagers who might be affected prior to blasting, so that they can be evacuated to a safe place. In Scenario 3 and 3A, it is assumed that the affected villages need to be relocated. Any issue about village relocation and resettlement may have great impact on production schedule and cause certain influence on its profitability. It is suggested that this issue should be carefully studied in feasibility study stage. Strengthening production management and technical services will help reduce operating costs. SRK also suggests improving organizational structure, introducing geology, mining, surveying and processing professionals and technical personnel, strengthening production management and technical services, so that production can be standardized and operating costs can be reduced.
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16 Recovery Methods
16.1 Introduction
Songjiagou Mine owns three processing plants. Two of them were put into operation in 2006 with capacities of 200 tpd and 1,200 tpd, and the third was put into operation in May 2011 with a capacity of 6,000 tpd. The total processing capacity is 7,400 tpd. Inventory extracted from the underground mine are processed in the 200 tpd plant while the inventory mined in the open pit is processed in the other two plants. The three plants in close proximity, lie about 4.2 km southeast of the open pit. The 1,200 tpd plant is in the centre of the processing area, and the 200 tpd plant and the 6,000 tpd plant are located respectively northwest and east of the 1,200 tpd plant. From 2006 to January 2013, a total of 444 kt of underground run of mine inventory (ROM), with an average grade of 0.85 g/t Au, has been processed in the 200 tpd plant. Similar flowsheets are adopted in the two plants which process the inventory mined from the open pit (the 1,200 tpd plant and the 6,000 tpd plant). The flowsheet comprises conventional three-stage crushing in a closed circuit and grinding in a closed circuit. The slurry has a particle size of 50% >0.074 mm after spiral classification is subjected to a flotation circuit comprising of one stage of roughing, one stage of cleaning, and two stages of scavenging. The gold concentrate is dehydrated and then sent for metallurgical processing. From 2008 to 2012, a total of 2.7767 Mt of ROM with an average grade of 0.30 g/t Au, has been processed in these two plants to produce gold concentrate grading 23.66 g/t Au, with an overall recovery rate of 83.44%.
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16.2.1.1
Primary Crushing
Haul trucks deliver the ROM inventory from the open pit to the primary crushing workshop for grid screening, the underflow of which is sent to the ROM inventory bin. Inventory with particle sizes less than 500 mm are fed to the jaw crusher by a heavy apron feeder, and the jaw crushers discharge is subjected to secondary crushing.
16.2.1.2
Secondary/Tertiary Crushing
A vibrating feeder feeds the primary crushing product to the cone crusher for secondary crushing. The crushers discharge is delivered to the vibrating screen for classification. The screen oversize is conveyed to the cone crusher for tertiary crushing, and its discharge is conveyed back to the vibrating screen for classification. Particles passing the screen (-20 mm) are sent to the fine ore bin.
16.2.1.3
Grinding
The fine ore (-20 mm) is conveyed by the belt feeders to the ball mills. Each ball mill and its respective spiral classifier form a closed circuit for grinding. Ball mill discharge is classified by a spiral classifier. The continuously revolving spirals carry the settled sands up and discharge the sands into the mill feed chute. Overflow from the classifier flows to the flotation conditioning tank.
16.2.1.4
Flotation
The flotation process includes one stage of roughing, one stage of cleaning, and two stages of scavenging. The slurry, mixed with sodium butyl xanthogenate (SBX) and frother (No. 2 oil) in the agitation tank, flows to the head cell of the roughing. The flotation tailings flow to the first scavenger flotation cells for further gold recovery. The rougher flotation concentrate is sent to cleaner flotation for upgrading; The cleaning flotation tailings go back to rougher flotation. The cleaning concentrate is pumped to dewatering facilities. Concentrates from the first and second scavenging are returned to the flotation circuit and tailings flow to tailings pump station. The collector, SBX, No.2 oil, and lime are added to the flotation circuits where required.
16.2.1.5
Concentrate Dewatering
The gold concentrate is thickened in a conventional thickener. The thickener underflow is pumped to ceramic disc filters to further reduce water content. The dewatered concentrate is transported to the smelters.
16.2.1.6
Reagents Handling
All the reagents are prepared and stored separately. The collector and frother are added at appropriate points by metering pumps. Lime slurry is pumped to the addition points by slurry pumps.
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200 tpd plant and 1,2 200 tpd plan nt were calcu ulated cumu ulatively, and d therefore separate figu ures are not t for that year. available f
Ta able 16-1: Historical Pro oduction Figures D Date Process sing Capaci ity (tpd) ROM Tonnage (t) 2 208,337 2 234,984 3 310,626 2,2 214,879 2,7 776,746 Grade (g/t) 0.52 0.87 0.39 0.30 0.30 C Concentrate e Grad de (g/t t) 29.9 92 34.0 02 25.2 24 23.4 45 23.6 66 Gold m metal (g) 98,830.00 188,834 4.00 106,473.47 558,280.61 700,751.66 G Gold recov very rate (%)
Note: * Fig gures for the 6,0 000 tpd plant rep present continuo ous production d data from May 2 2011 to Decemb ber 2012. * *T The 200 tpd and d 1,200 tpd plant ts commenced production p in 20 006, but their pro oduction data we ere not calculate ed separately until 2008.
As shown n in Table 1 16-1 (weigh hted mean), clearly, the ROM grade e has a sign nificant imp pact on gold d processing g indicators. I In general, Songjiagou S go old inventory y is easy to li iberate and process. Wardrop p produced the e graphs show wn in Figure 16-3 and Fig gure 16-4 us sing the proce essing plants s production n data, to sh how the corre elations of RO OM grade, co oncentrate gr rade, and reco overy rate.
Figure 16-3: Correlation C of ROM Gra ade and Con ncentrate Gr rade
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SRK reco ommends tha at Majestic c carry out m more tests to optimise th he processing g technical indicators i to o increase profits.
16.6 La aboratory y
The existing assay lab boratory is eq quipped with h basic titrati ion analytical instruments s to provide routine gold d a regia digest tions. assays by iodine titration after aqua s that a new assay laborat tory is under r construction n and atomic c adsorption a after aqua reg gia digestion n SRK notes will be the e method adopted to ana alyse gold co ontent. Once the new labo oratory is pu ut into use, th he impact of f improper operations on o analytical l precision w will be great tly reduced a and the labo oratory will p play a more e r in guidin ng the processing plant an nd mining gra ade control. effective role
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Figure 17-1 1: Concrete Paved Road d Connecting Mining Ar rea and Proc cessing Plan nt
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The product from the mine is gold concentrate. Shandong Humon Smelting Co., Ltd (Humon Smelting) is commissioned to smelt the gold concentrate. The processing agreement of gold concentrate signed by Zhongjia Mining and Humon Smelting includes the following stipulatons:
No inclusions of stone, sand, bags, or other debris are allowed in the gold concentrate; any volume of impurities will be deducted from the total tonnage processed by Humon Smelting. Concentrate sent to the smelter should have an even grade distribution; otherwise, Humon Smelting has the right to charge according to the minimum grade. At least 70% of the gold concentrate should pass -200 meshes in size; otherwise, Humon Smelting has the right to treat it as lump ore and charge RMB 50/t for grinding. Humon Smelting picks up the gold concentrate at the mine and bears the cost for delivery. Humon Smelting charges RMB 100/t of ore powder for dry ore processing. For deliveries whose gold grade is less than 20 g/t, the average grade among the deliveries should be used for settlement. If the silver grade is greater than or equal to 150 g/t, smelting will be charged at RMB 0.7/g; other elements are not priced.
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Chinese national environmental regulatory requirements; and Equator Principles (World Bank/International Finance Corporation (IFC) environmental and social standards and guidelines) and internationally recognised environmental management practices.
The site visit for the environmental review was undertaken from 30 October to 1 November 2012.
No EIA reports and approval for the 1,200 tpd or 6,000 tpd processing plants have been sighted as part of this review. The details of the Water and Soil Conservation Plan (WSCP) reports and approvals for the Songjiagou Project are presented below. Table 19-2: WSCP Reports and Approvals
Project Songjiagou Gold Mine Yantai City Muping District Songjiagou Mining and Processing Project Produced By Yantai City Muping District Water Survey Institute Production date Approved By Yantai City Muping District Water Bureau Approval date 9-Aug-11 11-Oct-11
No environmental Final Check and Acceptance (FCA) approvals for the Songjiagou Project have been sighted at the time of this site visit. SRK has sighted the Safety Final Check and Acceptance Assessment Report for the Songjiagou Gold Mine Open Pit Project, which was produced by Shandong Shengtaian Safety Assessment Company on October 2012.
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SRK has not sighted the approval by the relevant safety bureau for the above assessment report. No other safety assessment reports and approvals in relation to the TSF have been sighted as part of this review.
Open pit, roads and living area 11.67 ha; and Processing area 81.47 ha.
Section 4.3.4 of the EIA report for the Songjiagou Mine states the total land disturbance for the mining area will be 110,200 square metres (m2). The disturbed land estimates in the WSCP report and EIA report are generally consistent with SRKs observation at the time of this site visit. No current surveyed documented estimated areas of land disturbance for the Songjiagou Project have been sighted as part of this review. SRK recommends that the operational areas of land disturbed and progressively rehabilitated for the Songjiagou Project be surveyed and recorded on an annual basis.
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The waste rock dump (WRD) is located southeast of the mine site and covers an area of 40,000 m3; the project will generate 4.780,200 m3 of waste rock, of which 198,600 m3 of it is to be stored in the WRD and be finally backfilled while the rest will be reused as construction material. The EIA report also states that the waste rock generated by the previous underground mining is to be fully backfilled. However, SRK observed a temporary waste rock dump (WRD) next to the shaft collar and no records of the rates and volumes of waste rock backfilled/stored for the project have been sighted as part of this review. The Company informed SRK that all of the waste rock from previous mining was reused for road paving. During the site visit, SRK sighted two TSFs constructed for the Songjiagou Project. The Songjiagou Mine reported to SRK that one of the TSFs was closed and that the closure design was under way, and that the TSF other was operating. The preliminary design report for the operating TSF states the total capacity and effective capacity of the TSF are 9,475,800 m3 and 7,106,800 m3 respectively. The Songjiagou Mine reported that the tailings from processing plants are discharged into the operating TSF and about 4,000,000 m3 tailings had already been stored in the TSF. No online monitoring system has been sighted as part of this review. However, SRK noted that a water retaining ditch was constructed and the dam at the operating TSF was being reinforced by rocks at the time of SRKs site visit. SRK has not sighted a comprehensive geochemical/acid rock drainage (ARD) assessment for the Songjiagou Mines waste rock and tailings. However, the EIA report states that a toxic leaching test has been undertaken on the waste rock. The EIA report states that the waste rock is general industrial solid waste; leaching water from this waste rock meets all relevant standards; the discharged leaching water will not affect the water environment.
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SRK observed the water/flood collection system constructed for the TSF and mine site. However, SRK has not sighted any operational water monitoring report and or plans for the project at the time of the site visit.
Use of water sealed blast holes; and Water sprinkling of the waste rock loading area and roads.
