Ann: Maiden 2009 Year Net Profit , page-20

from Diggers

Gold Operations
The Tindals area incorporates several major gold deposits – namely the Cyanide, Tindals, Empress, Countess and
Perseverance – each of which has been worked by separate open pits and underground access. FML believes this
group of deposits has considerable potential to be developed as one group of deposits that is accessed by a new centralised decline. Currently FML is mining the Perseverance and has recently been developing in the Countess lode but has suspended work there for the time being as it has an excess of developed ore but will resume stoping at the Countess next quarter.
While mining operations have now built up significant stockpiles of ore, FML is still processing its ore on a toll treatment basis with another party while it completes a $19M upgrade to its Three Mile Hill treatment plant, due to be finished in November 2009. The Three Mile Hill treatment plant is expected to have a milling capacity of 1.2Mtpa so in order to offset some of the costs with operating it until FML can fully supply it with its own ore, FML has entered into some limited toll milling arrangements with other parties operating in the region. When fully operational, the Three Mile Hill treatment plant is expected to reduce FML’s milling costs by an estimated $10 - $15 per tonne.
There are a number of dumps in the near vicinity of the Three Mile Hill treatment plant that are thought to contain significant potential ore as some records indicate the selective mining in the past was very inefficient and these dumps may contain ore that was wrongly assigned there from the nearby open pits. This potential will be the subject of work in the near term along with planned exploration in and under some of these dumps which has never been carried out on a methodical basis.
The Mount gold deposit is located to the south of Coolgardie and may represent an attractive near term development opportunity. Previously worked as a small scale open pit and underground operation by private interests which mined gold in narrow quartz veins, FML believes there is considerable scope for low cost gold production from extensions of the multiple thin quartz veins in basalt into the ultramafic, which has not been adequately drill tested.
FML is planning to do some limited underground exploration of the gold mineralisation and will use the results of that work and other information to determine the most appropriate development path for the deposit, and in particular if it should be mined by open pit or underground methods.
FML had a successful last quarter of FY09, producing a record of 19,226 ounces of gold at an average cash cost of
A$ 695/oz, taking FY09 gold output to 41,401 ozs at an average cash cost of A$ 603/oz. With completion of the
refurbishment of its gold treatment plant towards the end of 2009, the company is set to lift its gold production
significantly in future and is targeting to produce over 70,000 ozs in 2009, over 80,000 ozs in 2010 and to be at a rate of about 100,000 ozs per annum by the end of 2010 and to produce over 100,000 ozs of gold in 2011 at low cash
costs.
The company’s improved operating performance means it is improving its financial position and expects to be hedge-
free by the end of September 2009 and to be debt-free by the end of 2009. This will enable it to lift its exploration spending to $6M in 2010 and to begin testing some of its many attractive gold targets. It is likely that along with recent drilling success, this planned exploration expenditure will result in an increase in the company’s current gold resources, which currently stand at almost 1.9M ozs.

Nickel Potential
In addition to its obvious gold potential, there is scope for FML to achieve nickel production from its 100% owned
Nepean mine just to south of Coolgardie. While there is an inferred resource of almost 600,000t averaging 2.2%
nickel at the mine, which could well be expanded by exploration since there has been relatively little in the modern era, we do not see this project as a high priority one for the company in relation to its gold interests and do not ascribe much value to it at this stage.