The Board of Directors of Hillgrove Resources Limited (Hillgrove) (ASX: HGO) reports for the quarter ended 31 October 2010 IIIIIIIIIIIIIIIIIIIIIIIII HILLGROVE RESOURCES LIMITED ACN 004 297 116 QUARTERLY REPORT IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII PERIOD ENDING 31 OCTOBER 2010 HIGHLIGHTS Kanmantoo Copper Mine project receives green light from the Hillgrove Board. AUD65 million equity raising arranged and fully underwritten by J.P. Morgan and Wilson HTM Corporate Finance, who are acting as Joint Underwriters and Joint Lead Managers to the offer. Unconditional portion of the funding package was completed on November 1, with approximately AUD14.5 million committed by institutional investors through the placement of 58.2 million ordinary Hillgrove shares at AUD0.25 per share. A conditional placement, raising approximately AUD50.5 million and also committed by institutional investors (with funds in escrow), is subject to shareholder approval at an EGM being held on Friday, 3 December 2010. A Share Purchase Plan is open up to 14 December 2010 for existing shareholders to participate in this capital raising. Mine development and construction is underway at the Kanmantoo Copper Mine. Bulk earthworks and site preparation were completed in the quarter to minimise delays. Civil works have begun in preparation for reconstruction of the Processing Plant from Pillara’s Lennard Shelf, which is on-site. Exploration continued at our projects in Indonesia. o Drilling of West Vein, at Masu Project, Sumba confirms consistent gold grade and widths down dip: MADPH022: 5.4m @ 3.60g/t Au; MADPH024: 10.1m @ 2.58g/t Au. o Surface sampling has recommenced at Tanah Daro Project, Sumba: Soil sampling identifies gold anomaly 200m x 300m with values > 1g/t Au; Rock chip sampling of highly altered, silicified hill identifies additional high grade gold values to 37.13g/t Au and silver to 406g/t Ag. o Exploration activities at the West Delta prospect area at Bird’s Head included: Channel sampling encountered widespread copper/gold anomalism over several square kilometres, with maximum assays of 4.3% Cu, 1.98g/t Au, 510ppm Molybdenum (different channels); Geological mapping confirmed zoned hydrothermal alteration over several square kilometres consistent with porphyry copper deposits throughout the world; Computer modelling of airborne magnetic data revealed several clustered magnetic highs interpreted to be later-stage intrusions associated with mapped zoned hydrothermal alteration and anomalous surface sampling copper values. Cash and investment portfolio totalled $68.7 million at the end of the quarter.
Transcript
The Board of Directors of Hillgrove Resources Limited (Hillgrove) (ASX: HGO) reports for the quarter ended 31 October 2010
QUARTERLY REPORT IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII PERIOD ENDING 31 OCTOBER 2010
HIGHLIGHTS
Kanmantoo Copper Mine project receives green light from the Hillgrove Board.
AUD65 million equity raising arranged and fully underwritten by J.P. Morgan and Wilson HTM Corporate Finance, who are acting as Joint Underwriters and Joint Lead Managers to the offer.
Unconditional portion of the funding package was completed on November 1, with approximately AUD14.5 million committed by institutional investors through the placement of 58.2 million ordinary Hillgrove shares at AUD0.25 per share.
A conditional placement, raising approximately AUD50.5 million and also committed by institutional investors (with funds in escrow), is subject to shareholder approval at an EGM being held on Friday, 3 December 2010.
A Share Purchase Plan is open up to 14 December 2010 for existing shareholders to participate in this capital raising.
Mine development and construction is underway at the Kanmantoo Copper Mine. Bulk earthworks and site preparation were completed in the quarter to minimise delays. Civil works have begun in preparation for reconstruction of the Processing Plant from Pillara’s Lennard Shelf, which is on-site.