The Songjiagou Mine stated that there is a water truck on the mining site. However, SRK did not sight any water trucks during the site visit. SRK did observe the dust collector installed in the 6,000 tpd processing plant.
Install muffler on air compressors; Slow down the speed for vehicles and no hooking; Adopt sound insulation measures; and Conduct explosions in the daytime.
The EIA report states that the noise emissions from normal production (not including blasting) are within the allowed limits. SRK observed that the processing equipment is installed in enclosed rooms and that warning signs for using sound insulating earmuff in the processing workshop are clearly posted. No operational noise monitoring report or plans have been sighted as part of this review.
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methods. The proposed monitoring items comprise domestic wastewater, waste gas, groundwater, noise, and solid waste.
19.5.10
SRK has reviewed the emergency response plan for the Songjiagou Project which describes the projects emergency response process for overall management. The emergency response plan for overall management describes the general rules for accident treatment. No emergency response plans that specifically address the open pit mining and processing plants have been sighted as part of this review. SRK recommends that the Songjiagou Project develop a fully functioning emergency response plan in line with Chinese national requirements and recognised international practices.
19.5.11
The Chinese national requirements for mine closure are covered under Article 21 of the Mineral Resources Law (1996), the Rules for Implementation of the Mineral Resources Law of the Peoples Republic of China (2006), the Land Use Regulations of the Peoples Republic of China (1986.6.25), and the Land Rehabilitation Regulation issued by the State Council on 5 March 2011. In summary these legislative requirements cover the need to conduct land rehabilitation, to prepare a site closure report, and to submit a site closure application for assessment and approval. At the time of the site visit, SRK has not sighted the proposed rehabilitation measures for the roads on site, although these measures were proposed to be put into practice starting in 2011. However, SRK is informed that Majestic Gold has made a plan to conduct land rehabilitation work for the land destroyed by the Songjiagou project in order to minimize the damage caused by mine construction and production activities and improve the utilization of land resources. The frame work of the plan was provided to SRK as below: Due to the climatic conditions and tree growth rate in Muping District, the management and maintenance period of rehabilitation projects is generally three years. Therefore, the total rehabilitation period will comprise the life of mine plus the management and maintenance period. The waste rock and tailings are designed to be piled up in a cone shape; the stacking platforms in the yard and at the top of the slope are horizontal. The volumes of waste rocks and tailings that the waste dump and tailings pond need to accommodate are estimated based on the stripping ratio and the total amount of stripping. The rehabilitation areas for the waste dump and TSF can be estimated based on the results of these calculations. All of the waste rock is expected to be used for backfilling, so the rehabilitation area in the waste dump consists of the bottom area of the cone. The TSF will not be removed, so the rehabilitation area in the TSF consists of the total surface area of the cone. The rehabilitation area of the stope is estimated by measuring the final surface area of pit after all waste rocks have been used for backfill. Excavation costs and transportation costs for the dump truck are included in the waste dumps rehabilitation budget. The backfilled pit stope, waste dump, and TSF should be covered by a layer of topsoil 1 m thick for ecological restoration. A local field and orchard are targeted for ecological restoration by sowing grass seed and planting seedlings according to the actual terrain and conditions surrounding the mine. Table 19-3 presents an illustration of the various components of the rehabilitation investment.
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Table 19-3Rehabilitation Investment Composition of Songjiagou Gold Mine Road construction and maintenance Building demolition and removal Topsoil backfill Formation and consolidation Stope Sowing grass seed Ecological restoration Planting seedlings Rock excavation and transportation Direct Topsoil backfill Direct engineering Waste cost cost Formation and consolidation Dump Sowing grass seed Ecological restoration Planting seedlings Topsoil backfill Formation and consolidation Tailings pond Sowing grass seed Ecological restoration Planting seedlings Miscellaneous expenses Indirect cost Target profit Tax Preliminary engineering cost Engineering supervision cost Final check and acceptance cost Property management cost Relocation compensation Contingency cost Rehabilitation supervision and maintenance cost Dynamic investment
Other costs
The investment on rehabilitation is composed of engineering construction costs, other costs, contingency costs, and supervision and maintenance costs. As rehabilitation is a long-term project, some economic factors such as price increases, inflation, state economic policies, and economic development should be taken into account when calculating the dynamic investment. The actual scale of the mine production and rehabilitation work in future may be different from the currently estimated scope, so a more accurate estimate of future rehabilitation investment should be determined in the feasibility study stage. Rehabilitation is a long-term and complex project carried out continually throughout the entire life of the mine. SRK recommends that the Company conduct a detailed study of the rehabilitation requirements in the feasibility study stage, actively learn from the successful experiences of other mines, determine the appropriate rehabilitation program, and submit it to the relevant authorities for approval.
19.5.12
SRK has reviewed the Safety Assessment Reports as provided by the Songjiagou Mine and is of the opinion that the reports cover items that are generally in line with recognised Chinese industry practices and Chinese safety regulations.
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Basic operational occupational health and safety (OHS) management systems and procedures have been developed for the Songjiagou Project. The OHS management systems and procedures cover basic safety production management for drilling, transportation, boiler management, ventilation, explosive storage, and fire and flood prevention. However, SRK observed that the above OHS management systems and procedures are developed based on the previous underground mining. In addition, the safety assessment report for the Songjiagou Gold Mine Open Pit Project provides safety management measures including open pit mining, flood and fire prevention, explosion, and transportation. SRK notes that these proposed safety management measures could be the basis for operational OHS management systems and procedures. SRK has not sighted, as part of this review, any operational OHS records for the current operations of the Songjiagou Project.
19.5.13
Social Aspects
Songjiagou Mine is located in Wanggezhuang Township, approximately 37 km southwest of Muping District, Yantai City, Shandong Province. The general surrounding land use mainly comprises forest and agriculture land. The main administrative body for the Songjiagou Project is the Shandong Provincial Government, with some delegation of environmental regulation to Yantai City and Muping District. SRK has not sighted any historical or current non-compliance notices and or other documented regulatory directives in relation to the development of the Projects mines and processing operations. The EIA reports do not report any natural reserves and significant cultural heritage sites, within or surrounding the Songjiagou Project. The nearest residents live in Qiansongjiao Village; all are Han Chinese. No land compensation agreements for the Songjiagou Project have been sighted as part of this review. The EIA report for the Songjiagou Mine provided a public participation survey for project construction. The survey results showed 100% support for the project. However, noise and waste rock were raised as the key environmental concerns for the projects development. The Songjiagou Mine informed SRK that from 2008 to 2010, they had donated over RMB 1,000,000 to water supply and road construction for the local village. SRK has not sighted any documentation in relation to any actual or potential impacts of non-governmental organisations on the sustainability of the Songjiagou Projects mine and processing operations.
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Note: The actual mining operation at Songjiagou Mine is contracted out, so there is no cost for the purchase of mining equipment.
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Table 20-2: Future Investment for Scenario 1 No. 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 4 4.1 4.2 4.3 4.4 5 6 7 Item Exploration, feasibility study design and governmental approval Exploration Feasibility study, engineering design and technical services Approval of mining licenses Mining and processing facilities Water supply Road construction Processing facilities Processing workshop Tailings storage facilities Ancillary facilities Camp facilities Laboratory Land lease and relocation Open pit Waste dump Processing plant and tailings pond Relocation and community relations Contingency cost Rehabilitation Total Cost (RMB000) 8,000 4,500 4,000 4,000 12,000 6,000 1,000 13,500 2,000 500 5,000 10,000 30,000 10,000 20,000 70,000 200,500
Table 20-3: Future Investment for Scenario 2 No. 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 2.6 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3 4.4 5 6 7 Item Exploration, feasibility study design and governmental approval Exploration Feasibility study, engineering design and technical services Approval of mining licenses Mining and processing facilities Power upgrade Water supply Road construction Processing facilities Processing workshop Tailings storage facilities Ancillary facilities Camp facilities Mining office Laboratory Warehouse Land lease and relocation Open pit Waste dump Processing plant and tailings pond Relocation and community relations Contingency cost Rehabilitation Total Cost (RMB000) 13,000 18,400 14,000 6,000 14,200 20,000 38,000 28,000 49,500 2,400 1,100 1,500 1,000 11,000 22,000 128,000 36,500 35,250 84,000 523,850
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Table 20-4: Future Investment for Scenario 2A No. 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3 4.4 5 6 7 Item Exploration, feasibility study design and governmental approval Exploration Feasibility study, engineering design and technical services Approval of mining licenses Mining and processing facilities Water supply Road construction Processing facilities Processing workshop Tailings storage facilities Ancillary facilities Camp facilities Mining office Laboratory Warehouse Land lease and relocation Open pit Waste dump Processing plant and tailings pond Relocation and community relations Contingency cost Rehabilitation Total Cost (RMB 000) 14,000 6,300 5,600 5,600 21,000 6,000 1,000 48,000 2,800 500 12,000 24,000 104,000 34,000 20,000 84,000 388,800
Table 20-5: Future Investment for Scenario 3 No. 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 2.6 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3 4.4 5 Item Exploration, feasibility study design and governmental approval Exploration Feasibility study, engineering design and technical services Approval of mining licenses Mining and processing facilities Power upgrade Water supply Road construction Processing facilities Processing workshop Tailings storage facilities Ancillary facilities Camp facilities Mining office Laboratory Warehouse Land lease and relocation Open pit Waste dump Processing plant and tailings pond Relocation and community relations Contingency cost
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Cost (RMB000) 15,000 28,000 17,800 15,000 23,000 25,400 65,000 53,000 67,500 4,600 1,300 2,000 2,000 23,000 23,000 185,000 59,000 52,200
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Item
Table 20-6: Future Investment for Scenario 3A No. 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 2.6 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3 4.4 5 6 7 Item Exploration, feasibility study design and governmental approval Exploration Feasibility study, engineering design and technical services Approval of mining licenses Mining and processing facilities Power upgrade Water supply Road construction Processing facilities Processing workshop Tailings storage facilities Ancillary facilities Camp facilities Mining office Laboratory Warehouse Land lease and relocation Open pit Waste dump Processing plant and tailings pond Relocation and community relations Contingency cost Rehabilitation Total Cost (RMB 000) 20,200 9,100 8,100 8,100 30,300 6,000 1,000 57,300 4,100 500 20,200 30,200 153,000 59,200 20,000 120,000 547,300
Please note that the above future investment plan is based on a rough estimation, and a more accurate plan is required in the feasibility study.
