VLC.V · 2020-08-31

Velocity Announces Positive Pre-Feasibility Study Results for the Rozino Gold Project, Southeast Bulgaria After-Tax NPV5% of CAD $163 million and IRR of 27.4%

Resource Estimates Technical Reports (NI 43-101) Economic Studies

NR20-18 August 31, 2020 Velocity Announces Positive Pre-Feasibility Study Results for the Rozino Gold Project, Southeast Bulgaria

After-Tax NPV5% of CAD $163 million and IRR of 27.4%

Vancouver, British Columbia – Velocity Minerals Ltd. (TSXV: VLC) (“Velocity” or the “Company”) announces the results of an independent Prefeasibility Study (“PFS”) on its Rozino gold project (“Rozino” or the “Project”) located in southeast Bulgaria. The PFS establishes the Rozino deposit as supporting an economic open pit mine operation with gold recovery by a combination of on-site concentration in a flotation plant (“Flotation Plant”) and further processing to produce a gold-silver doré in the existing and operating processing plant (“Processing Plant”) located in Kardzhali, 85 km by road from Rozino, where doré would be produced. The PFS financial model base case returns an after-tax Net Present Value at a 5% discount rate (“NPV5%”) of CAD $163 million and an after-tax internal rate of return (“IRR”) of 27.4%.

Rozino is located within the Tintyava prospecting and exploration licence owned by Tintyava Exploration AD (“Tintyava”), in which Velocity has 70% ownership.

“We are pleased to report results of the Rozino prefeasibility study, which further de-risks the project and provides opportunities for additional project enhancements as we advance the project towards production,” stated Keith Henderson, Velocity’s President and CEO, “The prefeasibility study presents financial results for the Rozino gold deposit as currently defined. Exploration work is ongoing aiming to discover and define additional mineralization within the 145 km² exploration licence and at Velocity’s other option properties in the region, which could potentially fit into a Hub and Spoke development model. Over the coming 12 months, Velocity will continue to aggressively explore the exploration properties in the surrounding area, aiming to discover and define mineral resources as part of this strategy.”

All amounts are reported in United States dollars (US$) unless otherwise specified.

Prefeasibility Study¹ Highlights

After-Tax Financials: After-tax NPV5% of CAD$163 ($123) million and after-tax IRR of 27.4% using a base case gold price of $1,500 per ounce.
Life of Mine Earnings: $293 million before interest, taxes, and depreciation.
Cash Cost: All-in sustaining cost² of $755 per ounce of gold and cash cost³ of $699 per ounce of gold.
Capital Costs: Total estimated capital costs of $94.8 million and pre-production capital costs of $87.1 million (including an 11% contingency).
Mineral Resource: Indicated Mineral Resource at a 0.3 g/t gold cut-off grade of 20.5 Mt at 0.87 g/t gold, for contained gold of 573,000 ounces and an Inferred Mineral Resource at a 0.3 g/t cutoff of 0.38 Mt at 0.8 g/t gold for 10,000 ounces⁴.
Initial Mineral Reserve: Probable Mineral Reserve at a 0.5 g/t gold cut-off grade of 11.8 Mt at 1.22 g/t gold for 465,000 ounces.
Mining: Open pit with 0.5 g/t gold cut-off grade (COG), low strip ratio of 2.2 and 1.22 g/t life of mine (“LOM”) gold grade.
Conventional Process Flow Sheet: Returns 79.3% gold recovery to doré at the operating Processing Plant.
Processing: On-site flotation producing gold-bearing pyrite concentrate assaying from 15 to 40 g/t and transportation to the Processing Plant (located 85 km from the Project) for processing to produce doré.
Low Environmental Risk: Small project footprint with benign, non-acid generating and nonhazardous waste and tailings material.
Opportunities for Project Enhancement: The Rozino gold deposit is open to the southeast and exploration is ongoing. Additional pit tailings storage capacity exists to accommodate potential increases in ore production.

Notes:

(1) Base case parameters assume a gold price of US$1,500/ounce and an exchange rate (CAD$ to US$) of 0.75. Financial results on 100% equity basis.

