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Announcement to the Australian Securities Exchange and Toronto Stock Exchange(Canada Newswire English Via Thomson Dialog NewsEdge) Attention Business Editors Masbate Gold Project optimisation review results 206,000oz pa at US $306/oz PERTH, Western Australia, Oct. 5 /CNW/ - The Board of Directors of CGA Mining Limited ("CGA", "the Company"), Filminera Resources Corporation ("Filminera") and Phil. Gold Processing & Refining Corp. ("PGPRC") are pleased to announce the successful completion of the optimisation review into the development of the Masbate Gold Project in the Philippines. Optimisation Results The optimisation of the previously completed full feasibility study ("FS") prepared by Ausenco International Pty Ltd Australia ("Ausenco") in June 2006 confirms the robust nature of the Masbate Gold Project, further improving project economics. The key results of the optimisation are summarised below: << ------------------------------------------------------------------------- Optimisation Study Results Years 1 - 8 ------------------------------------------------------------------------- Physical Parameters Unit ------------------------------------------------------------------------- Milled Ore Million Tonnes 37.8 ------------------------------------------------------------------------- Grade g/t 1.63 ------------------------------------------------------------------------- Mill Recovery - Gold % 82.7% ------------------------------------------------------------------------- Refining Recovery - Gold % 99.9% ------------------------------------------------------------------------- Bullion Produced - Gold Million ozs 1.65 ------------------------------------------------------------------------- Bullion produced per annum Ozs 206,000 ------------------------------------------------------------------------- Mill Throughput YR1-2 Mtpa 4 ------------------------------------------------------------------------- Mill Throughput YR3-8 Mtpa 5 ------------------------------------------------------------------------- Operating Cash Cost US$/oz 306 ------------------------------------------------------------------------- Capital Cost - Project US$ million 119.5 ------------------------------------------------------------------------- >> Average annual gold production over the first 8 years of the mine life is forecast at 206,000 ounces plus silver credits at a cash operating cost of US$306/oz. The cash operating cost does not reflect the benefit of the 6 year tax free holiday that PGPRC is entitled to. << ------------------------------------------------------------------------- Life of Mine Financial Parameters ------------------------------------------------------------------------- Parameter US$650 Gold Price ------------------------------------------------------------------------- Total Cash Flow After Income Tax US$ million 529.6 ------------------------------------------------------------------------- NPV @ 5% discount US$ million 289.7 ------------------------------------------------------------------------- IRR Geared - $65M % 77 ------------------------------------------------------------------------- IRR Ungeared % 51 ------------------------------------------------------------------------- >> An executive summary of the Masbate project optimisation review is appended to this announcement. Mining Contractor The optimisation assumes mining will be undertaken on a contractor basis. A Notice of Intent with respect to a strategic alliance mining contract has been issued to Leighton Contractors (Philippines) Inc, a wholly owned subsidiary of Leighton Holdings Limited ("Leighton"). Leighton will provide the full mining fleet and associated equipment (currently estimated to cost in the order of US$34m) and will provide contract mining services for the project. They will work under an alliance agreement as has been successfully applied at a number of other mines. The alliance agreement is designed to maintain unlimited flexibility with all aspects of mining, total transparency of costs and provide the safest and lowest mining cost per tonne. Leighton is Australia's largest project development and construction company. The group employs over 25,000 people throughout Australia and Asia and work in progress is now estimated at approximately $21 billion. Leighton has been operating in Asia since 1975, and has a unique combination of local knowledge and extensive international experience which has made them the region's international contractor of choice. The Asian operations are active in Hong Kong, Macau, China, Mongolia, Taiwan, Korea, the Philippines, Guam, Thailand, Vietnam, Laos and Cambodia, with annual revenue in that region over US$300 million and employing almost 2,500 people in Asia alone. Today, Leighton is also the world's leading contractor miner, mining in excess of 100 million tonnes of iron ore and 100 million tonnes of coal each year, across Australia and Asia. They operate and maintain a fleet of owned and leased mining plant and equipment, currently worth over US$1.5 billion. Reserves and Resources As set out in the NI 43 - 101 compliant technical report prepared by International Mining Consultants Pty Ltd ("IMC") ("the Masbate Report") the reserves and resources of the project are as follows: << Indicated Resources 59.3mt @ 1.55g/t containing 3.0m oz Inferred Resources 33.7mt @ 1.63g/t containing 1.8m oz >> Both of the above were calculated at a 0.7 g/t cut-off and US$450/ounce