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Table 20-7: Summary of Operating Cost. Item Unit Cost Mining cost RMB/t 11.3 (increase by RMB 0.3/t annually); Stripping cost RMB/t 8.55(increase by RMB 0.3/t annually); Processing cost RMB/t 47.46 Administration cost RMB/t 4.5 Resource tax RMB/t 4.5 Mineral resource compensation fee RMB/year 200,000 Smelting cost RMB/t 100
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Table 20-8: Annual Operating Costs for Scenario 1 (RMB M) Item Mining cost Stripping cost Processing cost Processing cost of gold concentrate Management cost Resource tax Resource compensation Total Total 208.6 525.3 811.3 86.0 76.9 85.5 1.4 1,794.9 2013 27.6 89.3 115.9 16.2 11.0 12.2 0.2 272.3 2014 28.3 65.3 115.9 20.3 11.0 12.2 0.2 253.2 2015 29.1 68.0 115.9 10.8 11.0 12.2 0.2 247.2 2016 29.8 74.0 115.9 10.2 11.0 12.2 0.2 253.3 2017 30.5 68.2 115.9 10.8 11.0 12.2 0.2 248.8 2018 31.3 74.5 115.9 9.4 11.0 12.2 0.2 254.4 2019 32.0 86.1 115.9 8.3 11.0 12.2 0.2 265.8
Table 20-9: Annual Operating Costs for Scenario 2 (RMB M) Item Mining cost Stripping cost Processing cost Processing cost of gold concentrate Management cost Resource tax Resource compensation Total Total 415.4 641.1 1,550.7 162.5 147 163.4 2.2 3,082.2 2013 27.6 69.7 115.9 10.5 11 12.2 0.2 247 2014 38.3 81 156.6 15.1 14.9 16.5 0.2 322.5 2015 39.3 55.3 156.6 27.6 14.9 16.5 0.2 310.4 2016 40.3 59 156.6 21.9 14.9 16.5 0.2 309.3 2017 41.3 59.7 156.6 17.9 14.9 16.5 0.2 307.1 2018 42.2 58.4 156.6 17.7 14.9 16.5 0.2 306.5 2019 43.2 61.2 156.6 14.8 14.9 16.5 0.2 307.4 2020 44.2 63.5 156.6 14.2 14.9 16.5 0.2 310.1 2021 45.2 64 156.6 11.2 14.9 16.5 0.2 308.6 2022 46.2 65.9 156.6 9.9 14.9 16.5 0.2 310.2 2023 7.6 3.4 25.3 1.7 2.4 2.7 0.2 43.2
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Table 20-11: Annual Operating Costs for Scenario 3 (RMB M) Item Mining cost Stripping cost Processing cost Processing cost of gold concentrate Management cost Resource tax Resource compensation Total Total 646 1,517.9 2,316.3 251 221.4 246.1 2.6 5,201.4 2013 27.6 74 115.9 10.5 11 12.2 0.2 251.3 2014 45.9 109 187.9 31.7 17.8 19.8 0.2 412.4 2015 47.1 111 187.9 32.7 17.8 19.8 0.2 416.5 2016 48.3 119.7 187.9 22.6 17.8 19.8 0.2 416.3 2017 49.5 117.4 187.9 19.5 17.8 19.8 0.2 412.2 2018 50.7 120.6 187.9 16.3 17.8 19.8 0.2 413.4 2019 51.9 125.8 187.9 16 17.8 19.8 0.2 419.4 2020 53.1 130.4 187.9 16.8 17.8 19.8 0.2 426 2021 54.3 131.6 187.9 16.9 17.8 19.8 0.2 428.5 2022 55.4 139.7 187.9 17.6 17.8 19.8 0.2 438.4 2023 56.6 155.7 187.9 29 17.8 19.8 0.2 467.1 2024 57.8 154.2 187.9 16.5 17.8 19.8 0.2 454.3 2025 47.8 29 133 5 14.4 16.1 0.2 245.4
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For Scenario 1, mining inventory only include Indicated Resources; For Scenarios 2, 2A, 3 and 3A, mining inventory include Inferred Resources and Indicated Resources; The pre-tax net present value (NPV) is estimated; The basis of the preliminary production plan is the designed ultimate pit (Scenarios 1, 2 and 2A consider the minimum safety distance for blasting, the detailed definition of which is shown in Table 15-8); It is assumed that all extracted inventory are processed within the life of the mine; It is assumed that no grade variation has been caused by stockpiling for the purpose of balancing annual production; and It is assumed that all the products are sold in the period they are produced.
Notes: *The cut-off grade is 0.3 g/t Au, and the grade of the dilution material is 0.12 g/t Au; **Mining recovery rate is 95% and the dilution rate is 5%; and ***Inferred Resources are treated as waste when calculating the stripping ratio.
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Table 21-2: Production Schedule of Scenario 2 Mining Inventory Year Tonnage (kt) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total 2,442 3,300 3,300 3,300 3,300 3,300 3,300 3,300 3,300 3,300 532 32,674 Au (g/t) 1.16 1.24 2.22 1.77 1.46 1.44 1.21 1.17 0.93 0.83 0.90 1.34 8,151 9,148 6,046 6,247 6,125 5,810 5,914 5,959 5,843 5,858 292 65,394 Waste (kt) S.R. (t/t) 3.34 2.77 1.83 1.89 1.86 1.76 1.79 1.81 1.77 1.78 0.55 2.00
Notes: *The cut-off grade is 0.3 g/t Au, and the grade of the dilution material is 0.12 g/t Au; and **The mining recovery rate is 95% and the dilution rate is 5%.
Table 21-3: Production Schedule of Scenario 2A Mining Inventory Year Waste (kt) S.R. (t/t) Tonnage (kt) Au (g/t) 2013 2,442 1.20 5,740 2.35 2014 2,442 1.33 6,354 2.60 2015 2,442 1.90 4,787 1.96 2016 2,442 1.86 4,922 2.02 2017 2,442 1.65 4,794 1.96 2018 2,442 1.42 5,099 2.09 2019 2,442 1.38 5,181 2.12 2020 2,442 0.93 4,517 1.85 2021 2,442 0.95 4,741 1.94 2022 2,442 1.21 4,572 1.87 2023 2,442 1.40 4,441 1.82 2024 2,442 1.42 4,276 1.75 2025 2,442 0.91 4,105 1.68 2026 928 0.88 1,866 2.01 Total 32,674 1.34 65,394 2.00
Note: *Cut-off grade: 0.30 g/t Au; dilution materials grade: 0.12 g/t Au; **Mining recovery rate: 95%, dilution rate: 5%.
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Table 21-4: Production Scheduleof Scenario 3 Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total Mining Inventory Tonnage(kt) 2,442 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,209 49,211 Au (g/t) 1.16 2.13 2.19 1.53 1.33 1.12 1.10 1.15 1.16 1.20 1.95 1.13 0.45 1.37 Waste(kt) 8,650 12,315 12,130 12,663 12,042 12,002 12,151 12,242 12,017 12,414 13,483 13,015 2,383 147,507 S.R. (t/t) 3.54 3.11 3.06 3.20 3.04 3.03 3.07 3.09 3.03 3.13 3.40 3.29 0.74 3.00
Note: *The cut-off grade is 0.3 g/t Au, and the grade of the dilution material is 0.12 g/t Au; and **The mining recovery rate is 95% and the dilution rate is 5%.
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total
Mining Inventory Tonnage (kt) Au (g/t) 2,442 1.24 2,442 1.04 2,442 1.96 2,442 1.73 2,442 1.65 2,442 1.41 2,442 1.28 2,442 1.18 2,442 1.00 2,442 0.95 2,442 1.13 2,442 1.07 2,442 1.55 2,442 1.55 2,442 1.79 2,442 1.42 2,442 1.76 2,442 1.34 2,442 0.97 2,442 1.61 371 0.49 49,211 1.37
Waste (kt) 6,348 7,436 7,166 7,078 7,047 7,041 7,100 7,090 7,191 7,073 7,133 7,082 7,114 7,216 7,168 8,073 8,312 8,290 8,039 8,077 431 147,507
S.R. (t/t) 2.60 3.05 2.93 2.90 2.89 2.88 2.91 2.90 2.94 2.90 2.92 2.90 2.91 2.96 2.94 3.31 3.40 3.39 3.29 3.31 1.16 3.00
Note: *The cut-off grade is 0.3 g/t Au, and the grade of the dilution material is 0.12 g/t Au; and **The mining recovery rate is 95% and the dilution rate is 5%.
Please note that as defined in NI 43-101, Inferred Resources cannot be converted into Reserves. Although Inferred Resources are considered into mining inventory in this PEAs study, this does not mean that Inferred Resource can be necessarily converted into Reserves and then mined out.
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59,632
Value-added tax (VAT), city maintenance and construction tax, educational surcharge and income tax;
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Sunk costs and other costs related to outstanding contracts and land leases; Exchange rate fluctuations; Financing costs; Refundable taxes and tariffs; Time loss caused by bad weather; Time loss caused by irresistible factors; and Relationships with the community.
The base date for calculation of pre-tax NPV is 30 December 2013. The year 0 is 2013 in the study. The discount rate is fixed at 10%. Majestic states that the bank loans and relevant fees for historical investment have now been repaid. Therefore, during preliminary economic analysis, historical investment will not be considered when calculating NPV. It is also assumed that the previous investment into the project will not be recovered. A summary of the pre-tax NPV for each scenario at varying discount rates is presented in the Table 21-5. The annual pre-tax cashflows are presented in the following sections.
Table 21-7: Summary of Scenarios NPVs
Units Scenario1 Scenario 2 Scenario 2A Scenario 3 Scenario 3A RMB M 3,163 5,394 4,995 7,482 5,928 NPV @ 7% USD M 503 858 795 1,191 943 RMB M 2,998 4,882 4,408 6,637 4,915 NPV @ 10% USD M 477 777 702 1,056 782 RMB M 2,899 4,584 4,082 6,164 4,399 NPV @ 12% USD M 461 730 650 981 700
Note: 1 USD: 1RMB = 6.2834
Items
21.5.1 Scenario 1
The annual pre-tax net cash flow is shown in Figure 21-1 and Table 20-8.
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te that the pr re-tax NPV e estimation is s based on th he optimised d preliminary y production plan, which h Please not is one of t technically fe feasible cases s and may be e different fr rom the actu ual condition ns. SRK sugg gests that the e production n plan be op ptimized duri ing the feasib bility study p period.
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Table 21-8: Pre-tax NPV Estimation of Scenario 1 No. 1 1.1 1.2 2 2.1 2.2 2.2.1 2.2.2 2.2.3 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.4 2.4.1 2.4.2 2.5 2.5.1 2.5.2 2.5.3 2.5.4 2.6 2.7 2.8 3 4 Item Cash inflow Business revenue
Recovery of residual value of fixed assets
2020
2021
2022
Subtotal Cash outflow Historical investment Exploration, engineering and approval Exploration FS, design and technical service Governmental approval i.e. mining right Mining and processing facilities Water supply Road construction Processing facilities Processing workshop Tailing storage facilities Auxiliary facilities Camp facilities Laboratory Land lease and relocation Open pit Waste dump Processing plant and TSF Relocation and community relationship Contingency cost Rehabilitation Operating cost Cash outflow subtotal Pre-tax net cash flow Pre-tax NPV (r = 10%)
2 1.5 1.0 1.0 3.0 3.0 0.8 2.0 3 4 3 20 1 272 318 727
1 0.5 1.0 0.5 1.5 3.0 0.2 0.5 2 4 2 1 253 270 1035
1 0.5 0.4 0.5 1.5 1.5 0.2 0.5 1 4 1 1 247 261 447
1 0.5 0.4 0.5 1.5 6 1 1.5 0.2 0.5 0.5 1 4 1 1 253 274 398
1 0.5 0.4 0.5 1.5 1.5 0.2 0.5 1 4 1 1 249 261 443
1 0.5 0.4 0.5 1.5 1.5 0.2 0.5 1 4 1 1 254 267 351
1 0.5 0.4 0.5 1.5 1.5 0.2 0.5 1 6 1 1 266 280 301 21 21 -21 21 21 -21 21 21 -21
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21.5.2 Scenario 2
The annua al pre-tax net t cash flow is s shown in Fi igure 21-2 an nd Table 21-9 9.
te that the pr re-tax NPV e estimation is s based on th he optimised d preliminary y production plan, which h Please not is one of t technically fe feasible cases s and may be e different fr rom the actua al conditions s. SRK recom mmends that t the produc ction plan be e optimized d during the fe easibility stud dy period.