(2) All-In Sustaining Cost (AISC) is defined as all cash costs related to production costs such as mining, processing, refining, site administration, and NSR royalty to final product (direct and indirect), and mine closure and rehabilitation. Sustaining capital costs related to continuing the business including development and equipment required to sustain production are included. Taxes, working capital, M&A, disposals, and acquisitions as well as new mine development capital costs are excluded. See “Use of Non-IFRS Financial Performance Measures” below.

(3) Cash Costs include production costs such as mining, processing, refining, site administration, and NSR royalty, divided by gold ounces sold to arrive at a cash cost per gold ounce sold. See “Use of Non-IFRS Financial Performance Measures” below.

(4) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Inferred Mineral Resources are considered too speculative geologically in nature to enable them to be categorized as Mineral Reserves and there can be no certainty that all or any part of an inferred mineral resources will ever be upgraded to Indicated Mineral Resources or Measured Mineral Resources.

The PFS was prepared by CSA Global, an international mining consultancy with experience in Bulgaria, in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). A technical report prepared pursuant to NI 43-101 on the Project will be filed on SEDAR within 45 days of the date of this news release.

Velocity’s strategy is to develop a low cost “Hub and Spoke” operation in southeast Bulgaria whereby multiple gold projects produce gold concentrates for trucking to an existing, central processing plant for the production of doré. Other than Rozino, the projects referred to in the “Hub and Spoke” development model do not have defined resources nor is there is any guarantee that resources will be defined. These projects are not included in the PFS. We refer to the risks and assumptions set out in our Cautionary Statement regarding Forward-Looking Information located at the end of this release.

Velocity’s Hub and Spoke Development Model

Rozino Development Overview: Mine Site to Payable Gold

Rozino is located within the Tintyava prospecting licence, a property owned by Tintyava in which Velocity Minerals Ltd has a majority 70% interest and is the operating partner. Gorubso Kardzhali AD (“Gorubso”) holds a 30% interest and both partners contribute pro rata to joint venture costs.

The PFS establishes the Rozino deposit as supporting an economic open pit mine operation. The Project includes on-site crushing, milling and simple flotation to produce a gold concentrate with a grade ranging between 15 and 40 g/t. The concentrate will be trucked 85 km on existing roads to the currently operating Processing Plant where gold-silver doré will be produced. The sale of doré to Bulgarian refineries will be an important consideration in the Feasibility Study for the Project.

In addition to returning positive economic results, this study also outlines significant benefits, including shortened permitting timelines and capital cost efficiencies, for the following reasons:

the existing Processing Plant is permitted, currently operational, and has sufficient capacity to process concentrate from Rozino,
the use of the existing Processing Plant reduces total capital cost requirements for Rozino, and
on-site development at Rozino only requires permitting for mining, flotation concentration, and disposal of relatively benign waste rock and tailings. The area of disturbance has been kept relatively compact to facilitate reclamation and closure.

PFS Financial Results and Sensitivity

The PFS financial model reflects an after-tax NPV5% of $123 million and an after-tax IRR of 27.4%. Total undiscounted after-tax cash flow over the life of the Project is estimated to be $179 million, with a robust return on capital employed (ROCE) of 3.1.

Table 1. Headline Financial Results.


Pre-Tax NPV 0%	$M 199 265
Pre-Tax NPV 5%	$M 137 183
IRR	% 34.7%
Payback (Production Start)	Years 2.9
AFTER-TAX		US$	CAD$
After-Tax NPV 0%	$M 179 239
After-Tax NPV 5%	$M 123 163
IRR	% 27.4%
Payback (Production Start)	Years 3.0

Single factor sensitivity analysis was completed on a number of key parameters, including gold price, capital expenditure and operating expenditure. These parameters are assessed as having the greatest impact on the economics of the Project. Parameters were increased and decreased, in isolation, in increments of 25% from the base case to assess the impact on the Project’s NPV5%. The Project NPV5% is most sensitive to metal prices.

Table 2. Project Sensitivities.

