Ann: Drilling Update for Kanmantoo, page-16

With everything quiet on the HGO front I've been trying to get a better understanding of cut off grades.

I came across this in the latest SBM MRE from June last year.



That's for me a big picture painted by three figures and four lines of description.

Being interested in numbers I find it a fascinating insight into the process and the complex nature of preparing a DFS for an UG mining project.

I suppose like most studies you start with an educated guess in the first round of calculations and slowly zero in on the best out come.

It would seem that the 4.7G/t break even case for mining and processing can be broken down to

0.7 g/t for processing i.e. 15%
1,2 g/t for stope mining i.e. 25% (30% of mining cost)
and
2.8 g/t for mine development. i.e. 60%

I have been puzzled by the fact that we can't mine and process 0.8% grades based on my assumptions of total costs.

It starts to make sense if you have a viable mine plan based on a much higher stope evaluation cut off grade that pays for the mine development.

Putting the 0.8% cut off grade through the spread sheet at a stope mining cost of circa 30% of full picture mining cost I'm a much happier camper as EBITDA breaks even at us $2.50

To have a break even EBITDA at $2.5 it would seem the stope evaluation cut off grade would need to be around 1.8%

Nice to learn something every day.

The way the drilling is panning out and the copper price is holding up we seem to be in a very good place.