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6.0 14.2 20.0 38.0 28.0 49.5 2.4 1.1 1.5 1.0 11.0 22.0 128.0 36.5 35.25 84.0 3,082 3,606 7,002 4,882
1.0 3.2 2.0 15.0 13.0 9.5 0.4 0.1 1.0 1.0 1.0 2.0 48.0 21.5 35.25 1.0 247 411 274
1.0 2.0 4.0 1.5 1.0 43 62 92 25.0 25 -25 24.0 24 -24 24.0 24 -24
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21.5.3 Scenario 2A A
The annua al pre-tax net t cash flow is s shown in Fi igure 21-3 an nd Table 21-1 10.
te that the pr re-tax NPV e estimation is s based on th he optimised p preliminary production p p plan, which Please not is one of technically t fe feasible cases s and may be e different fro om the actua al conditions s. SRK recom mmends that the produc ction plan be e optimized d during the fe easibility stud dy period.
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14.0 6.3 5.6 5.6 21.0 6.0 1.0 48.0 2.8 0.5 12.0 24.0 104.0 34.0 20.0 84.0
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5 6.0 1.0 1.5 0.2 0.5 0.8 1.0
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
1.0
0.45 0.4 0.4 1.5
15.0 0.2
15.0 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.0 1.0
1.0 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
0.8 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0
4.0
1.0 1.0 20.0 20 -20 25.0 25.0 25 -25 25 -25
3,130 226.8 235.9 229.5 232.6 231.6 234.7 237.5 228.4 233.1 235.9 238.2 238.5 233.7 93.4 313 302 243 246 245 248 251 249 246 249 251 252 247 107 3,519 398 482 878 852 730 592 567 290 304 467 577 588 281 104 7,040
4,408
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21.5.4 Scenario 3
The annua al pre-tax net t cash flow is s shown in Fi igure 21-4 an nd Table 21-1 11.
te that the pr re-tax NPV e estimation is s based on th he optimised d preliminary y production plan, which h Please not is one of t technically fe feasible cases s and may be e different fr rom the actua al conditions s. SRK recom mmends that t the produc ction plan be e optimized d during the fe easibility stud dy period.
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15 28 18
3.0 5.0 7.4 25.0 25.0 25.5 1.0 0.1 1.0 2.0 9.0 9.0 75.0 25.0 52.2 1.0 251 542 143
1.0 1.0 5.0 2.0 1.0 265 266 96 36.0 36 -36 36.0 36 -36 35.0 35 -35
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21.5.5 Scenario 3A A
The annua al pre-tax net t cash flow is s shown in Fi igure 21-5 an nd Table 21-1 12.
te that the pr re-tax NPV e estimation is s based on th he optimised p preliminary production p p plan, which Please not is one of technically t fe feasible cases s and may be e different fro om the actua al conditions s. SRK recom mmends that the produc ction plan be e optimized d during the fe easibility stud dy period.
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1 Cash inflow 1.1 Business revenue 1.2 Recovery of residual value of fixed assets Subtotal 2 Cash outflow 2.1 Historical investment 2.2 Exploration, engineering and approval 2.2.1 Exploration 2.2.2 FS, design and technical service 2.2.3 Governmental approvals i.e. mining right 2.3 Mining and processing facilities 2.3.1 Water supply 2.3.2 Road construction 2.3.3 Processing facilities 2.3.4 Processing workshop 2.3.5 Tailing storage facilities 2.4 Auxiliary facilites 2.4.1 Camp facilities 2.4.2 Laboratory 2.5 Land lease and relocation 2.5.1 Open pit 2.5.2 Waste dump 2.5.3 Processing plant and TSF 2.5.4 Relocation and community relationship 2.6 Contingency cost 2.7 Rehabilitation 2.8 Operating costs Cash outflow subtotal 3 Pre-tax net cash flow 4 Pre-tax NPV (r = 10%)
20.2 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 0.2 9.1 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.10 8.1 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.1 8.1 0.4 0.4 30.3 1.5 1.5 6.0 1.0 57.3 15.0 15.0 4.1 0.5 20.2 30.2 153.0 59.2 20 120 5,450 5,997 10,356 4,915 0.2 0.2 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 6.0 1.0 1.5 0.2 0.5 1.0 1.0 4.0 1.0 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.4 1.5 0.1 0.3
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
1.5 0.2
0.3 0.1
1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 252 254 254 256 258 260 261 267 268 276 280 265 267 268 270 272 274 275 288 282 290 294 757 708 567 486 428 319 276 378 350 623 625
1.0 1.0 1.0 1.0 34.0 33.0 33.0 306 305 301 311 32 319 318 314 324 69 33 33 723 471 248 628 -28 -33 -33
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Figu ure 21-7: Se ensitivity Analysis of NP PV for Scena ario 2 (10,000 tpd)
Figu ure 21-8: Sensitivity Ana alysis of NP PV for Scena ario 2A (7,40 00 tpd)
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Figu ure 21-9: Se ensitivity Analysis of NP PV for Scena ario 3 (12,000 tpd)
Figu ure 21-10: Se ensitivity An nalysis of NP PV for Scena ario 3A (7,40 00 tpd)
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22 Adjacent Properties
No information is available regarding any adjacent properties.
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24.4 Mining
24.4.1 Scenario 1
Despite the limitations imposed by the current mining license, as of 31 January 2013, at a cut-off grade of 0.3 g/t Au, 17,200 kt of resources at an average Au grade of 1.35 g/t remain within the ultimate pit, along with 57,899 kt of waste including 10,128 kt of Inferred Resources; the average stripping ratio is 3.37 t/t. According to the preliminary production schedule, the Scenario 1 pit is anticipated to have seven (7) years of stable production with a capacity of 7,400 tpd.
24.4.2 Scenario 2
At a cut-off grade of 0.30 g/t Au, as of 31 January 2013, 32,674 kt of resources with an average grade of 1.34 g/t Au remain within the ultimate pit. This includes 19,076 kt of Indicated Resources with an average grade of 1.32 g/t Au and 13,598 kt of Inferred Resources with an average grade of 1.37 g/t Au. The pit also contains 65,394 kt of waste, and the average stripping ratio is 2.00 t/t.
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According to preliminary production schedule, the LOM of Scenario 2 pit will be 11 years with a capacity of 10,000 tpd, including one year of construction, nine years of stable production, and one year of production reduction.
24.4.3 Scenario 2A
At a production capacity of 7,400 tpd, the life of mine can reach 14 years, with 13 years of stable production, and one year of production reduction.
24.4.4 Scenario 3
At a cut-off grade of 0.30 g/t Au, as of 31 January 2013, 49,211 kt of resources with an average grade of 1.37 g/t Au remain within the ultimate pit. This includes 26,284 kt of Indicated Resources with an average grade of 1.35 g/t Au, and 22,927 kt of Inferred Resources with an average grade of 1.40 g/t Au. The pit also contains 147,507 kt of waste, and the average stripping ratio is 3.00 t/t. According to preliminary production schedule, the Scenario 3 pit will have a LOM of 13 years with a capacity of 12,000 tpd, including one year of construction, eleven (11) years of stable production and one year of production reduction.
24.4.5 Scenario 3A
At a production capacity of 7,400 tpd, the life of mine can reach 21 years, with 20 years of stable production, and one year of production reduction.
The environmental impact assessment (EIA) report for Yantai Zhongjia Mining Co., Ltds Songjiagou Gold Mine Project (0.135 Mtpa); and The water and soil conservation plan (WSCP) report for Yantai City Muping District Songjiagou Mining and Processing Project.
No EIA reports or approval for the processing plants (1,200 tpd and 6,000 tpd) have been sighted as part of this review.
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No Environmental Final Check and Acceptance (FCA) Approvals for the Songjiagou Project have been sighted at the time of this site visit. SRK has sighted the Safety Final Check and Acceptance Assessment Report for the Songjiagou Gold Mine Open Pit Project, which was produced by Shandong Shengtaian Safety Assessment Company in October 2012. SRK has not sighted the approval by the relevant safety bureau for the above assessment report. No other safety assessment reports or approvals in relation to the tailings storage facility (TSF) have been sighted as part of this review. At the time of the 2012 site visit, the open pit of Songjiagou Mine was generally being developed and/or operated in accordance with the Project EIAs approval conditions. It is SRKs opinion that the environmental and social risks for the Project can be generally managed if Chinese environmental standards and regulatory requirements are followed. In summary the most significant environmental risks for the development of the Songjiagou Project, currently identified as part of the project assessment and in this review, are:
Significant land disturbance, and site rehabilitation and site closure requirements; Poor waste rock dump and TSF management; and Poor water management.
The above inherent environmental risks are categorised as moderate/low risks (i.e., requiring risk management measures). SRK has reviewed the Safety Assessment Reports as provided by the Songjiagou Mine and is of the opinion that the reports cover items that are generally in line with recognised Chinese industry practices and Chinese safety regulations. The operational occupational health and safety (OHS) management system/procedures for the Songjiagou Project have been developed. The OHS management system/procedures cover the basic safety production managements for drilling, transportation, boiler management, ventilation, explosives storage, and fire and flood prevention. However, SRK observed that the above OHS management system/procedures were developed based on the previous underground mining. The safety assessment report for the Songjiagou Project does provide additional safety management measures including measures related to open pit mining, flood and fire prevention, explosion, and transportation. SRK notes that these proposed safety management measures could be the basis for the operational OHS management system/procedures. SRK has not sighted, as part of this review, any operational OHS records for the current operations of the Songjiagou Project.
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The pre-tax NPV is RMB 2,099 M when the gold price decreases by 20%, and the pre-tax NPV is RMB 3,897 M when the gold price increases by 20%. The pre-tax NPV will increase to RMB 3,252 M, if the operating cost falls 20%; the pre-tax NPV will decrease to RMB 2,745 M if the operating cost rises 20%.
24.8.2 Scenario 2
Based on the assumed technical and economic parameters described in Chapter 21, the estimated pre-tax NPV is RMB 4,882 M (about USD 777 M). The pre-tax NPV is RMB 3,421 M when the gold price decreases by 20%, and the pre-tax NPV is RMB 6,343 M when the gold price increases by 20%. The pre-tax NPV will increase to RMB 5,256 M, if the operating cost falls 20%; the pre-tax NPV will decrease to RMB 4,507 M if the operating cost rises 20%.