	Sensitivities
CAPEX	-25%	46.5%	158
	Base Case	27.4%	123
	+25%	15.3%	77
OPEX	-25%	37.9%	186
	Base Case	27.4%	123
	+25%	13.8%	47
Gold Price	US$1,125 (-25%)	10.2%	27
	Base Case US$1,500	27.4%	123
	US$1,875 (+25%)	41.4%	218

Recommendations, Risks and Opportunities

Recommendations

The PFS represents the best available estimates of operating and financial parameters of the Rozino Project. CSA Global recommend that the Company progress to complete a Feasibility Study for the Project, which will aim to resolve key project parameters with greater certainty. It is recommended that ongoing exploration drilling be completed prior to commencement of the Feasibility Study so that any additional discoveries can be integrated therein.

Risks

The proposed open pit mining operation at Rozino is considered low to medium risk from a technical standpoint.

CSA Global were able to determine that mineralization can be adequately modelled for its diluted, recoverable grade properties assuming a selective mining unit (SMU) of 4 x 6 x 2.5 m using the multiple indicator Kriging (MIK) methodology. No further dilution or mining loss was considered appropriate. Key to this recommendation is that the operational and technical

mining team, mine management, and key operators to be well trained and attentive to dilution and ore loss controls and consistently apply best practices in mineral handling.

The small pit size and requirement for there to be six to eight working locations may result in ore and waste scheduling constraints. Detailed short-term planning will identify the stress points and enable mitigation.
Concentrate transport will require approximately 12 X 20 t trucks per day transporting concentrate to the existing Processing Plant located at Kardzhali (85 km by road). Although considered a low risk, public safety and concentrate supply continuity will be areas of focus during the mine life.

Opportunities to Enhance Project Value

There are several opportunities to add value at Rozino during the advancement of the FS engineering work.

Potential Additional Resources at Rozino: Further exploration drilling may create additional opportunity at the Project. Mineralization is open on the southeastern boundary of the deposit and ongoing drilling by Velocity has recently intersected moderate grade, near-surface gold mineralization (most recent news releases 21^st July 2020). The recent exploration results are considered not material to the outcomes of this PFS. The results of the recent and proposed exploration drilling will be considered in a future evaluation of the Mineral Resources and Mineral Reserves.
Ongoing Exploration: Exploration is ongoing on various other prospects within the Tintyava Property, all of which are within trucking distance of the Rozino Flotation Plant. There is some additional unused tailings capacity in the pit.
Recoveries: Additional metallurgical testwork is recommended in the FS to undertake additional variability testwork to obtain more confidence in the grade-recovery function and the oxidationrecovery relationship. If gold recovery at lower grades is better than expected, there could be more value derived from lower grade ore. In addition, more accurate estimation of the oxidation rating will improve short-range recovery estimates.
Silver upside: The metallurgical testwork indicates the presence of silver in the bulk concentrate and doré that could potentially add value. Routine drill core analyses have been limited to gold through much of the drilling campaigns. Consequently, silver was not able to be incorporated into the Mineral Resource estimate and Mineral Reserve statement. Silver analysis of laboratory pulps is recommended and will be undertaken for the FS.

Mineral Resource Estimate

The estimates are based on 2 m down-hole composited gold assay grades from angled diamond drilling available on 23^rd October 2019. Relative to the dataset available for the previous September 2018 Inferred Mineral Resource estimates, the estimation dataset contains assay results for an additional 114 holes for 12,733 m of drilling. This additional infill drilling, which reduced hole spacing for much of the deposit to around 50 m by 50 m, confirmed the general tenor and continuity of mineralization interpreted from the previously broad spaced drilling. This drilling, along with additional analytical information, supports the estimation of Indicated Mineral Resources.