Exploration continued at our projects in Indonesia.
o Drilling of West Vein, at Masu Project, Sumba confirms consistent gold grade and widths down dip:
MADPH022: 5.4m @ 3.60g/t Au;
MADPH024: 10.1m @ 2.58g/t Au.
o Surface sampling has recommenced at Tanah Daro Project, Sumba:
Soil sampling identifies gold anomaly 200m x 300m with values > 1g/t Au;
Rock chip sampling of highly altered, silicified hill identifies additional high grade gold values to 37.13g/t Au and silver to 406g/t Ag.
o Exploration activities at the West Delta prospect area at Bird’s Head included:
Channel sampling encountered widespread copper/gold anomalism over several square kilometres, with maximum assays of 4.3% Cu, 1.98g/t Au, 510ppm Molybdenum (different channels);
Geological mapping confirmed zoned hydrothermal alteration over several square kilometres consistent with porphyry copper deposits throughout the world;
Computer modelling of airborne magnetic data revealed several clustered magnetic highs interpreted to be later-stage intrusions associated with mapped zoned hydrothermal alteration and anomalous surface sampling copper values.
Cash and investment portfolio totalled $68.7 million at the end of the quarter.
KANMANTOO COPPER PROJECT, SOUTH AUSTRLIA Mining Leases 5776 and 6345; Exploration License 4401 (Hillgrove 100%)
The Board of Hillgrove Resources Limited made a Final Investment Decision (FID) on the 29 October, which was supported by an Equity Raising that will fully fund the Kanmantoo project through to production as well as the exploration activities in Hillgrove’s Indonesian projects for the next two years.
With the approval of the Board construction of the Kanmantoo Copper Mine processing plant has commenced, with mining expected to start in the second quarter and production in the fourth quarter of next year. Project Financing
Hillgrove announced the Board had reached a Final Investment Decision (FID) and secured project finance for the Kanmantoo Copper Mine project on the 29 October 2010. The project finance facilities comprise AUD30 million of senior debt, AUD20 million in bonding and guarantee facilities and associated commodity hedging facilities for the project. Hillgrove also undertook a fully underwritten AUD65 million institutional placement.
The package will fully fund the development and construction of the Kanmantoo Copper Mine and provide working capital up to the point where the project is cash positive. Approximately AUD121 million from the total funding package will be used to bring the Kanmantoo project to production (including contingency). The remaining proceeds will be used to fund activities in Hillgrove’s Indonesian exploration projects as well as provide for other general corporate expenses. Project Finance Facility Overview
Hillgrove has accepted a commitment letter in respect of project financing for the Kanmantoo Project and is in the process of finalising a facility agreement with Macquarie Bank Limited and Barclays Bank PLC. The key terms of the project financing package are set out below:
The project finance facility commitments are:
i) A Project Finance Facility:
AUD30 million cash advance term loan facility;
Project loan facility matures 30 September 2015 (or earlier if ore reserve tail falls below 33%);
ii) A Performance Bond and Guarantee Facility:
AUD20 million performance bond facility, which may be increased up to a maximum of AUD29 million, subject to cash collateralisation of the excess above AUD20 million;
Performance bond facility matures on 31 March 2016;
To be used for PIRSA environmental bond and ElectraNet bank guarantee and other minor project guarantees if required;
iii) Mandatory Hedging Facility (which requires mandatory AUD Copper hedging to be in place);
Hillgrove is to provide a completion guarantee and is obliged to meet any project cost overruns before project completion;
Hillgrove is to provide undertakings until project completion, including a negative pledge and restrictions on further finance debt and disposals; and
Distributions from the project company to Hillgrove will be subject to conditions, including ratio compliance and project completion.
While the Project Finance facilities provide less funding and the conditions are more onerous than was originally anticipated by Hillgrove, necessitating a larger capital raising than was expected, the total package is considered reasonable by the Board in light of market conditions. No equity was provided to financiers in consideration for their provision of financing commitments. Early Access Hedging
A key feature of the banking offer announced on the 29 October 2010 was to allow Hillgrove to execute hedging for the project prior to financial close. The first 25,000 tonnes of copper forwards were sold by Hillgrove at an average price of approximately AUD8,000 per tonne of copper, net of all costs and credit margins.