24.8.3 Scenario 2A
Based on the assumed technical and economic parameters described in Chapter 21, the estimated pre-tax NPV is RMB 4,408 M (about USD 702 M). The pre-tax NPV is RMB 3,109 M when the gold price decreases by 20%, and the pre-tax NPV is RMB 5,708 M when the gold price increases by 20%. The pre-tax NPV will increase to RMB 4,742 M, if the operating cost falls 20%; the pre-tax NPV will decrease to RMB 4,075 M if the operating cost rises 20%.
24.8.4 Scenario 3
Based on the assumed technical and economic parameters described in Chapter 21, the estimated pre-tax NPV is RMB 6,637M (about USD 1,056 M). The pre-tax NPV is RMB 4,580 M when the gold price decreases by 20%, and the pre-tax NPV is RMB 8,694 M when the gold price increases by 20%. The pre-tax NPV will increase to RMB 7,190 M, if the operating cost falls 20%; the pre-tax NPV will decrease to RMB 6,084 M if the operating cost rises 20%.
24.8.5 Scenario 3A
Based on the assumed technical and economic parameters described in Chapter 21, the estimated pre-tax NPV is RMB 4,915 M (about USD 782 M). The pre-tax NPV is RMB 3,383 M when the gold price decreases by 20%, and the pre-tax NPV is RMB 6,446 M when the gold price increases by 20%. The pre-tax NPV will increase to RMB 5,343 M, if the operating cost falls 20%; the pre-tax NPV will decrease to RMB 4,486 M if the operating cost rises 20%.
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25 Recommendations
25.1 Geology
Inferred mineral resources account for approximate 55% of the total resource at a cut-off grade of 0.3 g/t Au for the Songjiagou Project. SRK recommends enhancing exploration throughout the production period to upgrade the resource categories and reduce mining risk. The mine is located in the Mouping-Rushan gold belt and mineralization conditions are good. SRK recommends increased exploration, including step-out drilling within the exploration licensed area.
25.2 Mining
There is insufficient data to support the design of the overall slope and the bench face angle. SRK suggests that slope stability monitoring should be enhanced, and a rock mechanics study should be carried out as soon as possible to finalize these parameters, in order to guarantee production safety. The optimized pit limits are outside the limits of the mining license, and the actual mining capacity exceeds the permitted capacity. The mine is considering to applying for a mining license with larger scope and capacity. To ensure that the mine is operated in compliance with related laws and regulations, the mine should appoint a qualified design institute to prepare a feasibility study for large-scale production as soon as possible, and then submit it to the relevant authorities for approval. Applications for a large scope and capacity mining license and other supporting permits in accordance with local laws and regulations should be conducted. All the mining activities have been outsourced and the mining equipment is provided by contractors. It is suggested that equipment types and quantities should be determined in feasibility study stage to match the production capacity for the large-scale production. Daily production fluctuates significantly. SRK recommends optimizing a detailed schedule during the feasibility study stage so it can be used to guide production. The existing waste dump associated with small-scale production is not in use currently. According to the mine plan, waste will be transported to the waste dump after the new laboratory construction and grade control improvement. Based on the preliminary ultimate pit design results, the current waste dump is not large enough to accommodate all the waste within the ultimate pit. SRK suggests standardizing sampling, optimizing assay methods, and improving grade control. Location selection, land acquisition and design for a large enough dump also should be carried out as soon as possible. As the mine is adjacent to two villages, the open pit blasting work should be designed strictly complying with all relevant standards, and safety management procedures should be carried out at all times. SRK recommends taking all necessary shielding measures to protect the workshop, equipment and residential houses close to the blasting site, such as constructing anti-blasting embankments, wave-walls and protective barriers. If necessary, the mine should inform all villagers who might be affected prior to blasting, so that they can be evacuated to a safe location. Any issue about village relocation and resettlement may have great impact on production schedule and cause certain influence on its profitability. It is suggested that this issue should be carefully studied in feasibility study stage.
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SRK also suggests improving organizational structure, introducing geology, mining, surveying and processing professionals and technical personnel, strengthening production management and technical services, so that production can be standardized and operating costs can be reduced.
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26 References
1. 2. 3. 4. 5. 6. 7. 8. 9. No 3 Geological Mineral Resource Prospecting Institute of Shandong Province, Resource Verification Report of Songjiagou Gold Mine, Mouping Area, Yantai, Shandong, January 2011. Yantai Dehe Metallurgical Design and Research Institute Corporation Limited, Resource Utilization and Development Plan of Songjiagou Gold Mine, Mouping Area, Yantai, Shandong, July 2011. Wardrop Engineering Inc., Preliminary Assessment Technical Report of Songjiagou Project, Shandong Province, China, March 2011. SRK Consulting (China) Ltd, Memo on 18 Months Mining Plan of Songjiagou Gold Mine, June 2011. SRK Consulting (China) Ltd, Technical Report on the Cut off Grade Study of Songjiagou Gold Mine in Wanggezhuang Town, Mouping District, Yantai City, Shandong Province, China, August 2012. Mintec, Minesight Users Manual, 2012. Yantai Jinyuan Machinery Processing and Metallurgy Laboratory, Mouping Dahedong Gold Ore Processing Test Report, February 2010. Majestic Gold Corp, Historical Production Figures, March 2013. Dahedong Mineral Processing Company Limited, Major Equipment Configuration Record, March 2013.
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Hole ID SJ05-01 SJ05-02 SJ05-03 SJ05-04 SJ05-05 SJ05-06 SJ05-07 SJ05-08 SJ05-09 SJ05-10 SJ05-11 SJ05-12 SJ05-13 SJ05-14 SJ05-15 SJ05-16 SJ05-17 SJ05-18 SJ05-19 SJ05-20 SJ05-21 SJ05-22 SJ05-23 SJ05-24 SJ05-25 SJ05-26 SJ06-27 SJ06-28 SJ06-29 SJ06-30 SJ06-31 SJ06-32 SJ06-33 SJ06-34 SJ06-35 SJ06-40 SZK0-1 SZK0-2 SZK0-3 SZK48-1 SZK48-2 SZK56-1 SZK56-2 SZK7-1 SZK7-2 SZK8-1 SZK8-2
Azimuth 330 330 330 330 330 330 330 310 310 310 310 310 310 310 310 130 303 130 130 310 310 130 310 310 310 310 330 330 330 320 320 330 330 333 335 330 310 310 310 310 310 312 310 312 308 310 310
Dip -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -45 -60 -45 -45 -45 -45 -45 -45 -60 -45 -45 -45 -60 -60 -50 -60 -60 -58 -45 -45 -60 -60 -48 -50 -45 -45 -45 -45 -45 -43 -45 -44 -46 -45 -45
Length (m) 150.40 160.00 185.00 150.00 160.00 76.70 77.40 180.00 180.00 150.00 576.05 180.00 180.00 527.70 200.00 200.10 178.40 182.90 61.00 314.00 599.50 183.00 230.10 276.00 600.03 600.14 483.00 471.30 458.16 377.90 391.60 306.13 405.09 418.00 390.22 200.00 130.03 153.67 170.05 130.19 183.45 132.66 180.35 182.12 160.35 50.35 200.04
Easting (m) 1 40621444.51 40621479.20 40621515.56 40621404.09 40621643.52 40621606.88 40621580.98 40621387.18 40621611.88 40621554.94 40621717.37 40621373.63 40621264.44 40621646.99 40621272.43 40621313.80 40621330.60 40621400.09 40621369.07 40621369.09 40621833.91 40621341.69 40621344.87 40621313.80 40621771.39 40621584.82 40621739.65 40621660.71 40621583.03 40621644.76 40621644.76 40621478.99 40621560.69 40621620.12 40621567.73 40621879.99 40621182.78 40621278.81 40621372.08 40621623.51 40621679.78 40621676.07 40621739.85 40621233.08 40621305.66 40621293.79 40621444.00
Northing (m) 1 4110441.09 4110472.74 4110497.29 4110402.52 4110661.80 4110628.62 4110588.69 4110561.08 4110779.21 4110732.57 4110392.23 4110485.43 4110404.87 4110309.67 4110491.75 4110702.67 4110443.02 4110802.12 4110772.01 4110772.05 4110543.57 4110728.25 4110726.28 4110702.67 4110474.98 4110239.31 4110551.71 4110487.23 4110243.75 4110593.89 4110593.89 4110381.03 4110434.07 4110428.54 4110451.51 4111244.63 4110678.33 4110623.32 4110543.44 4110791.68 4110756.09 4110841.20 4110783.72 4110583.98 4110527.25 4110687.78 4110561.83