gold price. Low Grade Indicated Resources 18.65 mt @ 0.61 g/t containing 0.4m oz Probable Reserves 37.4 @ 1.65 g/t containing 1.984m oz The probable reserve reflects a conversion rate of 63% of the total indicated resource estimate (excluding the low grade dumps) at 0.7g/pt cut off. Given the conservative gold price (US$450/oz) used to determine the optimum pit shell adopted in the feasibility study, more of these resources could convert into a reserve and ultimately, into the mine schedule, once the project is operational. The resource includes 18.65Mt of low grade stockpiles which were drilled, modelled and metallurgically tested during the FS. The designation was due to the grade being determined as uneconomic at the then prevailing gold price (US$450/oz). The improvements in gold price will likely result in this material being determined as economic and convertible into a reserve category. The material is presently scheduled for treatment in years 9 and 10 and the necessary work to reclassify to reserves will be done during operations. It is however likely that when the new pit optimisation routines based on current gold price are completed, there may be additional material available within the open pits that will replace the low grade dump material in the latter years and thus push the life of mine ("LOM") beyond 10 years. It is also planned to undertake further infill drilling which may convert further inferred resources into the indicated category and subsequently into additional reserves. Metallurgy Subsequent to the FS, the owners of the project purchased a large SAG mill and two large ball mills. The combined grinding capacity of the complete installation is in excess of that specified within the FS. CGA, under the supervision of R.W. Bourne and Assoc ("RWB") (consulting metallurgist), completed testwork at Ammtec Laboratories in Perth WA. The results of that work indicate that by using the additional grinding capacity of the ball mills to grind the higher grade material to be processed in Years 1 and 2 to a fraction of P80.75 micron (compared with P80.150micron in the FS), gold recoveries can be increased by +4% to +6% dependent on material type. At the point in time (Year 3) when the higher grade material has been mined the finer grind will be discontinued. Modelling of the grinding circuit by Oreway Metallurgical Consultants ("Oreway") has demonstrated that a mill throughput approaching 5Mtpa is achievable if a grind of P80.150 micron is set as the operating standard and a secondary crusher included into the circuit. Process Plant Lycopodium Engineering Ltd, a highly regarded and internationally respected Australian design engineering firm has been commissioned as a subcontractor to Leighton to carry out the detailed design of the processing facility and selected infrastructure. Leighton has been issued with a Notice of Intent to undertake the design and construction of the process plant and selected infrastructure on a Fixed Price Lump Sum ("FPLS") contractual basis. Power The optimisation assumes that power will be provided by coal fired power station on Masbate Island. The main benefit of coal generation is the non reliance on fuel and the vagaries of the international fuel price and reduced operating costs. This is planned to be financed and operated by a third party. It is currently anticipated that the coal fired power station will be completed around June 2009, which will leave an interim period of six months, during which it is planned to source power from contracted bunker fuel equipment. The incremental costs of operating the project on bunker fuel over the life of mine ("LOM"), with no coal fired power station is 6%, which in turn assumes an oil price of US$68/bbl. Costs per ounce increase by 1.5% if the oil price assumption over the LOM is increased to US$75/bbl. Tailings Storage and Facility GHD Engineering Limited ("GHD") has been commissioned to carry out the design and supervise the construction of the tailings storage facility ("TSF"). The original design concept carried out by Knight Piesold will form the basis for the GHD design. All decant water will be reused in the process plant. At the point in time when a positive water balance is experienced and it becomes necessary to reintroduce processed solution to the environment that solution will be subject to cyanide detoxification and treatment for any residual heavy metals. Security and Community Relations A baseline study has been completed detailing the existing environmental and social conditions in and around the project site. A well respected and experienced security contractor will be appointed to manage the project site and an experienced environmental and sociological consulting firm will monitor the environment and community attitudes to the development. An extensive community relations plan has been developed with the program now approved by the Philippine Government. We have already commenced implementation of a number of key initiatives, all of which are designed to enhance the well being and livelihood of local communities on Masbate Island. Permits and Approvals All key permits have now been secured including the recent approval of the feasibility studies in respect of PGPRC (processing) and Filminera (mining and infrastructure) and the issue of a Mineral Processing Permit by the central and regional authorities in the Philippines. Financing The Company has already secured preliminary credit approval subject to documentation and completion