The early access hedging provides the Kanmantoo project with a solid start by reducing the largest risk: commodity pricing risk. These swaps, when combined with the swaptions purchased in late April this year, will allow Hillgrove to underpin project cashflows at very high prices in the cycle. The early access hedging was arranged by Hillgrove’s hedging adviser, Noah’s Rule, in conjunction with the participating banks, Macquarie and Barclays. Since then, Hillgrove has executed a further 11,250 tonnes of copper forwards, at an average price of approximately AUD8,700 per tonne of copper, net of all costs and credit margins. Only a relatively minor portion (less than 10%) remains to be completed. Processing Plant
The Process Plant Construction and Commissioning Contract with Abesque Engineering Limited was announced on 21 September 2010 and was subject to a final condition precedent of a FID.
Hillgrove and Abesque have been working closely together over the past two years to ensure the plant was ready for the construction phase. With all statutory approvals for the project obtained and the plant commissioning and construction contract awarded, it allowed some on-site and all the off-site works to continue in preparation for the rapid deployment of activities on-site immediately following the Board’s announcement.
Hillgrove undertook approximately AUD5 million of expenditure on critical path items leading up to FID in order to minimise construction delays associated with the delay in raising finance. Expenditure included bulk earthworks and plant site preparation by Exact Mining Services, significant grade control drilling to enable detailed mine planning and resource reconciliation (underway), and ordering of critical longer lead-time items required within the plant. Construction of the processing plant commenced in early November with initial works including the earth works and concrete foundations for the process plant and crushing station. Rapid changes will now be seen on site over the coming months.
Plate 1. Processing Plant Construction Area, Kanmantoo Copper Mine
Next Steps
Stripping and stockpiling of the topsoils from the mining and Tailings Storage facility has started with the first blast now scheduled for December 2010. Construction of the site offices has also commenced.
Following completion of the contract with the District Council of Mount Barker (DCMB) for the supply of recycled treated waste water for use as process water at the Kanmantoo Copper Mine, construction of a 16km buried pipeline from the DCMB’s Brown Dam to the Kanmantoo mine site within road reserves and existing rights of way has started. The term of the water supply contract is five years with a three-year option and the right to renew every three years thereafter while the mine operates with an allocation of up to 750ML per year. The work is expected to be completed by the end of January 2010.
Hillgrove is currently exploring two major projects within Indonesia (Plate 2).
Plate 2. Exploration Project Locations in Indonesia
On the island of Sumba, exploration on the Masu project is focused on defining gold mineralisation within a large hydrothermal alteration system.
At Bird’s Head in West Papua, exploration is focussed on defining copper – gold mineralisation associated with an interpreted porphyry complex and associated extensive hydrothermal alteration system.
SUMBA GOLD PROJECT, INDONESIA IUP 322/KEP/HK/2009 (Hillgrove 80%)
Hillgrove is an 80% beneficial shareholder in PT Fathi Resources, which holds IUP322 on the island of Sumba. Hillgrove is responsible for the sole funding and management of all exploration and development activities, up to a decision to mine. The IUP Explorasi (Exploration and Mining Business Licence) covers 999km² for a period of six years (Plate 3).
Plate 3. Map Showing Basic Geology and IUP Boundary for Sumba
The Island of Sumba is covered in ‘recent’ shallow marine sedimentary units that have effectively masked and preserved underlying volcanic lithology considered highly prospective for epithermal gold and porphyry copper – gold mineralisation. The erosion of recent sedimentary cover has revealed windows of volcanic lithology where Hillgrove is focussing its exploration efforts.
Exploration activities this quarter again focussed on the Masu Project area located in the southern region of the IUP, where trenching, soil sampling and diamond drilling proceeded. Soil and rock chip sampling at Tana Daro continued. Masu Project
Drilling
Initial scout diamond drilling of selected targets within the Masu Project is now complete (Appendix 1.).
Deeper drilling on the West Vein target largely confirmed elevated gold values in trenching and earlier shallow drilling, with better results being:
o MADPH022: 5.4m @ 3.60g/t Au;
o MADPH024: 10.1m @ 2.58g/t Au.
Although open along strike and at depth, the overall grade/thickness properties of the West Vein suggest it would not be of sufficient size to support a standalone gold operation.
