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:: Welcome To Premier Gold Mine Co. Ltd. © copyright 2004 All right reserved. Enjoy Surfing Our Official Homepage. Thank You. By Management

:: Welcome To Premier Gold Mine Co. Ltd. © copyright 2004 All right reserved. Enjoy Surfing Our Official Homepage. Thank You. By Management

FEASIBILITY WORK
 

The FS was completed by Lycopodium Engineering Pty Ltd (“Lycopodium”) and Cube Consulting Pty Ltd (“Cube”) based on 3.5 and 4.5 million tonnes per annum plant throughput scenarios supported by open pit mining activities.

In addition to previous Pre-Feasibility Study “PFS” work, the Moto Group has spent in excess of US$5M in the 15 months to November 2007 on technical design and evaluation work associated with the FS. Expenditure on resource definition and technical drilling for FS purposes totals over US$13M.

Probable Mineral Reserves of 37.8 Mt at 3.2 g/t Au for 3.9 Moz are planned to be mined and processed over an 8½ year mine life on the basis of a 4.5 Mtpa throughput.

Key Findings of the Feasibility Study

In order to maximize the Project’s return on capital, improve pay-back period, minimize cash operating cost and maximize asset utilization/exploitation, Premier has decided that the 4.5 Mtpa scenario as detailed in the FS currently represents the preferred option. Key points of the study include:

  • extensive re-scoping of the PFS project dimensions;
  • confirmation and further clarification of technical findings from the PFS;
  • Probable Mineral Reserves of  37.8 Mt at 3.2 g/t Au for 3.9 Moz;
  • total gold production of 3.3 Moz over 8½ years;
  • a nominal output of 400,000 ounces of gold per annum;
  • project financials evaluated using gold revenue of US$600 /oz and 100% equity basis;
  • generation of annual pre-tax operating cash flows averaging US$120M;
  • average cash operating costs of US$294 /oz produced;
  • payback period of approximately 4½ years for initial capital and infrastructure cost expenditures, excluding expenditures to date;
  • sensitivity analysis indicating reduction in payback period to 3 years for a gold revenue price of US$750/oz; and
  • capital and infrastructure cost estimates total US$483M including US$80M hydro-electric power station, US$78M initial mining fleet & US$47M construction contingency.
The table below provides a summary of the Mineral Reserves and Resources for the Premier Gold Project, and the net attributable interest for the Premier Group (being 60%).

 
Category
Gross
Net Attributable to Premier Group
Operator
 
Tonnes (millions)
Grade (Au g/t)
Contained Metal (koz)
Tonnes (millions)
Grade (Au g/t)
Contained Metal (koz)
 
 
 
 
 
 
 
 
 
Mineral Reserves
 
 
 
 
 
 
 
Proved
-
-
-
-
-
-
Moto Group
Probable
37.8
3.2
3,940
22.7
3.2
2,364
Moto Group
Sub-total
37.8
3.2
3,940
22.7
3.2
2,364
 
 
 
 
 
 
 
 
 
Mineral Resources
 
 
 
 
 
 
 
Measured
-
-
-
-
-
-
Moto Group
Indicated
77.8
2.8
7,030
46.7
2.8
4,218
Moto Group
Inferred
98.9
3.8
12,112
59.3
3.8
7,267
Moto Group

 

Source:  Refer to Qualified Persons section for details of Qualified Persons (TSX) or Competent Persons (AIM) with respect to the quotation of Mineral Reserves and/or Mineral Resources.


 
Note: The Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Mineral Reserves.
 

Exploitation of Resource Base and Future Direction

The FS evaluated the Project’s Indicated Mineral Resources of 77.8 Mt at 2.8 g/t Au for 7.0 Moz and did not take into account an additional Inferred Mineral Resource base of 98.9 Mt at 3.8 g/t Au for 12.1 Moz.

Since the completion of the PFS in August 2006, the conversion rate of Inferred to Indicated Mineral Resources has been close to 100% within the key deposits.

On this basis, the Premier Group proposes to actively develop a long term exploitation plan that includes high grade underground mining as well as expansion of planned open pits. Continued extensional exploration success further supports this initiative, with the FS, as anticipated, providing a sound start up position for future development. AMC Consultants Pty Ltd is preparing an underground concept study that will include drilling information to the end of 2007 which is expected to enhance project economics and leverage start-up capital.