of detailed due diligence for a US$65m project finance facility. The project finance facility documentation is underway and the execution and drawdown on the facility will be subject to standard project financing terms and conditions including completion of all conditions precedent, typical for a project of this nature. Now that the optimisation has been completed we expect to finalise this facility shortly. It is currently anticipated that one of the conditions precedent to the abovementioned facility will be hedging to provide a level of price protection on the gold price and potentially oil price. It is the current intention to use a combination of puts and forward sales, with the object of minimizing the forward sales component to provide a floor to revenues while leaving significant exposure to the upside in the gold price. In addition to this facility, the Company has A$27.7 million (August2007) cash on hand and Filminera has A$9.1M (August 2007). CGA has recently announced a placement of new shares and promissory notes for a total raising of US$65m, which is also planned to be applied to the development of the project. Construction Time Frame The construction time frame is currently estimated at 15 months, and consequently gold production is targeted for the first quarter of calendar 2009. The Board recognises that in order to achieve this timeframe it will be necessary to advance the commencement of certain works and capital purchase commitments prior to a commitment to development. To this end, the Board has approved expenditure on work required to maintain the critical path of the construction schedule. Development Timetable The Company is working to the following development timetable: << ------------------------------------------------------------------------- Milestone Date ------------------------------------------------------------------------- Arrange finance Q4, 2007 ------------------------------------------------------------------------- Preliminary site works and other long lead capital purchases Q4, 2007 ------------------------------------------------------------------------- Commencement of tailings dam and water dam construction Q4, 2007 ------------------------------------------------------------------------- Commencement of open pit mining Q2, 2008 ------------------------------------------------------------------------- Plant commissioning Q4, 2008 ------------------------------------------------------------------------- Gold production Q1, 2009 ------------------------------------------------------------------------- >> Project Team A number of key appointments have been made to establish both the development and operating team in the Philippines and in connection therewith, the Board of CGA has resolved to issue 2.25m employee options under the Employee Option Plan, expiring on 30 September 2012. The exercise price will be $0.90. The Board is pleased to secure the services of these key employees and looks forward to working with the team. National Instrument 43-101 Compliance National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") is a rule developed by Canadian Securities Administrators, which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. The scientific and technical information and all resource and reserve estimations regarding the Masbate project contained in this announcement are based upon the FS and the Masbate Report. Readers are cautioned that the conclusions, projections and estimates set out in this announcement are subject to important qualifications, assumptions and exclusions, all of which are detailed in the feasibility study and the Masbate Report. To fully understand the summary information set out herein, the Masbate Report should be read in its entirety. A copy of the Masbate Report is available on the SEDAR website at www.sedar.com under CGA's SEDAR profile. Mr Geoff.G.Jones, F.Aus.I.M.M.CP Mng, CGA's general manager, technical, is acting as the Qualified Person in compliance with NI 43-101 with respect to this announcement. He has prepared and or supervised the preparation of the scientific or technical information in this announcement. Cautionary Note Regarding Forward Looking Statements This announcement includes certain "forward-looking statements" within the meaning of Canadian securities legislation. All statements, other than statements of historical fact, included herein including, without limitation, statements regarding anticipated dates for construction and production, and other milestones related to the Masbate Gold Project; estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; and CGA's future operating or financial performance, are forward-looking statements. Information concerning mineral reserve and resource estimates including statements regarding the conversion of inferred resources to reserves also may be deemed to be forward-looking statements in that it reflects a prediction of the mineralization that would be encountered if a mineral deposit were developed and mined. Forward-looking statements involve various risks and uncertainties and are based on certain factors and assumptions. