floor, page-38

Oh dear, Pooh and Pascal - you really are trying to drive the price down aren't you.

Let's start Ore Reserve Estimation 101 with a definition of payability shall we? Read CTO's reports thoroughly, and it is explained that payability is the proportion of the whole structure that can be mined economically. Previous (historical) mining extracted 30% of the structures at a cut-off grade metal accumulation of 9 metre-grams per tonne. CTO used the same 30%, even though their cut-off grade is lower (3 m.g/t for resources and 7 g/t for reserves). Metre-grams are used in narrow ore bodies where widths are less than one metre, to dilute the grades out to the minimum mining width of one metre. They are also used to decide whether or not to include a certain drill intersection and also for statistics where it provides a common base for statistical analysis of drill intersectins that vary greatly in width and great - it compares apples with apples.

The JORC Code states: "Ore Reserves are those portions of Mineral Resources
which, after the application of all mining factors,
result in an estimated tonnage and grade which, in
the opinion of the Competent Person making the
estimates, can be the basis of a viable project, after
taking account of all relevant Modifying Factors."

"The term ‘Modifying Factors’ is defined to include
mining, metallurgical, economic, marketing, legal,
environmental, social and governmental considerations."

"Mining factors include:
Assumptions made regarding possible mining methods, minimum mining dimensions and or assumptions. internal (or, if applicable, external) mining dilution. It may not always be possible to make assumptions regarding mining methods and parameters when estimating Mineral
Resources. Where no assumptions have been made, this should be reported."

For Ore Reserves,
Mining factors include:
The method and assumptions used to convert the Mineral Resource to an Ore Reserve (ie either by application of appropriate factors by optimisation or by preliminary or detailed design).
• The choice of, the nature and the appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre-strip, access, etc.
• The assumptions made regarding geotechnical parameters (eg. pit slopes, stope sizes, etc.), grade control and pre-production drilling.
• The major assumptions made and Mineral Resource model used for pit optimisation(if appropriate).
• The mining dilution factors, mining recovery factors, and minimum mining widths used.
• The infrastructure requirements of the selected mining methods.

Payability is one of the Modifying (mining) Factors, not a fudge factor and there is nothing mysterious about it.
It's referred to in the JORC Code as the "mining recovery factor". CTO simply calls it payability factor instead of "mining recovery factor".

In fact, it's critical to understanding that CTO's Inferred Mineral Resource has already had this modifying factor applied to it, making it more stringent than the usual JORC category of Inferred. The tonnage in the Inferred category has been REDUCED BY 70% by assuming that onlt 30% of each structure will be economically mined.

This is the basis of CTO's statement that 70% to 80% of the Resource ounces will convert to reserve ounces (they use 68% in their mine planning).

Get your head around the fact that A COMPANY DOES NOT NEED A PROVED RESERVE TO COMMENCE MINING! Mine planning can be done on an Inferred Resource. Look at Emperor Mines Ltd Annual Reports for the last few years - they were a producing mine for over 60 years, yet 30% of their annual production came from the Reserve category, 30% came from the Resource category and 30% came from NEITHER CATEGORY - i.e. from material that was neither resource nor reserve, and therefore unreportable under the JORC code.

The 6.6 million ounces mined from the Cartesr Towers field NEVER had a JORC Resource let alone a Reserve. The miners followed the veins based on where they outcropped or were predicted to be geometrically. Diamond drilling didn't reach Charters until 20 years after mining commenced.

CTO's resource is well drilled (1,800 holes, 146 km of drilling, 1,551 significant drill intersections, high grades down to 1,200 metres). They have mined gold previously (and profitably) (38,000 ounces from 1997-2000) but this was always stated to be TRIAL MINING - it was done to get actual costs for the feasibility study. There was never enough money to drill out reserves ahead of the trial mining to continue it. However, CTO proved their point that there were un-mined portions of the old reefs that could still be profitably mined - they mined the No 2 Cross Vein (the old Maude St Leger vein), the Stockholm vein, the Washington vein and now the Warrior vein - all these areas had been mined, but CTO mined portins of the veins left behind.

Sorry guys - do your best to criticise it, but CTO will continue to prove you all wrong, and become one of the top 10 Australian gold producers. They have a very strong factual base for their decisions.

Forget what went on in the past - since the appointment of the four executive managers in 2002 under the MD (COO, GM Engineering, Corp Accountant, Corp lawyer & CO Secretary) it's been a completely different company. There has been a level of corporate governance imposed by these managers to ensure that everything is squeaky clean. Did you know that the MD can't sign any cheques - all payments have to go through the exec managers?

Their ore reserve & mineral resource statement has been in the public domain since August and May 2005 respectively - NO COMPLAINTS from JORC, ASX or ASIC orthe AusIMM governing body. Their peers are happy with it.