OBM Performance JAN 2022 - MAR 2022 (3Q), page-3

OBM will have to start digging up much higher grade ore from Missouri and focus on that for the rest of the year in order to make the AGM FY2022 average grade of 2.26 g/t. The H1 FY2022 average grade overall was 1.85 g/t, Riviera 1.54 g/t and Missouri 1.62 g/t. Is there any intelligence to say that high grade is being realised at Missouri?

Here is my wrap for OBM to December 2021, in case it help others looking towards Q3 performance:

Mining commenced just before the end of CY2020. According to plan diagrams published in July 2020, OBM was expecting to mine approx 79 kt of ore at 1.95 g/t in CY2020 and approx 1056 kt at 2.21 g/t during CY2021. The combined production target until the end of CY2021 was 1135 kt at 2.21 g/t. This plan consisted of approx 640 kt from Riverina Pit, 370 kt from Missouri Pit and 125 kt from Golden Eagle Underground.

This budgeted average grade of 2.21 g/t was below the weighted DFS average grade for the target areas of 2.59 g/t. This indicates that grades from these locations were expected to be marginally lower at the beginning.

Ore mined for the period totaled 1396 kt (878 kt Riverina, 216 kt Missouri and 302 kt Golden Eagle). This is 260 kt above budget, but that's where the good news ended. At an average of 1.67 g/t the mined grades was well short of the DFS weighted average grade of 2.59 g/t and the planned average grade of 2.21 g/t. This was the first issue which increased unit costs. To achieve the same gold output the mill has to process 32% more ore.

The average head grade processed for the period was 1.97 g/t. Processing higher grade material reduced the milling impost from 32% to 12%. However only approx 60% of the ore mined was processed leaving 40% or approx 564 kt unprocessed of ore lying around at around 1.24 g/t. This was the second issue.

The third issue was the large amount of overburden mined. Converting volume to weight provided an approx strip ratio. For the period Riviera averaged 9.3 with a peak of 18.8 in the March 2021 qtr down to 4.5 most recently. Missouri peak was 30.4 in the September 2021 qtr now down to 19.0. Some of the expenditure on the initial overburden have been capitalised and all things being equal one could be hopeful that the strip ratio will continue to improve at these sites. However the amortisation of the capitalised amounts will continue to be a drain on profitability. This is a feature when mining small deposits due to the need to frequently incur initial costs as mining moves from one small deposit to another.

The final issue and the root cause of problems to date is that observed grades are materially below DFS resource estimates. Golden Eagle ceased production after 302 kt at 2.64 g/t when the DFS resources was 393 kt at 3.85 g/t. To realise DFS grade at Golden Eagle the now mothballed 91 kt would have needed to contain 7.85 g/t. Clearly not. At the end of CY2021 the resource at Riviera was 29.3% mined recording 1.35 g/t compared with a DFS grade of 1.90 g/t. To achieve DFS grade the remaining ore there would need to contain 2.13 g/t. The most disappointing site to date was Missouri where the observed grade to date was 1.60 g/t compared with the DFS grade at 3.37 g/t. As this ore body is only 14.6% mined there is some hope of grades improving. To achieve DFS grade the remaining ore there will need to average 3.67 g/t.

Average gold recovery at 90.3% is OK.

Management has been working on improving mill efficiency, which is good, but really needed to mine better - lower strip and higher grades. Something to work on if indeed possible.