The Rozino sampling database compiled for these estimates includes 311 diamond holes for 44,071 m of drilling, of which 86 drill holes (14,289 m) completed by Asenovgrad Geoengineering EAD during the 1980s are not included in the resource estimation dataset due to insufficient quality control data. The estimation dataset compiled for resource modelling and defining mineralization extent totals 204 diamond holes for 26,321 m and includes drill holes within the interpreted mineralised domain and rare holes up to approximately 100 m from the domain. This drilling includes 170 holes (21,787 m) drilled by Velocity, 28 drill holes (3,794 m) completed by Hereward Ventures Ltd. (“Hereward”), and 6 drill holes (740 m) completed by Asia Gold Inc. (“Asia Gold”). The remaining angled drill holes from the database are located outside the modelling area and did not inform the resource estimation. Relative to the dataset available for the previous September 2018 Mineral Resource estimate, the estimation dataset contains data for an additional 114 diamond holes (12,733 m).

The combined hole spacing varies from around 50 m by 50 m and locally closer in central portions of the deposit, to around 100 m by 100 m in peripheral areas. Samples from Velocity’s diamond drilling provide 82% of the estimation dataset, with diamond holes drilled by Hereward and Asia Gold contributing 16% and 3% respectively.

Velocity’s work program at Rozino was designed and supervised by Stuart A. Mills, CGeol, the Company's Vice-President Exploration, who is responsible for all aspects of the work, including the quality control/quality assurance program. On-site personnel at the Project rigorously collect and track samples which are then security sealed and shipped to ALS Global laboratory in Romania. Samples were prepared and analyzed by fire assay using a 30 gram charge in compliance with industry standards. Field duplicate samples, blanks, and independent controlled reference material (standards) are included in every batch.

Hereward and Asia Gold’s diamond core from angled drilling was sampled and analyzed by industry standard methods. The core was generally halved for analysis with a diamond saw over about 1 m intervals, and samples were analyzed for gold by fire assay by commercial laboratories. Hereward and Asia Gold’s monitoring of sampling and assay reliability included duplicates and blanks for both data sets and certified reference standards for Asia Gold’s data.

The Mineral Resource estimate was carried out by MPR Geological Consultants Pty Ltd.

Estimated Resources are constrained within a mineralised envelope interpreted from 2 m down-hole composited gold grades and geological logging from diamond drill core. The envelope captures intervals of greater than 0.1 g/t, with the lower boundary reflecting the contact between variably mineralised sedimentary rocks and un-mineralised basement. It covers an area of approximately 0.8 km by 1.0 km.

Bulk densities of 2.35, 2.40 and 2.55 tonnes per cubic metre were assigned to completely oxidized, transitional and fresh material respectively, using surfaces representing the base of complete oxidation (“BOCO”) and top of fresh rock (“TOFR”) interpreted by Velocity. The density values were derived from the results of 250 immersion density measurements performed by Velocity and Hereward on samples of diamond drill core. Within the resource area the depth to BOCO averages around 11 m, with fresh rock occurring at an average depth of around 22 m.

Recoverable resources were estimated using Multiple Indicator Kriging (MIK) with block support adjustment, a method that has been demonstrated to provide reliable estimates of recoverable open pit resources in gold deposits of diverse geological styles. Indicator class grades used for the MIK modelling were determined from the mean composite gold grade of each indicator class. The effect of extreme grades on estimates was reduced by cutting six outlier composites with gold grades of greater than 60 g/t to 60 g/t for determination of the mean grade for the highest indicator class.

Estimates for mineralization tested by generally consistently 50 m by 50 m and closer spaced drilling are classified as Indicated, with estimates for more broadly sampled zones assigned to the Inferred category.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. To provide estimates with reasonable prospects for eventual economic extraction, Mineral Resources are reported within an optimized pit shell generated with the parameters shown in Table 3. These cost and revenue parameters were specified by Velocity and are compatible with the mining and recovery methods described in this announcement. They generate a cut-off grade of 0.3 g/t, which is selected as the base case for Mineral Resource reporting.

The optimal pit shell generated for constraining Mineral Resources has dimensions of about 770 m by 660 m, with a maximum depth of around 150 m.

Table 4 shows the Indicated and Inferred Mineral Resource estimates for Rozino. The figures in this table are rounded to reflect the precision of the estimates and include rounding errors.

