Qtly Report Update, page-16

Hi All4One,

I understand that BDR don't produce bullion, this can only be done by a refiner.

Bullion has a pretty clear definition however, and I would have expected produced but un-shipped gold to be categorized as inventory. We look like we're dealing with semantics which is disappointing as I thought we'd gone beyond this when PB was ejected.

The difference, as I understand it, between the oxide and sulfide ore at Tucano is really in how the plant is set up to deal with each type of ore. Throughput and plant settings need to be adjusted to ensure the maximum output is achieved.

I would think that BDR has the plant set up for a certain ratio at present and it looks like the mine plan for Q3 mined more sulfide ore than they wanted to put through the plant so they boosted the oxide component from the lower grade stockpiles (c. 15% of Quarterly throughput). This in turn lowered the head grade and thus the oz produced for the Quarter.

It would have also affected the cash balance at Q end too - i.e. BDR would have incurred the cost of mining sulfide ore at (say) 1.7g/t and paid MACA for this. However, they were only able to chuck a roughly equivalent amount of ore through the plant @ 0.68g/t. This obviously reduces the oz produced and thus the cash receipts.

On 127kt at the assumed differential (1.7g/t - 0.68g/t) with 89% recovery = 3,718 oz or A$6.4m (US$1,315 oz and 76c fx) was 'lost' from the revenue line for the Quarter.

I understand that at some point BDR will have to add a ball mill to the front of the plant to add additional crushing capacity once it moves to primarily sulfide ore. However, exploration looks to be discovering lots of oxide ore in both new locations and below the current pits that may delay this required capex.

Happy to be corrected.

Cheers
John