 
FEASIBILITY STUDY SUMMARY

The Premier Gold Project is located in the north-east of the DRC and is a joint venture between L’Office des Mines d’Or de Kilo-Premier (“OKIMO”)(30%), Border Energy Pty Ltd (a Premier wholly-owned subsidiary)(60%) and Orgaman sprl (10%).

Following the completion of a PFS in August 2006, the Premier Group committed to a FS for the project. Lycopodium and Cube were appointed as the principal engineering and geological consultants respectively to manage and undertake the study. Contributors to key components of the study are as follows:

 
Cube Consulting

·         Geological database management, interpretation and validation

·         Resource estimation

·         Mine design & scheduling, mine capital & operating cost estimates

Ammtec

·         Metallurgical testwork

Lycopodium

·         Metallurgical interpretation & process plant design

·         Infrastructure design

·         Project implementation

·         Capital & operating cost estimation

Knight Piésold

·         Site geotechnical & hydrological assessment

·         Tails storage facility design & geochemical assessment

·         Hydropower assessment & design

·         Site infrastructure design including roads, civils & bridges

SGS Ghana

·         Environmental and social licence assessment


All figures provided in the Feasibility Study Summary represent the Premier Gold Project, being 100% of the project, unless otherwise stated.

 
Resource Estimation, Geotechnical Assessment & Mine Planning

Since the PFS, an extensive infill, sterilisation and technical drilling programme consisting of over 600 holes totalling 75,000m of RC and Diamond Drilling was completed across the project including sterilisation and geotechnical drilling totalling 18,000m. Resource interpretation and estimation work used drill data available at the end of February 2007.

Geological logging, sample preparation, assaying, resource modelling and estimation works associated with the FS were conducted in accordance with Premier’s QA/QC systems. These systems were independently audited by Snowden Mining Industry Consultants (“Snowden”) in 2006 and were found to be of good industry standard with Snowden also endorsing Cube’s resource estimates and expressing an opinion on the Project’s upside potential.

Geo-statistical analysis was undertaken on the mineralised material prior to grade estimation of the resources using Ordinary Kriging on a 20x20x5m panel.  Uniform Conditioning with a 5x5x2.5m SMU was applied to these estimates to yield a recoverable Resource estimate. The Mineral Resources were then reported above a range of grade cut-offs for the mining study.

As at April 2007, the estimated Project Mineral Resources[1] above a 1 g/t gold cut-off are; Indicated Mineral Resources of 77.8 Mt at 2.8 g/t Au for 7.0 Moz and Inferred Mineral Resources of 98.9 Mt at 3.8 g/t Au for 12.1 Moz

 

[1] All the mineral resource estimates undertaken by Cube have been classified and reported in accordance with The 2004 Australasian Code for Reporting of Mineral Resources and Ore Reserves (2004 JORC Code).  The 2004 JORC reporting guidelines are equivalent to the guidelines adopted for the Canadian National Instrument 43-101.

 

Premier Gold Mines - Premier Gold Project April 2007

Mineral Resources >1.0 g/t Gold
Deposit
Indicated
Inferred
Mt
Gold g/t

Gold
'000 Oz

Mt
Gold g/t

Gold
'000 Oz

Pakaka
17.52
2.5
1,393
-
-
-
Gorumbwa
-
-
-
8.29
5.2
1,374
Kibali
-
-
-
17.08
2.2
1,206
Mengu Hill
6.57
3.4
720
0.16
2.4
13
Mengu Village
1.36
1.8
77
-
-
-
Karagba
7.96
2.7
691
21.76
3.1
2,151
Chauffeur
25.51
3.3
2,695
24.47
5.6
4,427
Durba
2.65
3.3
277
3.19
2.3
238
Sessenge Deeps
-
-
-
11.57
5.2
1,923
Megi
-
-
-
4.14
2.1
277
Marakeke
-
-
-
2.41
1.7
134
Kombokolo
1.91
2.6
162
0.05
2.7
4
Sessenge
8.72
2.4
666
0.88
2.2
63
Ndala
-
-
-
0.26
4.0
34
Pamao
5.62
1.9
347
4.58
1.8
268
Total
77.82
2.8
7,030
98.85
3.8
12,112

Note: The Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Mineral Reserves.

A geotechnical evaluation program using information derived from purpose drilled geotechnical diamond core holes recommends inter-berm mining angles ranging between 31° and 41° in the weathered rocks and between 35° and 57° for fresh rock. As the project matures, these parameters will be further optimised.