East Vein sampling has encountered broad, low grade gold values in surface trenching, modest gold grades and widths in shallow drilling but almost universally thin, low gold grades in deeper drilling. Structural interpretation of the East Vein complex shows the vein system flattening out significantly, with a corresponding decrease in observed width and gold grade. No further drilling is proposed on this target at this time, with one drill rig demobilised and the second placed on standby.
Drilling will recommence at Masu on completion of the planned geophysical survey and after re-evaluation of all data and thence geochemical sampling of selected targets based on this re-evaluation.
Trenching
Trenching of observed epithermal veins, silicified zones and higher soil gold values is continuing, with significant intersection presented above in Table 1.
Mapping and Soil Sampling
Regional reconnaissance geological mapping continues to expand the known extent of hydrothermal alteration, quartz veins and silicification along the Masu Corridor.
Soil sampling is ongoing over altered volcanic lithology identified through the mapping process.
Project Review
At the invitation of Hillgrove, the Masu Project area has recently been visited by an internationally reputed epithermal gold mineralisation specialist over a six day period with a brief to review existing exploration results and provide comparisons to similar epithermal gold systems in the Pacific Rim. The review concurred with Hillgrove’s emerging view that the West and East Veins are intrusion-related low sulphidation epithermal quartz-sulphide Au + base metal occurrences that were unlikely to be of sufficient size to support an economic mining proposition, but that further exploration of the Masu corridor was definitely warranted.
Tanah Daro Project – Pelitalira Prospect
Surface sampling at the Pelitalira Prospect, located in Central Sumba, resumed after the successful completion of land access socialisation. The prospect comprises a prominent hill of silicified, intermediate volcanic lithology cut by quartz lodes in a number of locations. Intense hydrothermal alteration is also evident across the entire prospect area.
Soil sampling to date has identified a 200m x 300m gold anomaly grading >1g/t Au, trending WNW where it disappears under shallow cover.
Rock chip sampling of altered volcanic lithology and quartz lodes has returned significant gold, silver and in places copper values as presented in Table 2 and Appendix 2.
These results are very encouraging and support a decision to undertake scout drilling in the near term. Sampling, mapping and planned trenching will continue, in preparation for a planned drilling campaign in the first quarter of 2011. Ground geophysical surveys are also under consideration.
Drilling and sampling has confirmed widespread gold mineralisation across the Masu project area, and although results to date indicate tested targets are relatively small, the Masu corridor is both large and significant, and remains highly prospective for large gold deposit occurrences.
With the help of specialists in this type of extensive epithermal mineralogy, Hillgrove has now determined to undertake a geophysical examination of the Masu project area and re-evaluate work and interpretation to date with a view to gaining a deeper understanding of controls on gold mineralisation. In addition, Pelitlaira is shaping up as a very interesting target and we look forward to bringing news of progress there over the coming months.
Geophysical Survey
An airborne magnetic and radiometric survey is planned to commence over the Masu Project in early December. The geophysical survey is designed to provide a clearer picture on the regional-scale structural picture at Masu, to assess for the presence of favourable structural targets beneath shallow cover and to assess the potential for shallow buried porphyries.
BIRD’S HEAD COPPER/GOLD PROJECT, WEST PAPUA, INDONESIA IUP40/2010 (Hillgrove 80%)
Hillgrove is an 80% beneficial shareholder in PT Akram Resources which holds IUP40/2010 in the Bird’s Head region of West Papua (Plate 4). Hillgrove is responsible for the sole funding and management of all exploration and development activities up to a decision to mine. The IUP Explorasi (Exploration and Mining Business Licence) covers 992.3km² for a period of six years.
Plate 4. Bird’s Head Project in West Papua, Indonesia
With negotiations successfully completed during the last quarter to grant PT Akram certainty of access to the West Delta target area, and importantly clearly identifying all affected landowners under an inclusive access and compensation agreement, exploration activities increased significantly.
Activities included ongoing channel sampling, geological mapping and remodelling of geophysical data in preparation for diamond drilling.