Table 3. Parameters used to generate pit shell to constrain Mineral Resources.

	Parameter			Value
Gold price Cost per tonne of material mined Cost per tonne of material milled, excl. mining Metallurgical recovery Refining charge			$1,500 per ounce $2.59 per tonne $11.74 per tonne 79.3% $1.44 per ounce
Average pit wall angles		Wall azimuth 030 to 150o Wall azimuth 150 to 030o	36o 40o

Note:

(1) The reasonable prospects for eventual economic extraction utilizes a fixed metallurgical recovery of 79.3% that does not vary for ore type or grade.

Table 4. Mineral Resource Estimate (effective date April 15, 2020).

	Within $1,500/oz pit shell
	Indicated Mineral Resource Estimate
	Cut-off		Tonnes		Grade Gold		Contained
	g/t		Mt		g/t		Gold koz
0.2 0.3 0.4 0.5 0.6		27.2 20.5 15.5 12.0 9.42		0.72 0.87 1.04 1.22 1.40		630 573 518 471 424
	Inferred Mineral Resource Estimate
	Cut-off		Tonnes		Grade Gold		Contained
	g/t		Mt		g/t		Gold koz
0.2 0.3 0.4 0.5 0.6		0.49 0.38 0.29 0.23 0.17		0.7 0.8 0.9 1.0 1.2		11 10 8 7 7

Notes:

(1) The selected base case Mineral Resources are reported at a cut-off grade of 0.3 g/t gold.

(2) Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

(3) The Mineral Resources have been classified and reported in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum “CIM Definition Standards - For Mineral Resources and Mineral Reserves” ("CIM Definition Standards").

Mineral Reserves

The Rozino deposit supports an economic open pit mining operation. The Mineral Reserve estimate is based on the Indicated classification of the Mineral Resource contained within the pit design. The Mineral Reserve estimate has considered all modifying factors appropriate to the Rozino Gold Project.

The reference point at which the Mineral Reserves are defined is where the ore is delivered to the processing plant.

Table 5. Probable Mineral Reserves (effective date 20^th August 2020).

Ore Type		Reserve Category	Tonnes Mt	Gold	Contained	Metallurgical	Recoverable
				Grade	Metal	Recovery	Metal
				g/t	koz Gold	%	koz Gold
	Oxide	Probable 1.9 1.07 64 67.4 43
	Transitional	Probable 1.8 1.15 68 70.7 48
	Sulphide	Probable 8.1 1.27 332 83.3 277
	Total	Probable 11.8 1.22 465 79.3 368

Notes:

(1) The Mineral Reserve disclosed herein has been estimated in accordance with CIM Definition Standards.

(2) Mineral Reserves discard cut-off grade was 0.5 g/t gold.

(3) Mineral Reserves are based on a $1,500/oz gold price.

(4) Mineral Reserves account for mining dilution and ore loss.

(5) Probable Mineral Reserves were based on Indicated Mineral Resources.

(6) Sum of individual amounts may not equal due to rounding.

None of the Inferred category of the Mineral Resources are included in the Mineral Reserves. Inferred Mineral Resources do not contribute to the financial performance of the Project and are treated in the same way as waste.

Mining losses and mining dilution are incorporated in the MIK Mineral Resource estimate. CSA Global were able to determine that mineralization can be adequately modelled for its diluted, recoverable grade properties assuming a selective mining unit (SMU) of 4 x 6 x 2.5 m using the MIK methodology. CSA Global consider that the Mineral Resources can be effectively mined by open cut extraction using the selected mining equipment and qualifications relating to training, grade control practices, and drilling and blasting technique applied, without additional dilution and loss factors being applied.

Mining

The mine will be a conventional open pit shovel and truck operation.

The mine plan allows for the production of 9.2 Mt of high-grade ore and 2.7 Mt of low-grade ore (a total of 11.8 Mt) over a period of 7 years. High grade ore will have a cut-off of 0.8 g/t gold and an average head grade of 1.38 g/t. Low grade ore will have a cut-off of 0.5 g/t and an average head grade of 0.68 g/t. Lowgrade ore will be stockpiled on the waste rock dump and processed over the last 18 months of mine life. The mining schedule also identifies ore by the degree of weathering (Oxidised, Transitional and Sulphide). Metallurgical testwork indicated that there was no benefit to processing the ore types separately and therefore there is no selectivity in the mining or processing operations.