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from CGA's expectations include uncertainties related to fluctuations in gold and other commodity prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; the need for cooperation of government agencies in the development of the Masbate Gold Project; the need to obtain additional financing to develop the Masbate Gold Project; the possibility of delay in development programs or in construction projects and uncertainty of meeting anticipated program milestones for the Masbate Gold Project; and other risks and uncertainties disclosed under the heading "Caution Regarding Forward-Looking Statements" in CGA's Annual Information Form for the year ended 30 June 2007 filed with the Canadian securities regulatory authorities on the SEDAR website at www.sedar.com. MASBATE GOLD PROJECT OPTIMISATION EXECUTIVE SUMMARY Introduction The optimisation review was undertaken by CGA, Filminera and PGPRC staff with assistance from independent consultants. The complete FS prepared by Ausenco which forms the basis for this optimisation review, is the subject of the Masbate Report, which is available on SEDAR. Project Location The Masbate Gold Project is located near the northern tip of the island of Masbate, 360 km south-east of the country's capital of Manila, and is centred at latitude 120 28' N and longitude 12 24' E. It lies within the municipality of Aroroy, Masbate Province, Region V, Philippines. The Masbate Project is a proven gold mining area with Atlas Consolidated Mining and Development Corporation ("Atlas") having mined the Masbate gold deposit between April 1980 and 1994, mining a total of 17.5 Mt at 2.1 g/t Au from open pit and underground mining operations. The bulk of the ore came from the Main Vein pit, but several satellite pits and underground operations also contributed mill feed. Mill throughput averaged 1.2 Mt / p.a. During the 14 years of operation over one million ounces of gold were produced, averaging 72,000 oz / p.a. In addition, a small contribution (49,200 oz) was from heap-leach operations carried out between 1984 and 1993. For a map of the Project Location please see: http://files.newswire.ca/578/CGAminingOct04pt1.doc Ownership CGA indirectly owns, through its 100% ownership of Philippine Gold Ltd, 40% of Filminera and 100% of PGPRC. The remaining 60% of Filminera is owned by a Philippine registered company, Zoom Mineral Holdings Inc, in which CGA has a 40% interest. CGA also has an option to acquire the remaining 60% of Zoom Mineral Holdings Inc, in accordance with Philippine law. Filminera holds the mineral tenements that include the Masbate gold deposit. The mining claims and applications cover an area of approximately 8,316 ha. PGPRC will develop and own the process plant and will be responsible for the sale of all gold. PGPRC and Filminera have a contractual relationship, which includes PGPRC purchasing ore from Filminera whilst maintaining joint financial and legal liability for the social and environmental obligations under Philippine law. For a diagram of the Ownership structure please see: http://files.newswire.ca/578/CGAminingOct04pt2.doc Geology and Mineralisation The Masbate mineralisation is of epithermal origin and is located within a large uplifted block between two regional NW/SE faults. Gold is associated with sulphide mineralisation (pyrite) that is located within fracture-filling quartz veins, silicification of the host rock and as selvedge between veins and wall rock. Calcite is also a common vein mineral. Argillaceous, sericitisation and bleaching of the wall rock is also a feature of the mineralisation. Gold is finely distributed within sulphides; mineralogical work suggests a grain size of 5 um to 20 um. The depth and extent of weathering is largely dependent on the host lithologies, nature and degree of alteration and structural features. Typically, the volcanic agglomerates are highly weathered to a depth of between 20 m to 40 m in the Main Vein area and 50 m to 60 m in Colorado. Moderate weathering along joints and fissures extend to approximately 25 m to 50 m in Main Vein, and below the targeted open pit in Colorado. The massive quartz veins are unaffected by weathering except where there is brecciation. << Resources/Reserves Estimate for Masbate The FS was carried out by Ausenco who commissioned IMC to interpret, compute and report resources and reserves in compliance with JORC and NI43 - 101 standards. ------------------------------------------------------------------------- Cut - Off Grade ------------------------------------------------------------------------- 0.0 0.5 0.6 0.7 0.8 0.9 1.0 1.2 1.5 1.7 2.0 ------------------------------------------------------------------------- Au g/t 1.02 1.19 1.35 1.55 1.72 1.84 1.92 2.07 2.34 2.56 2.90 ------------------------------------------------------------------------- M Indicated tonnes 120.3 94.6 75.6 59.3 49.5 43.0 39.4 33.4 24.1 18.8 12.7 ------------------------------------------------------------------------- Gold Moz 3.9 3.6 3.3 3.0 2.7 2.5 2.4 2.2 1.8 1.5 1.2 ------------------------------------------------------------------------- Au g/t 1.03 1.18 1.37 1.63 1.89 2.10 2.25 2.48 2.82 3.08 3.45 ------------------------------------------------------------------------- M Inferred tonnes 74.0 59.8 45.9 33.7 26.1 21.6 19.1 15.9 12.2 10.1 7.8 ------------------------------------------------------------------------- Gold Moz 2.4 2.3 2.0 1.8 1.6 1.5 1.4 1.3 1.1 1.0 0.9 ------------------------------------------------------------------------- The resources as set out in the Masbate Report are as follows: Indicated Resources 59.3mt @ 1.55 g/t containing 3.0m oz Inferred Resources 33.7 mt @ 1.63 g/t containing 1.8m oz >> Both of the above were calculated at a 0.7 g/t cut-off and US$450/ounce gold price. Low Grade Indicated Resources 18.65 mt @ 0.61 g/t containing 0.4m