Exploration Results
Surface channel and rock chip sampling within the West Delta prospect continued over the past two months. Assay results from this work have confirmed the presence of widespread, anomalous copper mineralisation. Higher copper values appear to relate to structural features such as faults and jointing, with lower grade values relating to widespread hydrothermal alteration and associated disseminated copper mineralisation. Significant results are presented as Table 3 and Plate 5.
Plate 5. Channel sampling location and significant copper intersections
Note: Copper assays determined by multi element sweep using ICP methodology
Analyses completed by Intertek Laboratories, Jakarta Intersections calculated as a weighted average, 0.1% Cu lower cutoff, maximum 2m consecutive internal waste
Geological mapping around the Green Cliffs Breccia target area identified a zoned hydrothermal alteration system extending over several square kilometres, centred on computer modelled magnetic highs. Zoned alteration is consistent with the interpreted presence of a shallow, buried intrusive complex thought to be the source of anomalous copper values identified in channel sampling (Plate 6 and 7).
Plate 6: 3D Magnetic inversion modelling of West Delta area showing modelled magnetic targets on analytical signal image
Plate 7. Perspective view of West Delta hydrothermal alteration zones
A central potassic altered zone mapped at the West Delta prospect is associated with anomalous copper values in soils and a single historical rock chip value of 3.7% copper. This is surrounded by a broader phyllic alteration zone, characterised by strong silica alteration grading into clay-dominant zones of argillic alteration. Boulders of advanced argillic alteration are found along numerous ridge tops indicating that a large sulphide-rich lithocap had covered the area but has subsequently been eroded off. The patterns of alteration seen at West Delta are similar to that seen in copper-gold porphyry systems throughout the circum Pacific and the level of erosion indicated by the remnant lithocap points to an intact porphyry system at shallow depths below the prospect area.
Channel sampling was undertaken almost exclusively within the mapped potassic and phyllic zones and assay results of low grade copper mineralisation are consistent with a conventional model of porphyry copper mineralisation. Mapping results indicate that a larger zone of potassic alteration is likely to exist at depth, with associated modelled higher grade copper mineralisation.
Remodelling of Geophysical Data
Reprocessing of historical airborne magnetic data using the latest 3D geophysical modelling software has identified numerous magnetic bodies at depth. Recent mapping infers these magnetic bodies relate to late-stage intrusive complexes, which can be associated with porphyry copper mineralisation. Modelling has highlighted clusters of higher magnetic bodies located beneath mapped hydrothermal alteration and associated anomalous copper values. Ongoing mapping, structural interpretation and surface sampling geochemistry will provide a framework for ranking targets for drill testing.
Next Steps
The results reflect the steady progress towards building a 3D picture and postulating a model of the mineralisation at Bird’s Head. Progress is slow but steady, driven by the challenging terrain and the need to work closely with the local communities, from where we derive much of our workforce.
Assay results to date are encouraging and the next stage is to undertake a diamond drilling campaign, for which we are currently requesting tenders. Subject to availability and weather, we are hoping for first results towards the end of the first quarter 2011.
The important and primary Green Cliffs Breccia target sits outside Hutan Lindung (Protection Forest) and is accessible for drilling. However, several of the identified porphyry targets sit within Hutan Lindung forest reserve. Hillgrove is currently seeking permission to undertake drilling of those targets within Hutan Lindung, in consultation with local and national authorities.
KHARTOUM PROJECT, QUEENSLAND EPM1479 (80% of copper, lead, zinc, nickel and 50% of gold-silver deposits discovered in JV with Auzex)
Having reviewed the results of recent rock chip and soil sampling in conjunction with geological mapping, Hillgrove has elected to withdraw from the Khartoum joint venture.
Highlights from the InterMet Resources Quarterly Report follow:
Work completed during the current reporting period focused on fieldwork over the bauxite IUP leases in West Kalimantan, Indonesia.
No field work was conducted on South Australian and Queensland Projects.
Numerous tenements in South Australia have now been relinquished or are in the process of being transferred across to J.V. partners. InterMet Corporate
On the 19 August Mr David Archer tendered his resignation as Managing Director of InterMet Resources Limited and as Director of its subsidiaries, effective immediately. Mr Ronald Belz was subsequently appointed as a non-executive Director.