Elevation (m) * 138.90 139.42 138.39 135.81 119.41 122.07 123.02 137.36 100.34 95.66 129.81 118.62 103.03 113.32 124.17 138.16 109.88 122.16 131.73 131.70 102.20 136.10 135.91 138.16 99.67 102.75 114.71 124.69 102.86 114.56 114.56 130.59 131.54 134.05 134.05 123.00 127.63 119.31 134.66 97.85 88.12 85.93 84.62 114.26 131.90 133.37 131.59
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Hole ID SZK8-3 ZK1 ZK11 ZK13 ZK150 ZK151 ZK16 ZK17 ZK18 ZK19 ZK2 ZK21 ZK23 ZK26 ZK27 ZK28 ZK3 ZK33 ZK35 ZK4 ZK40 ZK41 ZK42 ZK5 ZK51 ZK52 ZK6 ZK7 ZK8 ZK9 CK0-1 CK12-1 CK16-1 CK24-1 CK28-0 CK28-1 CK3-1 CK32-1 CK36-1 CK40-1 CK4-1 CK4-2 CK7-1 CK8-1 TC0-1 TC0-2 TC0-3
Azimuth 310 0 0 0 310 310 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 310 310 0 0 0 0 130 130 130 130 130 130 130 130 130 130 125 130 135 130 130 136 135
Dip -55 -90 -90 -90 -75 -75 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -75 -75 -90 -90 -90 -90 -70 -58 -40 -15 -30 -30 -40 -23 -15 -19 -65 -57 -15 -60 5 4 3
Length (m) 193.38 409.00 403.64 507.76 201.48 200.39 470.62 375.00 250.60 253.74 328.50 80.53 80.20 84.10 64.25 50.81 292.20 70.52 79.61 362.30 70.08 80.76 88.01 315.00 200.04 200.20 440.00 616.90 510.70 530.00 125.70 135.20 146.90 82.00 58.00 62.00 85.00 126.00 111.20 113.00 111.90 25.00 57.50 134.80 45.00 66.30 113.20
Easting (m) 1 40621258.13 40621597.36 40621515.51 40621375.41 40621436.75 40621380.12 40621500.13 40621675.44 40621303.65 40621431.17 40621762.65 40621182.98 40621364.79 40621340.58 40621454.92 40621584.21 40621829.89 40621354.78 40621570.58 40621667.46 40621119.99 40621200.39 40621257.19 40621817.05 40621424.52 40621460.85 40621602.34 40621281.18 40621174.87 40621299.27 40621181.70 40621353.98 40621380.65 40621398.44 40621419.92 40621451.87 40621192.15 40621456.81 40621567.45 40621530.19 40621200.24 40621252.23 40621177.76 40621321.99 40621146.83 40621264.60 40621314.57
Northing (m) 1 4110714.93 4110710.46 4110799.13 4110575.95 4110489.61 4110537.03 4110531.67 4110667.46 4110591.41 4110492.83 4110765.92 4110699.06 4110790.45 4110678.85 4110708.06 4110820.05 4110873.44 4110419.65 4110480.24 4110762.32 4110746.86 4110796.86 4110853.76 4110670.91 4110581.88 4110547.15 4110569.71 4110100.95 4110538.15 4110618.40 4110705.28 4110678.17 4110693.37 4110750.58 4110779.60 4110751.06 4110658.49 4110787.85 4110732.39 4110802.69 4110727.20 4110674.96 4110631.82 4110664.28 4110732.25 4110640.74 4110620.11
Elevation (m) * 141.58 91.98 115.40 139.62 135.24 133.91 132.33 113.22 129.34 133.79 83.55 130.20 129.80 134.90 106.81 104.00 81.09 124.10 133.60 88.65 115.00 133.40 139.80 82.44 132.88 133.08 122.76 82.71 109.96 131.58 129.72 133.23 128.89 123.83 122.81 87.34 121.18 120.73 95.84 112.01 135.40 137.40 114.21 132.65 128.62 123.52 128.65
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Hole ID TC11-1 TC12-1 TC12-2 TC15-1 TC16-1 TC16-2 TC19-1 TC20-1 TC20-2 TC24-1 TC24-2 TC28-1 TC3-1 TC3-2 TC32-1 TC32-2 TC36-1 TC36-2 TC40-1 TC40-2 TC4-1 TC4-2 TC4-3 TC44-1 TC7-1 TC7-2 TC8-1 TC8-2 TC8-3 1_CM0 1_CM0_3B 1_CM10S_3B 1_CM2N_3B 1_CM3N_3B 1_CM4N_3B 1_CM4S_3B 1_CM5S_3B 1_CM6N_3B 1_CM6S_3B 1_CM7S_3B 1_CM8S_3B 1_CM9_3B 1_YM1N_3B 1_YM2N 1_YM2N_3B 1_YM3N_3B 1-CM1
Azimuth 135 130 135 135 130 126 130 130 130 129 135 130 132 151 130 130 130 130 130 130 130 130 154 138 130 135 110 130 128 300 301 312 321 320 326 340 317 321 324 316 316 316 46 15 47 44 315
Length (m) 220.00 105.20 23.00 131.00 181.00 24.40 119.00 33.00 77.30 25.50 127.50 14.00 44.00 137.50 25.00 57.50 21.50 33.00 18.40 21.50 29.00 55.00 71.00 15.00 27.00 174.30 131.00 44.00 44.20 474.90 420.05 13.72 191.26 13.38 13.72 14.02 19.35 240.39 161.83 272.04 11.28 230.00 510.51 331.62 53.60 332.00 230.00
Easting (m) 1 40621153.31 40621272.15 40621439.61 40621198.53 40621245.50 40621474.87 40621176.40 40621350.11 40621473.24 40621365.13 40621477.19 40621408.56 40621131.19 40621303.73 40621437.12 40621539.06 40621481.98 40621590.94 40621517.28 40621611.21 40621178.90 40621331.72 40621387.36 40621554.22 40621136.29 40621219.83 40621193.48 40621290.40 40621407.75 40621557.34 40621556.85 40621742.44 40621311.88 40621350.83 40621370.55 40621538.53 40621560.81 40621430.38 40621580.07 40621617.17 40621631.56 40621649.34 40621450.04 40621285.11 40621426.57 40621282.88 40621650.47
Northing (m) 1 4110612.66 4110747.49 4110607.21 4110536.30 4110809.13 4110617.59 4110515.26 4110760.26 4110656.19 4110786.42 4110690.91 4110787.76 4110699.93 4110581.27 4110804.42 4110716.98 4110804.35 4110713.45 4110815.81 4110730.56 4110746.15 4110616.89 4110581.03 4110825.84 4110664.11 4110598.34 4110762.11 4110694.05 4110595.15 4110463.79 4110464.26 4110826.17 4110689.05 4110739.22 4110761.50 4110632.78 4110657.82 4110825.87 4110675.33 4110689.48 4110714.65 4110748.65 4110536.36 4110654.36 4110554.79 4110657.90 4110747.97
Elevation (m) * 109.68 144.95 124.17 105.72 139.86 118.25 105.42 136.39 113.25 130.78 106.64 124.44 124.68 130.54 120.09 97.63 116.72 95.67 112.23 92.51 136.84 132.79 131.44 109.79 118.96 118.23 136.22 135.28 132.30 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00
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Hole ID 2_CM0 2_CM0_3B 2_CM1_1_3B 2_CM1_2_3B 2_CM1_3_3B 2_CM10_1_3B 2_CM11_1_3B 2_CM2_2_3B 2_CM2_3_3B 2_CM3_1_3B 2_CM3_2_3B 2_CM3_3_3B 2_CM4_1_3B 2_CM4_2_3B 2_CM4_3_3B 2_CM5_1_3B 2_CM5_2_3B 2_CM6_1_3B 2_CM6_2_3B 2_CM7_1_3B 2_CM7_2_3B 2_CM8_1_3B 2_CM9_1_3B 2_CM9_2_3B 2_YM1_3B 2_YM2_3B 2_YM3_3B 3_CM0_3B 3_CM1N_3B 3_CM1S_3B 3_CM2N_3B 3_CM2S_3B 3_CM3N_3B 3_CM3S_3B 3_CM4N_3B 3_CM4S_3B 3_CM5N_3B 3_CM5S_3B 3_CM6N_3B 3_CM6S_3B 3_CM7N_3B 3_YM1N_3B 3_YM1Nn_3B 3_YM1S_3B 3_YM1Sn_3B 3_YM2N_3B 3_YM2Nn_3B
Azimuth 300 301 307 320 319 320 317 324 315 310 316 322 317 342 320 309 319 311 332 313 323 309 319 297 357 358 5 297 311 309 320 316 319 315 320 316 314 315 318 309 316 8 8 217 217 8 8
Dip 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Length (m) 373.00 373.00 28.00 10.62 37.00 15.00 17.10 8.00 21.24 180.96 10.00 33.45 16.00 9.00 20.73 14.56 21.00 15.00 11.00 12.32 10.44 11.00 34.00 9.00 400.00 365.00 126.00 262.00 29.28 23.33 24.00 22.75 10.00 16.61 8.04 61.00 15.00 12.77 8.00 59.00 12.97 360.00 360.00 116.00 116.00 415.00 415.00
Easting (m) 1 40621557.34 40621557.09 40621490.86 40621448.59 40621313.65 40621678.40 40621696.75 40621470.48 40621327.53 40621544.52 40621496.14 40621359.65 40621561.61 40621517.04 40621369.26 40621579.49 40621531.29 40621588.67 40621562.26 40621600.94 40621604.93 40621635.58 40621657.32 40621646.58 40621469.53 40621418.15 40621287.79 40621558.50 40621490.55 40621539.41 40621505.17 40621553.85 40621519.69 40621575.23 40621560.42 40621611.15 40621616.42 40621653.35 40621207.97 40621690.41 40621691.29 40621485.18 40621484.36 40621481.18 40621480.36 40621432.84 40621432.02
Northing (m) 1 4110463.79 4110464.43 4110543.81 4110582.92 4110655.51 4110760.03 4110784.59 4110602.70 4110680.91 4110617.43 4110627.00 4110686.82 4110638.45 4110647.24 4110723.34 4110663.14 4110660.91 4110675.26 4110687.83 4110690.22 4110731.27 4110717.71 4110735.69 4110776.64 4110513.10 4110540.15 4110632.08 4110463.14 4110591.85 4110553.86 4110616.60 4110576.25 4110642.95 4110604.65 4110693.90 4110657.05 4110724.63 4110692.59 4110339.16 4110740.80 4110810.09 4110512.47 4110513.25 4110514.83 4110515.60 4110554.48 4110555.26
Elevation (m) * -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00 -80.00
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Hole ID 3_YM2S_3B 3_YM2Sn_3B 4_CM0_3B 4_CM1_3B 4_CM-1N_3B 4_CM-1S_3B 4_CM2N_3B 4_CM2S_3B 4_CM3N_3B 4_CM3S_3B 4_CM4N_3B 4_CM4S_3B 4_YM1N_3B 4_YM1Nn_3B 4_YM1S_3B 4_YM1Sn_3B 4_YM2N_3B 4_YM2Nn_3B 4_YM2S_3B 4_YM2Sn_3B KDZK1 KDZK2 L2A L3A L3B1 L3B2 L4A L4B UL106-A UL106-C UL106-D UL106-E UL206-A UL206-B UL206-C UL206-D UL206-E UL206-F UL206-G
Azimuth 222 222 309 310 321 316 324 318 314 316 320 316 41 41 223 223 49 49 229 229 310 310 301 303 314 328 310 310 314 320 325 323 330 150 150 330 330 330 140
Dip 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -80 -80 0 0 0 0 0 0 -30 -60 -30 -30 -10 -30 -10 -30 -30 -60 -10
Length (m) 311.00 311.00 181.66 86.66 44.81 48.40 19.04 8.50 17.88 20.40 21.30 23.23 473.00 473.00 78.29 77.70 250.80 250.80 85.43 86.16 120.60 120.30 357.50 252.50 60.00 117.50 180.00 100.00 105.00 99.70 100.36 100.13 65.28 63.24 83.64 65.28 60.52 75.10 43.49