oz The reserves are summarised below: Probable Reserves 37.4mt @ 1.65 g/t containing 1.984m oz The probable reserve reflects a conversion rate of 63% of the indicated resources (excluding the low grade dump material). Given the conservative gold price of US$450/oz used to determine the optimum pit shell adopted in the FS, more of these resources could be converted into a reserve, once the project is operational. In late 2006 and early 2007, subsequent to the acquisition of the project by CGA, an alternative approach to mining has been investigated. This approach was aimed at taking advantage of the current high gold price and also to generate higher initial cashflow from the project, thereby improving the overall economics of the project. Mining In the FS mineral reserve estimate, it had been assumed that all mining would target the stockwork and vein material with a cut-off zone within the stockwork, based on a marginal economic cut-off. The alternate approach is to target just the high grade vein material. This will likely result in some dilution from the surrounding stockwork; however with this approach, it is viable to target a subset from the base case reserve that has higher grade. This high grading approach requires a number of small starter pits in the initial years of operation; however the upside in terms of higher gold production offsets the higher initial mining costs. A mining schedule developed for this option for years 1 and 2, has been extracted resulting in a run of mine grade for this period approaching 2.0g/t. The low grade material ([email protected]/t) originally stockpiled by Atlas during former operations were originally considered as indicated resources in the FS but not included in the production schedule. The exclusion was due to the grade being determined as uneconomic at the prevailing gold price (US$450/oz). The improvements in gold price will likely result in this material being determined as economic and convertible into a reserve category. The material is presently scheduled for treatment in years 9 and 10 and the necessary work to reclassify to reserves will be done during operations. It is however likely that when the new pit optimisation routines based on current gold price are completed, there may be additional material available within the open pits that will replace the low grade dump material in the latter years and thus push the LOM beyond 10 years. A grade control system will be implemented in years 1 & 2 during the high grading periods. At the point in time when the grind size increases, a bulk mining approach will be introduced and the grade control system discontinued. This strategy is reflected in the LOM operating cost schedule. Pre-production mining of material from the starter pits will provide for commissioning ore and stockpile development, water dam construction and general site facilities. The proposed mining plan utilises a staged pit development. The initial starter pits are to be designed so as to exploit the higher grade material within the 0.7 g/t cut off limits. The starter pits will be progressive cut back to the final pit limits as and when necessary. The geotechnical parameters established during the FS have been adopted during the preliminary design phase, however these will be reviewed during operations when some additional observations and measurements may result in a more advantageous set of parameters being developed. The exploitation of the ore will be carried out on 5m benches with a two flich approach as and when required, dependent on the attitude of the ore on particular benches. The preferred mining contractors have carried out sufficient work to determine that a combination of 110 tonne back acting excavators (diggers) and 65 tonne haul trucks is the most efficient for the intended operation. A complete set of ancillary equipment will also be provided by the contractor. Mining Contractor The optimised model has been prepared on the assumption that the mining of the Masbate Gold Project will be undertaken on a mining contractor basis. A Notice of Intent with respect to the mining contract has been issued to Leighton. Leighton will provide the full mining fleet and associated equipment (currently estimated to cost in the order of US$34m) and will provide contract mining services for the project. They will work under an alliance agreement as has been successfully applied at a number of other mines. The alliance agreement is designed to maintain unlimited flexibility with all aspects of mining, total transparency of costs and provide the safest and lowest mining cost per tonne. Leighton has been operating in Asia since 1975, and has a unique combination of local knowledge and extensive international experience which has made them the region's international contractor of choice. The Asian operations are active in Hong Kong, Macau, China, Mongolia, Taiwan, Korea, the Philippines, Guam, Thailand, Vietnam, Laos and Cambodia, with annual revenue in that region over US$300 million and employing almost 2,500 people in Asia alone. Today, Leighton is also the world's leading contractor miner, mining in excess of 100 million tonnes of iron ore and 100 million tonnes of coal each year, across Australia and Asia. They operate and maintain a fleet of owned and leased mining plant and equipment, currently worth over US$1.5 billion. Metallurgy In early 2007, CGA commissioned RWB to carry out additional testwork to determine gold recoveries at various grind sizes. The rationale