Some comments on the announcement, page-4

The reported grade and tonnage reconciliation is a weakly positive development at this stage of the project but has some significant statistical pitfalls if interpreted as being an absolute measure of future grade/tonnage reconciliation. Let me explain why:

Firstly the tonnage reconciliation; since tonnage reconciliation is based on where the orebody is known to be located in an x, y & z coordinate system the only major issues of accuracy are the location of the drill holes that samples the orebody and the density of the rock used to convert the interpreted ore body to a tonnage. Unless the drill holes are mis-located or the density assigned to the orebody is wildly wrong (or the interpretation is really bad), the tonnage reconciliation should be within the total statistical error of such estimations. I assume this error would be in the 5-10% range. So the positive 4% tonnage reconciliation is probably well within the norm of such estimations at this stage of the project.

The reconciliation of grade is another matter. The statistics of a population of samples (in this case drill hole assays) can be described with their mean, standard deviation (SD) and variance (the square of SD) amongst many other statistical measures. When a small portion of a population is measured (in this case goes through the milling plant) that has a higher (or lower) mean grade than expected we intuitively think one of two things;

1) the rest of the population (read orebody) will be higher grade (or lower as the case may be) or
2) a back-calculation of the rest of the population (read orebody) will render a lower (or higher as the case may be) grade in the remaining population.

Both assumptions are invariably (statistically) incorrect. The smaller the sub-sample of a population the higher the inherent variance is compared with much larger populations of samples. In engineering we call this “volume variance” (although in mining resource estimates I have seen the term “block variance”). When the variance of a small population (in this case about 5% of the total resource tonnage; read volume) is compared to much larger volumes (say when 50% of the orebody has been mined) its variance is always higher.

Due to volume variance effect (which is 100% statistically valid), there is just as much chance that other 5% portions of the orebody will report grades lower than expected. What engineers and scientists are looking for when estimating the mean of a population is to get the final number right and not very small sub-populations with the whole population.

It is therefore absolutely incorrect to base future grades on the sampling of such a small portion of the overall population. Do so at your peril. For those that are not mathematically and statistically minded there are simple tests you can perform to visualize the volume variance effect to help you through this mine field (no pun intended).