Easting (m) 1 40621428.30 40621427.48 40621556.34 40621551.83 40621425.43 40621490.71 40621517.00 40621561.87 40621541.87 40621589.65 40621590.87 40621633.63 40621496.88 40621496.26 40621496.88 40621496.26 40621447.43 40621446.81 40621447.43 40621446.81 40621472.62 40621523.12 40621556.34 40621556.34 40621609.71 40621558.65 40621556.34 40621551.83 40621681.30 40621511.33 40621497.62 40621483.45 40621501.79 40621502.82 40621578.40 40621676.08 40621515.42 40621357.05 40621550.48
Northing (m) 1 4110556.66 4110557.44 4110463.76 4110543.68 4110475.49 4110429.34 4110606.57 4110573.31 4110625.11 4110585.52 4110663.90 4110624.03 4110508.92 4110509.50 4110508.92 4110509.50 4110548.17 4110548.76 4110548.17 4110548.76 4110529.46 4110493.48 4110463.76 4110463.76 4110659.61 4110692.02 4110463.76 4110543.68 4110753.95 4110621.47 4110612.03 4110585.56 4110575.13 4110574.16 4110684.64 4110760.79 4110650.62 4110689.66 4110649.73
Elevation (m) * -80.00 -80.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -120.00 -40.00 -80.00 -80.00 -80.00 -120.00 -120.00 9.00 9.00 9.00 9.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00 -40.00
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Variogram m
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Coarse Duplicates Assay Result Samples taken on Jan 30 - 31 2012 by SRK Coarse duplicate Original-Au (g/t) ALS-Au (g/t) Original ID D0004167 0.482 0.292 STC15-1 H94 3.830 2.210 STC3-1 H37 0.446 0.188 STC0-1 H35 0.294 0.156 STC0-1 H34 0.210 0.168 STC0-1 H39 0.071 0.047 STC4-1 H17 0.922 0.809 STC4-1 H16 3.380 4.070 STC3-1 H36 0.290 0.189 SCK32-1 H129 0.267 0.522 SCK32-1 H128 0.271 0.154 STC7-1 H175 0.271 0.192 STC7-1 H174 0.292 0.083 STC7-1 H173 0.348 0.359 STC7-1 H171 0.622 0.258 STC7-1 H170 0.323 0.297 STC11-1 H71 0.233 0.177 STC11-1 H75 0.207 0.168 STC7-1 H12 0.640 0.564 STC7-1 H195 0.295 0.234 STC4-1 H07 0.919 0.822 STC4-1 H08 0.270 0.242 STC4-1 H09 2.460 1.855 STC4-1 H10 2.580 2.800 STC4-1 H11 0.849 1.635 STC11-1 H76 0.237 0.167 STC11-1 H80 0.407 0.446 STC11-1 H81 0.614 0.546 STC20-2 H13 0.204 0.190 SCK8-1 H122 0.420 <0.005 SCK8-1 H43 0.423 0.446 SCK8-1 H37 0.304 0.186 SCK12-1 H105 0.238 0.352 SCK7-1 H01 0.564 0.552 SCK7-1 H02 0.326 0.268 SCK7-1 H03 0.422 0.366 SCK7-1 H05 0.236 2.640 SCK16-1 H279 0.949 0.499 SCK28-1 H7 0.597 0.276 SCK28-1 H8 2.510 2.840 SCK28-1 H9 0.289 0.593 SCK12-1 H77 0.430 0.370
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Number SJG001 SJG002 SJG003 SJG004 SJG005 SJG006 SJG007 SJG008 SJG009 SJG010 SJG011 SJG012 SJG013 SJG014 SJG015 SJG016 SJG017 SJG018 SJG019 SJG020 SJG021 SJG022 SJG023 SJG024 SJG025 SJG026 SJG027 SJG028 SJG029 SJG030 SJG031 SJG032 SJG033 SJG034 SJG035 SJG036 SJG037 SJG038 SJG039 SJG040 SJG041 SJG042
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Number SJG043 SJG044 SJG045 SJG046 SJG047 SJG048 SJG049 SJG050 SJG051 SJG052 SJG053 SJG054 SJG055 SJG056 SJG057 SJG058 SJG059 SJG060 SJG061 SJG062 SJG063 SJG064 SJG065 SJG066 SJG067 SJG068 SJG069 SJG070 SJG071 SJG072 SJG073 SJG074 SJG075 SJG076 SJG077 SJG078 SJG079 SJG080 SJG081 SJG082 SJG083 SJG084 SJG085
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
Samples taken on Jan 30 - 31 2012 by SRK Coarse duplicate Original-Au (g/t) ALS-Au (g/t) Original ID SCK12-1 H78 0.946 1.795 SCK16-1 H246 1.430 4.090 SCK16-1 H261 0.815 0.633 SCK16-1 H276 0.700 1.745 SCK16-1 H277 1.650 0.940 SCK16-1 H239 0.666 1.155 SCK16-1 H240 1.090 1.105 SCK8-1 H111 4.480 1.330 SCK8-1 H113 0.342 0.256 SCK8-1 H58 0.973 0.334 SCK8-1 H59 0.764 0.944 SCK8-1 H61 0.630 0.178 SCK8-1 H63 0.347 0.853 SCK32-1 H120 0.981 0.916 SCK32-1 H119 0.770 0.801 SCK32-1 H118 4.420 2.180 SCK32-1 H117 0.685 1.230 SCK28-1 H30 1.660 1.705 SCK16-1 H241 0.335 0.137 SCK16-1 H247 3.040 1.130 SCK16-1 H248 1.130 1.535 SCK16-1 H250 20.000 7.080 SCK16-1 H251 0.360 0.312 SCK8-1 H107 0.684 0.560 SCK28-1 H5 1.670 1.260 SCK16-1 H257 7.300 3.760 SCK16-1 H258 5.560 2.960 SCK16-1 H260 1.560 1.385 SCK28-1 H37 0.534 0.283 SCK28-1 H38 0.337 0.325 SCK28-1 H40 0.739 0.487 SCK28-1 H41 0.317 0.115 SCK8-1 H13 0.371 0.411 SCK12-1 H68 0.572 1.205 SCK8-1 H52 0.406 0.448 SCK8-1 H53 0.531 0.349 SCK16-1 H253 0.460 0.274 SCK16-1 H254 0.387 0.309 SCK12-1 H17 0.687 0.609 SCK16-1 H267 49.200 22.900 SCK28-1 H29 0.734 0.187 SCK0-1 H23 0.230 0.698 STC4-2 H33 0.258 0.329
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Number SJG086 SJG087 SJG088 SJG089 SJG090 SJG091 SJG092 SJG093 SJG094 SJG095 SJG096 SJG097 SJG098 SJG099 SJG100 SJG101 SJG102 SJG103 SJG104 SJG105 SJG106 SJG107 SJG108 SJG109 SJG110 SJG111 SJG112 SJG113 SJG114 SJG115 SJG116 SJG117 SJG118 SJG119 SJG120 SJG121 SJG122 SJG123 SJG124 SJG125 SJG126 SJG127 SJG128
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
Samples taken on Jan 30 - 31 2012 by SRK Coarse duplicate Original-Au (g/t) ALS-Au (g/t) Original ID STC4-2 H35 0.307 0.238 SCK0-1 H122 0.306 0.253 STC4-2 H7 0.597 0.333 STC4-2 H8 0.408 0.193 STC4-2 H10 0.333 0.078 SCK3-1 H18 0.226 0.076 SCK3-1 H33 0.833 0.525 SCK3-1 H25 0.467 0.160 SCK3-1 H28 0.575 0.690 SCK4-1 H11 1.040 0.749 SCK4-1 H12 2.710 2.350 SCK4-1 H19 0.458 0.211 SCK4-1 H18 0.725 0.508 SCK4-1 H17 0.406 0.370 STC24-2 H93 0.562 0.517 STC24-2 H94 0.243 0.173 STC24-2 H95 0.255 0.195 SCK3-1 H66 0.313 0.243 SCK3-1 H68 0.319 0.176 STC24-2 H85 0.411 0.483 STC4-2 H45 0.316 0.194 SCK32-1 H25 0.357 0.431 SCK4-1 H102 0.290 0.123 SCK32-1 H19 1.060 1.235 SCK0-1 H54 0.353 0.133 STC8-1 H115 0.319 0.125 STC8-1 H118 1.700 1.240 SCK32-1 H21 0.703 1.500 SCK32-1 H24 0.856 0.962 SCK32-1 H8 1.060 1.025 SCK4-2 H8 0.594 0.504 SCK4-2 H19 0.334 0.275 SCK4-2 H22 0.988 0.796 SCK4-2 H24 0.800 0.961 SCK4-2 H20 2.860 4.060 SCK4-2 H1 0.395 0.398 SCK4-2 H8 0.704 0.409 SCK4-1 H91 0.731 0.473 SCK4-1 H97 0.385 0.388 SCK4-1 H95 0.777 0.723 SCK4-1 H108 1.050 1.030 SCK4-1 H107 0.575 0.536 SCK4-1 H111 0.464 0.238
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Number SJG129 SJG130 SJG131 SJG132 SJG133 SJG134 SJG135 SJG136 SJG137 SJG138 SJG139 SJG140 SJG141 SJG142 SJG143 SJG144 SJG145 SJG146 SJG147 SJG148 SJG149 SJG150
Samples taken on Jan 30 - 31 2012 by SRK Coarse duplicate Original-Au (g/t) ALS-Au (g/t) Original ID SCK36-1 H21 0.371 0.276 SCK32-1 H19 0.385 0.272 SCK32-1 H25 0.531 0.769 SCK32-1 H28 0.683 0.525 SCK32-1 H21 0.785 0.672 SCK32-1 H27 0.353 0.199 SCK32-1 H52 0.410 0.162 SCK32-1 H53 2.820 2.190 SCK32-1 H54 0.400 0.288 SCK7-1 H2 0.422 0.392 SCK36-1 H3 0.566 0.518 SCK36-1 H4 1.080 1.125 SCK36-1 H2 0.806 0.847 SCK8-1 H9 0.416 0.297 SCK8-1 H77 0.454 0.390 SCK8-1 H10 0.474 0.573 SCK8-1 H75 3.630 3.230 SCK8-1 H11 0.453 0.405 SCK36-1 H1 0.139 0.155 SCK36-1 H2 0.776 1.390 SCK36-1 H3 0.321 1.035 SCK36-1 H4 1.360 1.900
Pulp Duplicates Assay Result Samples taken on Jan 30 - 31 2012 by SRK Pulp duplicate Original ID Original-Au (g/t) ALS-Au (g/t) D0004167 0.482 0.292 STC15-1 H94 3.830 2.210 STC3-1 H37 0.446 0.188 STC0-1 H35 0.294 0.156 STC0-1 H34 0.210 0.168 STC0-1 H39 0.071 0.047 STC4-1 H17 0.922 0.809 STC4-1 H16 3.380 4.070 STC3-1 H36 0.290 0.189 SCK32-1 H129 0.267 0.522 SCK32-1 H128 0.271 0.154 STC7-1 H175 0.271 0.192 STC7-1 H174 0.292 0.083 STC7-1 H173 0.348 0.359 STC7-1 H171 0.622 0.258
Number SJG001 SJG002 SJG003 SJG004 SJG005 SJG006 SJG007 SJG008 SJG009 SJG010 SJG011 SJG012 SJG013 SJG014 SJG015
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
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Number SJG016 SJG017 SJG018 SJG019 SJG020 SJG021 SJG022 SJG023 SJG024 SJG025 SJG026 SJG027 SJG028 SJG029 SJG030 SJG031 SJG032 SJG033 SJG034 SJG035 SJG036 SJG037 SJG038 SJG039 SJG040 SJG041 SJG042 SJG043 SJG044 SJG045 SJG046 SJG047 SJG048 SJG049 SJG050 SJG051 SJG052 SJG053 SJG054 SJG055 SJG056 SJG057 SJG058
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