behind this work was that the previous owners of the project had committed to the purchase of a large SAG mill and two large ball mills. The combined grinding capacity of the mills was greater than that determined as appropriate in the FS and the excess grinding capacity could therefore be used to grind the ore to a finer fraction and result in increased metallurgical recovery. The RWB scope involved the examination of all previous metallurgical testwork so as to make use of as wide a selection of materials as possible. To confirm the recovery benefits metallurgical testing was carried out on 17 composite samples of vein and stockwork fractions. The results are summarised as follows: << ------------------------------------------------------------------------- % Recovery % Recovery Material Type Grade g / t @P80.150u @P80.75u Benefit ------------------------------------------------------------------------- Vein ------------------------------------------------------------------------- Transition 2.67 77.5 81.9 +4.4% ------------------------------------------------------------------------- Primary 4.81 77.4 81.4 +4.0% ------------------------------------------------------------------------- Stockwork ------------------------------------------------------------------------- Transition 1.19 74.0 76.9 +2.9% ------------------------------------------------------------------------- Primary 1.42 57.6 63.8 +6.2% ------------------------------------------------------------------------- The following conclusions can be drawn from these results: - Ore grades are higher for the vein material compared to the stockwork material. - Vein recoveries for the transition ore are 5% better than stockwork at the same grind. - Vein recoveries for primary ore are 17.6% better than stockwork at the same grind. - Gold dissolution is approximately 4% better at a grind of P80.75micron compared to that at P80.150micron. The above rationale has been applied to the newly developed mine production schedule. In years 1 and 2 the higher grade, predominantly oxide, transition and fresh vein material as well as oxide and transition stockwork material will be ground to P80.75 micron. To substantiate the predicted production rates Oreway was commissioned to model the milling circuit throughput at various ore type blends and product sizing. The results are summarised below: - Blended material comprising 8% oxide, 52% transition and 39% fresh material will achieve 452tph at a grind of P80.75micron utilising all available installed power. - The same blend of material as above can achieve a throughput of 614tph at a grind of P80.150 micron when 55% of the mill feed is secondary crushed to 80% passing 75mm. The following conclusions can be drawn from the above: - There is a requirement for a secondary crusher when a throughput approaching 5Mtpa (625tph) is required. - The installation of a secondary crusher will assist the grinding circuit to increase its throughput from the above stated 425tph at a product size of P80.75micron to the required 500tph at a product size of P80.75micron Process Plant Lycopodium has undertaken an optimisation review of the process plant design with the objective of achieving the following criteria. ------------------------------------------------------------------------- Operating Schedule ------------------------------------------------------------------------- Annual Throughput Y1 & 2 4,000,000 Tonnes per annum (tpa) ------------------------------------------------------------------------- - Yr3 - 10 5,000,000 Tonnes per annum (tpa) ------------------------------------------------------------------------- Gold Recovery 82.6% ------------------------------------------------------------------------- Crushing Plant ------------------------------------------------------------------------- Design Capacity 634 Tonnes per hour (tph) ------------------------------------------------------------------------- Operating Hours 24 Hours per day ------------------------------------------------------------------------- Operating Days 7 Days per week ------------------------------------------------------------------------- ------------------------------------------------------------------------- Grinding and Leach Circuit ------------------------------------------------------------------------- Design Capacity 500 Tonnes per hour (tph) ------------------------------------------------------------------------- Operating Hours 24 Hours per day ------------------------------------------------------------------------- Operating Days 7 Days per week ------------------------------------------------------------------------- ------------------------------------------------------------------------- Leach Circuit ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nominal Total Residence Time 24 Hours ------------------------------------------------------------------------- Leach Feed Pulp Density for Circuit Design 42 % w/w ------------------------------------------------------------------------- Carbon Concentration 15 g/l ------------------------------------------------------------------------- Solution Tail, Carbon 0.02 Circuit Design (less than) ppm ------------------------------------------------------------------------- Electrical Power distribution within the plant area and vicinity will be at 4,160 V and 415 V respectively. The estimated loading figures for the Masbate Gold Plant are as follows: - Maximum Demand - 23MW - Average Load - ~21MW >> The optimisation