This mine plan will allow the processing of 1.75 Mt of ore per annum for a total mine life of 7 years.

Primary and ancillary mining equipment will be leased and operated by the Company. Drilling and blasting will be carried out by a licenced contractor. The contractor will supply and manage explosives on a justin-time use basis, thus requiring no on-site storage requirements.

Blasting will be on 5 m benches. The benches will be mined in two 2.5 m passes using three X 90 tonne class excavators for primary excavation. The blasted rock will be loaded into 55 tonne capacity trucks. The truck fleet will number between 12 and 15 units at steady state production rates.

The mine pit will comprise two phases: Phase 1 in the east will be mined first followed by Phase 2 in the west. Most of the Phase 2 waste will be placed into the depleted Phase 1 pit. The tailings from the highgrade ore will be stored in the valley TMF with a capacity of 8.6 Mt. When the Phase 2 pit is complete, the tailings from the low-grade ore (2.8 Mt) will be placed into the pit.

The mine sequence generates an optimised cash flow by deferring low grade ore to the end of mine life, minimising waste haulage costs, and generating a compact environmental footprint.

The pit optimisations were completed for a range of gold prices around $1,450/oz and a gold cut-off grade of 0.50 g/t. The ultimate shell used to guide the pit design was selected at the 90% metal price or $1,305/oz. This shell generates 11.9 Mt of ore at a strip ratio of 2.2 (waste : ore), and a cash operating cost of $667/oz of payable gold.

The pit optimizations and designs were based on geotechnical parameters guided by weathering, rock type and wall orientation. Generally, the design criteria utilized a factor of safety of between 1.2 and 1.3 and overall slope angles of 32˚ to 59˚.

Table 6. Mining Production Parameters.

Mining Parameters		Units	Base Case
	Steady State Ore Mining Rate	Mtpa 2.20
	Steady State Plant Processing Rate	Mtpa 1.75
	Steady State Mining Rate (ore plus waste)	Mtpa 7.00
	Total HG Mineralization Mined	Mt 9.2
	Total LG Mineralization Mined	Mt 2.7
	Total Waste Mined	Mt 26.5
	Total Material Mined	Mt 38.3
	LOM Average Strip Ratio	Waste : Ore 2.2
	Average HG Gold Head Grade	g/t 1.22
	Total Mined Gold	koz 465
	Cut-off Gold Grade	g/t 0.5
	LOM	Years 7
	Mining Operating Cost	$/t mined 2.60

Metallurgical Testing

To support the process design requirements for the Prefeasibility Study, extensive metallurgical testwork programs were undertaken by Wardell Armstrong International Ltd (“WAI”) in the UK, and Eurotest Control (“ETC”) in Sofia, Bulgaria. Testing evaluated different process options to confirm whether the base case flowsheet developed for the Company’s 2018 Preliminary Economic Assessment (“PEA”) using a composite sample was still optimal for processing the different ore types (Oxide, Transitional and Sulphide) as discrete entities.

The outcomes of the testwork programs confirmed that the flowsheet developed for the PEA, namely flotation followed by CIL (“FCIL”) to produce doré, remained the optimal basis for plant design in the PFS.

Testwork also investigated gravity gold recovery in combination with flotation and CIL recovery, but it was proven to be less economic than the simpler FCIL design.

Minor changes to the PEA flowsheet include:

Operating the rougher-scavenger in a closed-circuit configuration;
Addition of a cleaner stage in the flotation circuit;
Inclusion of a concentrate regrind stage (at the Processing Plant) to a P80 of 20 µm.