Whittle open pit optimizations were undertaken on each deposit based on the Indicated Mineral Resources. Mining costs were generated from first principles, benchmarked with similar operations and then applied by depth from the surface.  Open pit designs were based on the US$550/oz optimization shells, with staging incorporated to yield balanced mining fleet requirements and access preferential mill feed. A total of 6 pits are planned to be mined within the Premier Gold Project encompassing total Probable Mineral Reserves of 37.8 Mt at 3.2 g/t Au for 3.9 Moz.

The Probable Mineral Reserves are based on the Indicated Mineral Resource base only. It follows that significant upside exists for the project with the potential for conversion of the 12.1 MozInferred Mineral Resource base as a result of additional drilling. The breakdown per project area is listed below:

 
Moto Gold Project - Probable Mineral Reserves
Deposit
Oxide
Transitional
Fresh
Total
Mt
Au g/t
Au koz
Mt
Au g/t
Au koz
Mt
Au g/t
Au koz
Mt
Au g/t
Au koz
 
 
 
 
 
 
 
 
 
 
 
 
 
KCD (Durba)
2.7
3.2
269
2.1
3.6
246
14.3
3.7
1,682
19.0
3.6
2,198
Kombokolo
0.1
2.4
8
0.1
3.4
12
0.5
3.9
60
0.7
3.6
81
Mengu Hill
1.8
3.3
184
1.0
4.3
145
1.6
3.8
195
4.4
3.7
524
Pakaka
1.7
2.4
133
0.5
3.0
51
4.9
2.9
447
7.1
2.8
631
Pamao
0.3
1.6
14
0.3
2.0
21
1.6
2.2
114
2.2
2.1
149
Sessenge
1.3
2.2
89
0.5
2.8
43
2.6
2.6
218
4.3
2.5
349
Mengu Village*
20kt
1.8
1
40kt
2.2
3
0.1
2.2
4
0.1
2.1
8
Total
7.7
2.8
698
4.6
3.5
520
25.5
3.3
2,722
37.8
3.2
3,940

Note: The Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Mineral Reserves.

 
  •       While the Mengu Village pit contains Probable Mineral Reserves, it has been excluded from plant feed schedules and Project financial modeling due to its comparatively small magnitude.

Metallurgical Assessment, Process Design & Gold Output
Metallurgical testwork performed by Ammtec Ltd under the direction of Lycopodium indicates that a simple flowsheet, incorporating primary crushing, SAG milling to a product size of 80% passing 106 microns followed by a carbon in leach circuit will yield optimum recovery for oxide ores.  Transition and fresh ores will utilise the same comminution circuit followed by flotation to produce a concentrate that will be reground to 15 microns and then leached in a dedicated CIL circuit. The float tail will be leached separately.

Test data shows the ore is of low to medium competency with a Bond Ball Mill Work Index mill design of 7.2kWh/t and 8.2 kWh/t for the oxide and fresh ores respectively.  No preg-robbing issues are expected and tested composites yielded 25% gravity recoverable gold.

Nominal predicted metallurgical recoveries are:
 
Pit

Au Predicted Recovery (%)

Feed Proportion

Oxide
Transition
Fresh
KCD (Durba)
85.5
89.5
83.3
50%
Kombokolo
95.6
95.3
74.0
2%
Mengu Hill
-
88.7
71.0
12%
Pakaka
88.7
-
81.1
19%
Pamao
90.9
-
84.4
6%
Sessenge
90.3
75.3
80.0
11%

 
Infrastructure & Facilities        

Project infrastructure development includes roads, housing, industrial parks, community facilities, an air strip and power generation facility.  A 24 MW run-of-river hydro-electric power station was assessed and found to be feasible and will provide 86% of the annual power requirements. The FS assumes that the necessary approvals and permits for the hydro-electric power station will be obtained.  Installed diesel generators will supplement hydro-electric power supply during the dry season and assist during peak load periods.  It is proposed that all development activities will conform to internationally accepted standards with project development focusing on sustainability including the empowerment of local communities and business.  Principal and district access roads will be upgraded to support the operations. These will greatly benefit and promote the development of regional and local industries and communities.

A HDPE lined tailings storage facility with an ultimate capacity of 44 million tonnes has been designed for a staged construction throughout the Project’s life. The area below the pond will be lined to prevent seepage.

 
Costs Estimates and Financial Evaluation

Estimated processing operating costs (including general and administration) are estimated for the three types of plant feed - US$11.75 /tonne oxide, $15.38 /tonne transition and US$13.93 /tonne primary ore.

