Ann: Exploration Update - Dalgaranga Gold Project, page-213

A little thought about possible ASIC if they restarted mining using a hypothetical approach which while quite simplest and maybe off the mark, it uses historical SPR data on cost of production from the existing infrastructure. The key assumption adopted is the same dollar expenses are incurred for a mine with a grade of 0.9 g/t and 2.0 g/t, 2.5 g/t and 3.0 g/t.

I went through all the quarterly reports from June 2021 to September 2022 and compiled the weighted average milled grade and ASIC and the results were:

12 months to September 2022 - average grade 0.87g/t, ASIC $2,495
18 months to September 2022 - average grade 0.92g/t, ASIC $2,256

If they had achieved an average grade of 2.0g/t or 2.5 g/t or 3.0 g/t instead of the above grades at the same $ expense the ASIC would have reduced to:

12 months to September 2022 - ASIC of $1,087, $869 and $724
18 months to September 2022 - ASIC of $1,037, $829 and $630

Expenses will have subsequently increased due to inflation. I am not sure how much expenses have increased but probably somewhere up to 20%. Using the current resource grade of 2.5% with 20% higher expenses gives a ballpark ASIC of around $1,000 to $1,050. The start up would be a mix of underground, which is more expensive to mine, and open pit ore so the $1,000 to $1,050 ASIC is too low. I am sure there are other expenses which would need to be added.

Could we be looking at an ASIC as low as $1,300 in a DFS? EMR and CMM achieve under this ASIC and BGL is expected to achieve less than that level. At current POG of $3k to $3.1k that would be an amazing margin of $1.7k to $1.8k or between $220m and $270m pa (cash flow would be significantly less as ASIC excludes other significant expenses). If the grade increased to 3.0g/t the ASIC is a ball park $750 to $850 (including 20% expense increase) making the ASIC possibly less than $1,100!

Sometime ago SL noted one of his new recruits saying how profitable the restarted mine would be. Well $1,300 is very profitable if they were to achieve such an outcome.

Even if it is off the mark, it is an interesting example of how differences in grade have a huge impact on mine profitability.

Interested in other posters views of this approach, especially if you think I am dreaming of such a low ASIC.

PS The reason I included a grade of 3.0 g/t is due to the gradual increase in grade of the Dalgaranga project from 1.23 g/t @ Sep 22, 1.6 g/t @ Jan 23, 2.2 g/t @ July 23 and 2.49 g/t @ Dec 23. With the high grade NN deposit and the focus on the high grade WW, 4P and Sly Fox we may end up with a grade around 3.0 g/t or even higher.