Samples taken on Jan 30 - 31 2012 by SRK Pulp duplicate Original ID Original-Au (g/t) ALS-Au (g/t) STC7-1 H170 0.323 0.297 STC11-1 H71 0.233 0.177 STC11-1 H75 0.207 0.168 STC7-1 H12 0.640 0.564 STC7-1 H195 0.295 0.234 STC4-1 H07 0.919 0.822 STC4-1 H08 0.270 0.242 STC4-1 H09 2.460 1.855 STC4-1 H10 2.580 2.800 STC4-1 H11 0.849 1.635 STC11-1 H76 0.237 0.167 STC11-1 H80 0.407 0.446 STC11-1 H81 0.614 0.546 STC20-2 H13 0.204 0.190 SCK8-1 H122 0.420 <0.005 SCK8-1 H43 0.423 0.446 SCK8-1 H37 0.304 0.186 SCK12-1 H105 0.238 0.352 SCK7-1 H01 0.564 0.552 SCK7-1 H02 0.326 0.268 SCK7-1 H03 0.422 0.366 SCK7-1 H05 0.236 2.640 SCK16-1 H279 0.949 0.499 SCK28-1 H7 0.597 0.276 SCK28-1 H8 2.510 2.840 SCK28-1 H9 0.289 0.593 SCK12-1 H77 0.430 0.370 SCK12-1 H78 0.946 1.795 SCK16-1 H246 1.430 4.090 SCK16-1 H261 0.815 0.633 SCK16-1 H276 0.700 1.745 SCK16-1 H277 1.650 0.940 SCK16-1 H239 0.666 1.155 SCK16-1 H240 1.090 1.105 SCK8-1 H111 4.480 1.330 SCK8-1 H113 0.342 0.256 SCK8-1 H58 0.973 0.334 SCK8-1 H59 0.764 0.944 SCK8-1 H61 0.630 0.178 SCK8-1 H63 0.347 0.853 SCK32-1 H120 0.981 0.916 SCK32-1 H119 0.770 0.801 SCK32-1 H118 4.420 2.180
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Number SJG059 SJG060 SJG061 SJG062 SJG063 SJG064 SJG065 SJG066 SJG067 SJG068 SJG069 SJG070 SJG071 SJG072 SJG073 SJG074 SJG075 SJG076 SJG077 SJG078 SJG079 SJG080 SJG081 SJG082 SJG083 SJG084 SJG085 SJG086 SJG087 SJG088 SJG089 SJG090 SJG091 SJG092 SJG093 SJG094 SJG095 SJG096 SJG097 SJG098 SJG099 SJG100 SJG101
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
Samples taken on Jan 30 - 31 2012 by SRK Pulp duplicate Original ID Original-Au (g/t) ALS-Au (g/t) SCK32-1 H117 0.685 1.230 SCK28-1 H30 1.660 1.705 SCK16-1 H241 0.335 0.137 SCK16-1 H247 3.040 1.130 SCK16-1 H248 1.130 1.535 SCK16-1 H250 20.000 7.080 SCK16-1 H251 0.360 0.312 SCK8-1 H107 0.684 0.560 SCK28-1 H5 1.670 1.260 SCK16-1 H257 7.300 3.760 SCK16-1 H258 5.560 2.960 SCK16-1 H260 1.560 1.385 SCK28-1 H37 0.534 0.283 SCK28-1 H38 0.337 0.325 SCK28-1 H40 0.739 0.487 SCK28-1 H41 0.317 0.115 SCK8-1 H13 0.371 0.411 SCK12-1 H68 0.572 1.205 SCK8-1 H52 0.406 0.448 SCK8-1 H53 0.531 0.349 SCK16-1 H253 0.460 0.274 SCK16-1 H254 0.387 0.309 SCK12-1 H17 0.687 0.609 SCK16-1 H267 49.200 22.900 SCK28-1 H29 0.734 0.187 SCK0-1 H23 0.230 0.698 STC4-2 H33 0.258 0.329 STC4-2 H35 0.307 0.238 SCK0-1 H122 0.306 0.253 STC4-2 H7 0.597 0.333 STC4-2 H8 0.408 0.193 STC4-2 H10 0.333 0.078 SCK3-1 H18 0.226 0.076 SCK3-1 H33 0.833 0.525 SCK3-1 H25 0.467 0.160 SCK3-1 H28 0.575 0.690 SCK4-1 H11 1.040 0.749 SCK4-1 H12 2.710 2.350 SCK4-1 H19 0.458 0.211 SCK4-1 H18 0.725 0.508 SCK4-1 H17 0.406 0.370 STC24-2 H93 0.562 0.517 STC24-2 H94 0.243 0.173
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Number SJG102 SJG103 SJG104 SJG105 SJG106 SJG107 SJG108 SJG109 SJG110 SJG111 SJG112 SJG113 SJG114 SJG115 SJG116 SJG117 SJG118 SJG119 SJG120 SJG121 SJG122 SJG123 SJG124 SJG125 SJG126 SJG127 SJG128 SJG129 SJG130 SJG131 SJG132 SJG133 SJG134 SJG135 SJG136 SJG137 SJG138 SJG139 SJG140 SJG141 SJG142 SJG143 SJG144
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
Samples taken on Jan 30 - 31 2012 by SRK Pulp duplicate Original ID Original-Au (g/t) ALS-Au (g/t) STC24-2 H95 0.255 0.195 SCK3-1 H66 0.313 0.243 SCK3-1 H68 0.319 0.176 STC24-2 H85 0.411 0.483 STC4-2 H45 0.316 0.194 SCK32-1 H25 0.357 0.431 SCK4-1 H102 0.290 0.123 SCK32-1 H19 1.060 1.235 SCK0-1 H54 0.353 0.133 STC8-1 H115 0.319 0.125 STC8-1 H118 1.700 1.240 SCK32-1 H21 0.703 1.500 SCK32-1 H24 0.856 0.962 SCK32-1 H8 1.060 1.025 SCK4-2 H8 0.594 0.504 SCK4-2 H19 0.334 0.275 SCK4-2 H22 0.988 0.796 SCK4-2 H24 0.800 0.961 SCK4-2 H20 2.860 4.060 SCK4-2 H1 0.395 0.398 SCK4-2 H8 0.704 0.409 SCK4-1 H91 0.731 0.473 SCK4-1 H97 0.385 0.388 SCK4-1 H95 0.777 0.723 SCK4-1 H108 1.050 1.030 SCK4-1 H107 0.575 0.536 SCK4-1 H111 0.464 0.238 SCK36-1 H21 0.371 0.276 SCK32-1 H19 0.385 0.272 SCK32-1 H25 0.531 0.769 SCK32-1 H28 0.683 0.525 SCK32-1 H21 0.785 0.672 SCK32-1 H27 0.353 0.199 SCK32-1 H52 0.410 0.162 SCK32-1 H53 2.820 2.190 SCK32-1 H54 0.400 0.288 SCK7-1 H2 0.422 0.392 SCK36-1 H3 0.566 0.518 SCK36-1 H4 1.080 1.125 SCK36-1 H2 0.806 0.847 SCK8-1 H9 0.416 0.297 SCK8-1 H77 0.454 0.390 SCK8-1 H10 0.474 0.573
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Samples taken on Jan 30 - 31 2012 by SRK Pulp duplicate Original ID Original-Au (g/t) ALS-Au (g/t) SCK8-1 H75 3.630 3.230 SCK8-1 H11 0.453 0.405 SCK36-1 H1 0.139 0.155 SCK36-1 H2 0.776 1.390 SCK36-1 H3 0.321 1.035 SCK36-1 H4 1.360 1.900
HG/QH/YH/CJ/YW/PX/AX/NX/WZ
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CERTIFIC CATE AND D CONSENT T To accom mpany the r report entitled Independ dent Techni ical Report Independen nt Technica al Report of f Songjiago ou Gold Pro oject, Shand dong Provin nce, the Peoples Repub blic of Chin na and dated d August 2, , 2013
I, Anson X Xu, do hereby y certify that t:
1) I am a Principal C Consultant in Geology and Mineral Res sources, partn ner and direct tor with the f firm of SRK Consu ulting (China) Limited (SR RK) with an o office at: B12 205 COFCO Plaza, P 8 Jiangu uomen Nei Dajie, Beijing, the Peo oples Republ lic of China; 2) I gradu uated with a B Bachelors deg gree in Geolo ogy of Mineral l Deposits fro om Nanjing Un niversity, Chi ina (B.Sc.) in 1982, a Masters degree in Geolo ogy of Mineral l Deposits from m Chengdu University U of T Technology, China C (M.Sc.) oral degree in Geology from m University o of Nebraska-Li incoln, USA ( (Ph.D.) in 1996. in 1988, and a Docto y profession sin nce 1982. Fro om 1982 to 1990 I worked in n teaching geo ochemistry an nd geology of I have practiced my eposits in Che engdu Univers sity of Techno ology. From 1990 to 1996 6, I worked in n University of o Nebraskaore de Lincol ln in teaching and researchi ing assistance; and from 19 996 to 2004 I w worked in Ca anadian mining g companies, and sin nce 2005 I wo orked in minin ng consulting business in SRK. S I worke ed in exploration managem ment, resource estima ates, and techn nical review a and preliminar ry economic assessment a and d reporting fo or various type es of mineral deposi its, including iron, gold, silver, copper, nickel, cobalt t, lead-zinc, diamond, d baux xite, and others located in China, , Canada, M Mongolia, Kaz zakhstan, Ind donesian, Phi ilippines, Nor rth Korea, C Congo (King), Cameron, Madag gascar, and Pe eru, etc. I auth hored/co-autho ored several te echnical repor rts for IPO list ting or transac ctions in TSX and Ho ong Kong Stock Exchange 3) I am a fellow of the Australasian Institute of M Mining and Metallurgy (FAu usIMM) (No. 2 224861) since 2005, and in d standing. a good 4) I have visited the su ubject property y from 30 to 31 October 201 12; and 11Apri il 2013. alified Person set out in Nat tional Instrum ment 43-101 an nd certify that t by virtue of 5) I have read the definition of Qua my edu ucation, affilia ation to a prof fessional assoc ciation, and pa ast relevant wo ork experience e, I fulfill the r requirements to be a Qualified P Person for the e purposes of f National Ins strument 43-1 101 and this technical repo ort has been prepar red in complia ance with Natio onal Instrumen nt 43-101 and d Form 43-101 1F1; 6) I, as a Qualified Per rson, am indep pendent of the issuer as defin ned in Section n 1.5 of Nation nal Instrument t 43-101; 7) I am a co-author of this technical l report and ha ave supervised d the independ dent verificatio on completed by SRK and the pre eparation of the t mineral re esource mode el described in n Section 13, and the PEA A studies of t this technical report. . I accept profe fessional respo onsibility those e sections I co o-authored; 8) I have had no prior involvement i w this project; with e read Nationa al Instrument 43-101 and c confirm that th his technical r report has bee en prepared in n compliance 9) I have therew with; 10) SRK Consulting C (C Canada) Inc. w was retained by Majestic Gold Corp to o prepare a t technical repo ort about the Songji iagou Gold pr roject, Shando ong Province, China pursu uant to Canad dian Securities Administrat tors National Instrum ment 43-101 and a Form 43-1 101F1 guidelin nes. The prece eding report is based on a sit te visit, a revie ew of project files, a and discussion ns with Majest tics and Songj jiagou mines. personnel; 11) I have not received, nor do I expe ect to receive, , any interest, directly or indirectly, in the Songjiagou Gold project urities of Maje estic Gold Cor rp; or secu 12) That, as a of the date of this certifi ficate, to the b best of my kno owledge, infor rmation and b belief, this tec chnical report contain ns all scientifi fic and technic cal informatio on that is requ uired to be dis sclosed to mak ke the technic cal report not mislea ading.
A Anson Xu, PhD D, FAusIMM M (#224861) P Principal Cons sultant (Geolo ogy)
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