Surface mining operating costs averaged US$1.58 /tonne over the mine life on an owner mining operating basis. The cost of mining ore incorporated a premium over the unit cost of mining waste. Costs include provision for ongoing rehabilitation of mining areas.

The Project development costs are estimated at US$483M. This includes the mining fleet (US$78M), treatment plant, tailings storage facility and water dams, services, infrastructure, a hydro-electric power installation (US$80M), pre-production, working capital and contingency.  The capital cost estimate was completed to a confidence level of ± 15% with the main elements summarised below:

 
Description
US$M
% Total
Site Establishment & Construction Costs
60.9
13
Treatment Plant Costs
75.7
16
Reagents and services
30.0
6
Infrastructure Costs
110.7
23
Mining Costs
111.8
23
EPCM & Specialist Consultants
53.5
11
Owners costs including logistics & resettlement
40.3
8
Owners Operations Costs
2.2
-

Total Capital    (including contingency)

483.0
100
Contingency Amount Included in Above Items
47.4
11

Financial analysis for the FS has been undertaken on the basis of the Project being a stand-alone entity. Standard evaluation formats are followed with the inclusion of costs for initial capital and pre-production costs, operating costs and sustaining capital.

Working capital and ‘first-fill’ consumables stock values have not been returned at end of mine life. Salvage values of equipment, plant and other high value items have not been included. Site closure costs are excluded, although progressive rehabilitation costs for mining areas have been included in operating cost estimates. This is consistent with the findings of the FS indicating that the Project has significant potential to extend past the evaluated mine life.

Project sunk costs to the end of September 2007 have been included for purpose of taxation calculation but do not feature directly in the calculation of total capital expenditure for the project.

DRC corporate taxes and precious metal royalties have been included, as well as major levies for expatriate labour costs. Accelerated depreciation provisions allowed under DRC legislation have been incorporated where applicable.

Evaluation of the FS was undertaken on a project basis and excludes non project costs related to agreements between Premier and OKIMO and surface rental due to the state.

No forward sales of product are assumed and a gold sale price of US$600 /oz was used for base case financial evaluations.  Net project cash flows are stated below.
 
Net Project Cash Flows ($USM)
Yr 0
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Yr 6
Yr 7
Yr 8
Yr 9
(497)*
83
114
129
126
110
84
49
114
20

 

* Note: US$497m includes provision of US$14m for pre-production mining expenditure related to project development. 

Tenure

Premier continues to wait for the formal publication of the report of a commission set up to review 60 mining agreements entered into by the para-statal companies of the DRC Government and the timetable for its release remains unclear.   As far as Premier is aware, the Commission's report may include recommendations, which will apply to most mining companies, that certain financial terms of the partnerships be renegotiated.

In the meantime, Premier is seeking to finalize discussions in relation to a draft consolidated lease pursuant to the terms of the protocol agreed between OKIMO  and Borgakim Mining sprl, (a Premier subsidiary), in November 2006 ("November 2006 Protocol").    It is noted that certain of the areas which originally comprised the Premier Gold Project under Premier's existing contracts with OKIMO have not been included by the Mining Registry in the OKIMO exploitation permits recently issued to OKIMO following its application in April 2007 to transform its title in accordance with the Mining Code. Following an evaluation of the new OKIMO exploitation permit co-ordinates against the co-ordinates agreed under the November 2006 Protocol, the area to be covered by the new consolidated lease is to be reduced from 2,350 sq km to 1,841 sq km.

 
Conclusion

Given the solid foundation presented by the FS, Premier proposes to work with its joint venture partners to determine the best way to progress and enhance the economics of the Project in the best interests of shareholders.

Premier wishes to thank the government of the Democratic Republic of Congo and OKIMO for its ongoing support and looks forward to working with all stakeholders to successfully develop the Premier Gold Project.  The successful development of the Project will result in significant benefits to all the stakeholders, including the state and the local community, and will add to the reputation of the Democratic Republic of Congo as a major participant in the international resources sector.

The Board of Premier would also like to thank the Premier staff for their contributions in bringing this Feasibility Study to fruition. In particular the Board would especially like to thank Klaus Eckhof and Andrew Dinning for their valued contributions.

Klaus has informed the Board that with the Feasibility Study completed, he would like to step down as President and CEO and as a Director of Premier.  The Board also announced that in addition to his duties as Chief Operating Officer, Andrew Dinning will also assume the duties of President upon Klaus' resignation.

The Board looks forward to the development phase of the Premier Gold Project.