The testwork established grade-recovery and recovery-oxidation relationships which were applied to the processing schedule and gold recoveries per period over the life of the mine. The testwork permitted the development of grade-recovery and recovery-oxidation models to enable accurate pit optimisation and period-by-period estimates of the expected recovery as the proportions of oxide materials and head grade vary over the life of the Project. For the Mineral Reserve, the average expected recovery for Oxide material is 67.4%, Transitional 70.7% and Sulphide 83.3% for an average overall combined recovery of 79.3% to final doré. Over the life of the Project it is estimated that the expected recovery will vary from 65 to 85% on an annual basis depending on the relative proportions of oxidised ore and gold grade in the plant feed.

Adequate testwork data is available on the process to provide operating parameters for flowsheet design and major equipment sizing within the contingency allowances normally associated with a PFS.

Process Engineering

The on-site Flotation Plant, including comminution, is designed to process 1.75 Mtpa of ore over the LOM following initial ramp-up. The optimal process identified for the Rozino sulphide mineralization is flotation to produce a gold-bearing sulphide (pyrite) concentrate at the Rozino site. This will be followed by grinding of the concentrate to a P80 of 20 µm and CIL processing to produce a gold-silver doré at the Processing Plant.

The ROM ore will pass through a three-stage crushing process and a ball mill to produce a flotation feed with a final grind size of P80 of 75 µm.

The concentrate will be thickened, filtered, and loaded into trucks for transport by road to the Processing Plant. The concentrate will have a moisture content of about 12%. The concentrate mass pull, depending on ore type, is anticipated to range between 2.14% (for oxide) and 4.18% (for sulphide) by weight, with an average of 3.8%. Approximately 67 000 t of concentrate, with gold grades averaging between 15 g/t and 40 g/t, will be produced annually.

The concentrate will be trucked 85 km on paved roads to Gorubso’s existing and operating Processing Plant. The plant has a nominal throughput capacity of 162 ktpa. A total of 368 koz of gold in doré will be produced over the mine life.

Tailings from the Flotation Plant will be pumped to the TMF for the initial 5.25 years of mine life, and then to the Phase 2 pit (after termination of mining) during the last 1.75 years of project life.

Table 7. Flotation Plant Production Parameters.

Flotation Plant Processing Parameters		Units	Base Case
	Flotation Plant Throughput	tpd 5,000
	Annual Plant Throughput	Mtpa 1.75
	Flotation Plant Metallurgical Recovery	% 90.4
	Mass Pull	% 3.8
	Moisture in Concentrate	% 12.0
	Average Annual Concentrate Production	dkmt 65
	Total Concentrate Production	kt 454
	Average Concentrate Gold Grade	g/t 29
	Flotation Process Costs - OPEX	$/processed t 7.04
	Concentrate Transport Cost	$/wmt concentrate 13.92

Table 8. Processing Plant Production Parameters.

Processing Plant Parameters		Units	Base Case
Metallurgical Recovery % 87.6
Overall Metallurgical Recovery % 79.3
Steady State Payable Gold Production kozpa 59.4
Total Gold Production koz 368
	Operating Cost	$/t 2.35 milled
	Operating Cost	$/t 61.16 concentrate treated

Production and Processing Schedule

The proposed open pit operation at Rozino will have a mining rate of up to approximately 8 Mtpa to sustain a 5,000 t/d flotation plant feed at an average strip ratio of 2.2. The plan relies on the use of two pit phases and a low-grade and high-grade stockpiling strategy to optimise cash flow and create a compact project footprint. The mine plan was developed on a quarterly basis (reported on an annual basis) to ensure that a robust production schedule was developed.

Plant production commences with the processing of about 50% oxidised ore (Oxide and Transitional) in the first year of feed. Low-grade sulphide and then oxide ore are fed back into the plant after the mining operation ceases and the pit is converted into a TMF.

Doré production varies depending on the ore type and head grade delivered. The production plan allows for inventory build up at the Flotation Plant and the Processing Plant, as well as delays in doré revenues. The gold-in-doré sold per annum is expected to vary from 30 to 76 koz and total 368 koz for the life of the Project.

Table 9. Life of Mine Production and Processing Schedule.