assumes that the power for the project will initially come from a contracted bunker fuel plant temporarily installed on site at the Masbate project site. Various options including barge mounted units are presently being considered. DMCI Holdings Inc ("Consunji"), the largest construction contractor in the Philippines, are assisting CGA with investigations to determine the viability of establishing a coal fired power generation station at the project site. Consunji are the owners of a coal mining project on a nearby island where Consunji generate their own power via a coal fired power generation station. Consunji were also the successful tenderers for the supply and distribution of power on Masbate Island. To enable Consunji to fulfil its contract to the Masbate Island, it will be necessary for them to install a 15MW coal fired power station backed up by a diesel powered standby facility. At present Consunji and Filminera are discussing and considering how best to combine the power facilities so as to ensure power will be delivered as efficiently as possible to the project. Filminera will own the power generation equipment used for the gold project and structure an operating and maintenance relationship with Consunji. The indicated benefits of coal fired power generation are an approximate 6% reduction in total mine operating costs (LOM US$316/oz versus US$334/oz) and a material reduction in the exposure of the project to fuel prices. The power cost is expected to be in the range of US$0.08 - $0.12/kWh, including capital, fuel and maintenance costs. Water Supply The supply of water to the site is based on the following: << - Reclaim water recycled from the TSF. The new TSF to be constructed to the south of the mine and processing facility will be equipped with a reclaim water system to return decant water from the deposited tailings to the process water dam at the processing facility area. It is anticipated that the TSF will provide up to 100% of the water required for the processing plant. - The requirement to reuse the tailings decant solution has been the prime motivator behind the reinvestigation into the detoxification regime to be adopted on site at Masbate. During year 1 and year 2 all water returned from the tailings dam will be reused in the process and due to this the detoxification of processing residues, prior to introduction into the TSF has been altered. - GHD has been tasked with determining the complete project water balance as part of the tailings disposal design. Present indications are that a cyanide detoxification system will have to be incorporated into a water treatment plant to be installed during year 3 of operations. - Potable water will be sourced from existing and new deep well bores adjacent to the Guinobatan River. An allowance has been made in the capital cost estimate to replace the existing pumps, to extend the raw water line and for two new deep well pumps.0 >> Tailings Storage Facility GHD has been contracted to complete a detailed design of the tailings disposal system .The battery limits of their contract are the outlet flange of the tailings pump located at the processing facility and the re-introduction of returned decant solution to the process water pond. The tailings dam structure is planned to be built with reclaim materials from within the planned limits of the tailings storage facility. Geotechnical test work has already been carried out on the foundation areas for the structures and on pit materials that potentially can be used to construct the retaining walls. Broadly, it is planned to construct the tailings dam with a compacted clay upstream liner with a rock fill downstream support. The foundation fill material will also be compacted clay. The tailings dam will have an initial capacity of 4 million tonnes and at Stage 8 a capacity of 38 million tonnes. GHD will supervise the construction of the TSF to ensure that the finished utility complies with the already issued Environmental Clearance Certificate. Buildings Site buildings will include the administration office, workshops, laboratory, security, mining office and messing. Construction of these structures will be under the supervision of Filminera personnel. Security Comprehensive site security will be contracted to a well regarded and experienced Philippine contract security company who will provide: << - security personnel; - thorough background checks of all on site personnel; - intelligence sourcing; - monitoring of local community attitudes including those of small scale miners operating at the project; and - implementation of a security program tailored to the particular needs of the Masbate Project. >> Masbate Island does not face any notable Islamic fundamentalist issue as in Mindanao, given the predominance of Roman Catholisism; however there is evidence of some New Peoples Army activity. They have claimed responsibility for some limited damage to the project during the lead up to the elections earlier in the year. The Company's view is that a strong and meaningful community relations program is the best investment in security. Environmental The environmental program has been developed by BMP Environment & Community Care, Inc. based on the 2007 Baseline Monitoring program previously completed. Capital Costs The capital cost of the project has been estimated as per the following summary: << ------------------------------------------------------------------------- US$ M's ------------------------------------------------------------------------- Infrastructure 