HILLGROVE CORPORATE
Board Changes
Although announced in the previous quarterly, the interim CEO, Drew Simonsen, was appointed as Managing Director on the 18 August, following an extensive executive search process involving an international recruitment agency. Drew has quickly settled into the role and had a significant effect already on processes and efficiencies in preparation for imminent growth of the group with an operating mine.
Equity Raising Overview
Hillgrove intends to raise AUD65 million under the equity raising, with the offer undertaken at a fixed price of AUD0.25 per share. The fully underwritten equity raising will comprise two tranches:
i) An unconditional placement of new shares to existing institutional shareholders and other institutional investors which raised some AUD14.5 million; and
ii) A conditional placement, expected to raise approximately AUD50.5 million. Settlement of this tranche is subject to shareholder approval at an EGM being held on Friday, 3 December 2010.
The Offer Price represents a 16.7% discount to Hillgrove’s closing price on Thursday, 28 October and a 16.7% discount to the 5-day VWAP.
The equity raising has been fully underwritten by J.P. Morgan and Wilson HTM Corporate Finance, who are acting as Joint Underwriters and Joint Lead Managers to the offer.
Extraordinary General Meeting
Hillgrove successfully completed the unconditional component of the AUD65 million equity capital raising announced by the Company on Monday 1 November. A total of approximately AUD14.5 million was committed by institutional investors through the placement of 58.2 million ordinary Hillgrove shares at AUD0.25 per share.
The Extraordinary General Meeting (EGM) is seeking approval of the additional portion of the funding package. A total of AUD50.5 million has been committed by institutional investors through the proposed placement of 201.8 million ordinary Hillgrove shares at AUD0.25 per share, under a conditional placement. Settlement of this tranche is subject to shareholder approval at the EGM being held Friday, 3 December 2010 in Adelaide.
The EGM will also be seeking to ratify the remaining components of the financing package by refreshing options already held by our largest shareholder and commodities broker, RBS Sempra Metals & Concentrates LLC, which was purchased by J.P. Morgan Chase, effective 1 July 2010. As a result of this acquisition, J.P. Morgan (through J.P.
Morgan Metals & Concentrates LLC) became our largest shareholder and holder of the concentrate off-take agreement for the Kanmantoo Copper Mine. The EGM will also seek approval to offer conditional share performance rights and termination package to the CEO, Mr Drew Simonsen, and to refresh the company’s 15% issuance capacity to shareholders.
We encourage shareholders to vote by Proxy or attend the meeting.
Share Purchase Plan
Hillgrove is currently offering eligible shareholders up to AUD15,000 worth of shares under a non-underwritten Share Purchase Plan (SPP).
Eligible shareholders are those who settled the purchase of their shares on or prior to 28 October, did not fully subscribe to the January 2010 offer, and have registered addresses in Australia and New Zealand.
The offer price for the SPP is the lower of:
(i) AUD0.25, being the price per share for the Equity Raising announced on Friday, 29 October 2010 (Institutional Placement); and
(ii) a discount of 5% to the volume weighted average price of Hillgrove shares traded in the ordinary course on ASX during the 5 trading days up to, and including, the closing date of the SPP, being 14 December 2010, rounded down to two decimal points for each cent.
Should you be interested and have mislaid or not received your personalised application form, a new form can be obtained by calling Registries Limited on 1300 737 760.
The SPP closes on 14 December 2010.
Cash and Investments
Cash on hand as at 31 October 2010 was $65.5 million.
The market value of Hillgrove’s investment portfolio as at 31 October 2010 was approximately $3.2 million.
ABOUT HILLGROVE
Hillgrove is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused on developing its Indonesian and Australian base and precious metals projects. The Company is targeting the discovery of world class epithermal gold and porphyry copper/gold deposits in Eastern Indonesia.