		Unit			LOM		Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7
					Total
	MINING PRODUCTION
	Waste		Mt		26.49	1.82		4.89		5.42		5.15		5.20		3.47		0.53		0.00
Low Grade (LG) ore			Mt		2.65	0.10		0.76		0.84		0.46		0.28		0.17		0.04		0.00
			Au gpt		0.68	0.72		0.70		0.68		0.66		0.66		0.64		0.65		0.00
High Grade (HG) ore			Mt		9.17	0.19		1.55		1.73		1.73		1.44		2.09		0.44		0.00
			Au gpt		1.38	1.35		1.26		1.34		1.21		1.23		1.71		1.52		0.00
Total Ore			Mt		11.82	0.29		2.32		2.57		2.19		1.73		2.26		0.47		0.00
			Au gpt		1.22	1.12		1.08		1.12		1.10		1.14		1.63		1.46		0.00
	Total Pit Ore and Waste		Mt		38.32	2.12		7.21		7.99		7.33		6.92		5.73		1.00		0.00
	High-Grade Ore Rehandle		Mt		0.63	0.00		0.02		0.00		0.33		0.00		0.00		0.28		0.00
	Low-Grade Ore Rehandle		Mt		2.46	0.00		0.00		0.00		0.00		0.00		0.00		0.88		1.59
	Strip Ratio		w:o		2.2	6.2		2.1		2.1		2.4		3.0		1.5		1.1		0.0
	FLOTATION PLANT PRODUCTION
Total Ore			Mt		11.82			1.49		1.75		1.75		1.75		1.75		1.75		1.59
			Au gpt		1.22			1.26		1.32		1.22		1.21		1.67		1.12		0.71
			Au koz		465			60		74		69		68		94		63		36
	Milling Rate		Ktpd		4.7			4.1		4.9		4.9		4.9		4.9		4.9		4.4
	Proportion Oxide		%		16%			32%		16%		5%		13%		0%		0%		50%
	Proportion Transitional		%		16%			19%		28%		14%		4%		0%		0%		49%
	Proportion Sulphide		%		69%			49%		56%		82%		83%		100%		100%		2%
	Flotation Recovery		% Au		90.4%			84.7%		86.9%		92.3%		92.0%		96.7%		96.4%		75.0%
	CIL PLANT PRODUCTION
Concentrate Processed			Kmt		454.21			47.47		66.31		71.05		68.44		72.00		72.00		56.94
			Au gpt		28.8			30.4		30.1		27.8		28.5		37.9		26.9		18.3
	CIL Recovery		% Au		87.6%			90.1%		89.3%		87.1%		87.3%		87.9%		85.3%		85.8%
	Gold		Au koz		368			40.2		56.8		55.4		54.7		76.3		54.1		30.8
	Overall Metallurgical	%		79.3%			66.7%		76.2%		80.8%		80.2%		81.2%		85.9%		85.4%
	Recovery

Note:

(1) Columns may not sum exactly due to rounding.

Infrastructure

A 12 km paved road links the village of Rozino with the main II-59 provincial road. Capital for upgrades and operating costs for annual maintenance have been appropriately allocated. The final two kilometres between Rozino village and the mine site is currently a gravel road. This section of road will not be paved but will be upgraded to accommodate typical mine traffic and concentrate haul trucks. There are a further four kilometres of 12 m wide haul roads between the pit, waste rock dump and processing plant that will be completed during the construction period.

Water management is central to maintaining an appropriate environmental and operational performance for the Project. The principle adopted for site water management is to intercept and control contact water flowing within the operational areas. The site water balance indicates that the Project will have a negative water balance. Water reuse will be maximised, but plant process make-up water will need to be sourced from local water sources. This water will be pumped to a raw water dam directly below the contact water dam, and then pumped to water storage tanks at the processing facility.

The TMF is designed to hold 8.6 Mt of tailings and is located directly to the northeast of the plant in a valley. Tailings from the processing of the low-grade ore (2.8 Mt) will be pumped to the Phase 2 pit on completion of mining. High-head tailings pumps and new tailings and return water lines will be installed

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