4.352 ------------------------------------------------------------------------- Process Plant 45.882 ------------------------------------------------------------------------- Secondary Crusher 2.000 ------------------------------------------------------------------------- Unallocated Costs 11.392 ------------------------------------------------------------------------- Overhead 8.733 ------------------------------------------------------------------------- Contingency 4.855 ------------------------------------------------------------------------- Design Engineering 4.822 ------------------------------------------------------------------------- Mills Purchase (sunk) 2.904 ------------------------------------------------------------------------- Agreed Fixed Cost 84.940 ------------------------------------------------------------------------- Mill Refurb 7.547 ------------------------------------------------------------------------- Mining 8.616 ------------------------------------------------------------------------- Tailings Storage Facility 5.414 ------------------------------------------------------------------------- Power, Water & Infrastructure 1.281 ------------------------------------------------------------------------- Optional Items 0.632 ------------------------------------------------------------------------- First Fills 2.837 ------------------------------------------------------------------------- Owners Costs 7.386 ------------------------------------------------------------------------- Interim Costs (sunk) 0.661 ------------------------------------------------------------------------- Sub Total 37.374 ------------------------------------------------------------------------- Total Estimated Capital US$119.314M ------------------------------------------------------------------------- >> The capital cost includes a contingency of US$7.2m (6.4%) and the proposed funding package has made an additional allowance for up to US$2.5m for foreign currency movements prior to execution of the FPLS. Leighton will carry out the construction of the process facility and selected infrastructure, pursuant to the FPLS contract, covering a scope of works to the value of US$84.94M. The FPLS contract will have the normal completion and process guarantees. The construction time is estimated to be 15 months. Operating Cash Costs Operating cash costs have been determined on the basis of a treatment rate of 4 million tonnes per annum in years 1 & 2, and 5 million tonnes per annum thereafter and on the basis of the process route described. A summary of operating costs, excluding Excise Tax and Value Added Tax (applicable to Year 1 only), is tabled below: << ------------------------------------------------------------------------- Cost US$/Tonne Ore US$/Gold Ounce Produced ------------------------------------------------------------------------- Mining 4.65 122 ------------------------------------------------------------------------- Processing 5.41 142 ------------------------------------------------------------------------- Administration & Maintenance 1.59 42 ------------------------------------------------------------------------- 11.65 306 ------------------------------------------------------------------------- >> Taxation PGPRC (which processes and sells all the gold) will benefit from a tax holiday during the first six years of operation, with VAT payable only in year one. At that time Filminera and PGPRC may apply for exemption from VAT but cannot apply any exemption retrospectively. PGPRC has applied for registration with the Board of Investments ("BOI") as a producer of gold and silver dore under a non-pioneer status which it qualifies for under the 2007 Investment Priorities Plan ("IPP"). Mining activities may be granted an income tax holiday ("ITH") incentive, and based on the advice of external consultants, the activity applied for by PGPRC is not among the exceptions and hence, PGPRC will qualify for a minimum 6 year ITH. Under the 2007 IPP of the BOI, registered activities/ projects located in less developed areas (which includes Masbate Island) are automatically entitled to an initial 6-year ITH regardless of status (pioneer or non-pioneer) or type of project (new or expansion. This may be extended for a further one plus one (i.e. total of two additional years) where certain conditions during operation are met. Hence, the maximum period of ITH availment may infact be 8 years. Withholding tax of 10%-15% will be applied to any interest and dividend payments outside the Philippines made by either Filminera or PGPRC. All repayments of debt will not be subject to any withholding tax. Excise Tax is payable to the Philippine Government in relation to revenue from the sale of gold. The Excise Tax is applied, at the rate of 2.0%, to the gold and silver sales revenue on a quarterly basis after deduction of the cost of gold transport and refining. Cash operating costs are quoted exclusive of the Excise Tax. Assuming a life of mine gold price of US$650 per ounce, the life of the mine royalty costs are forecast at US$23.7 million for the government Excise Tax of which 40% will return back to the Masbate Province and its community. Australian Contact, President & CEO - Michael Carrick, Tel: +610 8 9263 4000, Fax: +61 8 9263 4020, Email: [email protected]; US Contact, Chairman - Mark Savage, Tel: (505) 344-2822, Fax: (505) 344-2922, Email: [email protected] Copyright 2007 Canada Newswire Ltd. All Rights Reserved. |