Hillgrove’s flagship development is the Kanmantoo Copper Mines, located less than 55km from Adelaide in South Australia. Kanmantoo currently hosts a Mineral Resource of 32.2Mt (2.3Mt Measured, 22.5Mt Indicated and 7.4Mt Inferred) grading 0.9% copper and 0.20g/t gold, containing 292,200 tonnes of copper, 191,100 ounces of gold and 3,313,600 ounces of silver. With completion of construction targeted for 2011, Kanmantoo will be a 2.4Mt per annum open-cut mine producing approximately 20,000 tonnes of copper in concentrate and 10,000 ounces of gold per annum. The information in this report that relates to Exploration Results is based on information compiled by Mr. Jim Kerr, who is a Member of The Australasian Institute of Geoscientists. Mr. Kerr is General Manager – Exploration for Hillgrove Resources and has sufficient relevant experience to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Kerr consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The information in this report that relates to Mineral Resource estimates is based on information compiled by Mr Paul Payne, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Payne is a full-time employee of Runge Limited and has sufficient relevant experience to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Payne consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
For more information contact: Drew Simonsen Russell Middleton Managing Director Company Secretary Tel: +61 (0)2 8221 0404 Tel: +61 (0)2 8221 0404
Note: Gold assays determined by averaging up to 3 repeats using 50gm Fire Assay method Silver values calculated from multi element sweep using ICP analytical method Significant intercepts calculated as weighted average, maximum of 2m internal waste at a 0.5g/t Au cut off East Sumba datum: WGS84 Zone 51 Southern Hemisphere Analyses conducted at Intertek Laboratories, Jakarta, Indonesia
Table 2: Tanah Daro (Pelitalira Prospect) Significant Rock Chip/Float Sampling Results
Sample No Sample Type UTM E UTM N Au g/t Ag g/t Cu %
000046 Rock Chip 803876 8933773 1.17 41.5 0.1
000048 Rock Chip 803831 8933776 37.13 406 <
000051 Rock Chip 803510 8933799 1.53 2.6 <
000082 Rock Chip 821690 8937191 1.89 1.9 <
000085 Rock Chip 821837 8936567 1 14 <
000101 Float 820241 8937607 3.29 43.4 <
000372 Rock Chip 803861 8933801 6.1 76.4 0.39
000377 Rock Chip 802547 8934573 1.27 13.6 <
000389 Rock Chip 820711 8937336 2.07 2.4 <
000390 Rock Chip 820868 8937215 1.05 12.4 <
001518 * Subcrop 803472 8933777 3.16 21 <
001519 * Rock chip 803837 8933775 3.44 54.3 <
001520 * Rock chip 803864 8933779 5.19 177 0.28
001521 * Rock chip 803864 8933779 18.9 765 0.08
001522 * Float 803862 8933786 3.2 215 3.58
001523 * Float 803864 8933804 73 84.7 0.30
3182 Subcrop 803854 8934385 2.055 30.6 <
3189 Float 803868 8933739 2.033 1.1 <
3191 Rock chip 803867 8933780 1.83 52.1 0.12
3192 Subcrop 803888 8933800 3.62 6.4 0.09
3193 Subcrop 803889 8933800 3.21 49.4 0.04
3194 Float-near 803907 8933822 13.85 87.5 0.39
3197 Subcrop 803939 8933854 1.88 23.1 <
4404 Float-near 803898 8933823 15.55 185 3.36
TDRK009030 Rock chip 803548 8933899 8.48 8.5 <
TDRK009044 Rock chip 803148 8934337 1.86 0.3 <
Note: Gold assays determined by averaging up to 3 repeats using 50gm Fire Assay method Silver, copper, lead values calculated from multi element sweep using ICP analytical method Central Sumba datum: WGS84 Zone 50 Southern Hemisphere Analyses conducted at Intertek Laboratories, Jakarta, Indonesia * Previously announced results
Note: Gold values are derived from an average of up to 3 repeats using fire assay method. Copper and molybdenum values are derived from a multi element sweep using ICP method. Datum used for the Birds Head Project is WGS 84 Zone 53. Analysis completed by Intertek Laboratories, Jakarta.
+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 2
1.13 Total operating and investing cash flows
(brought forward) (28,086) (63,614)
Cash flows related to financing activities
1.14 Proceeds from issues of shares, options, etc. 9 1,327 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings (2,500) 1.18 Dividends paid (4) (71) 1.19 Other (provide details if material)
Net financing cash flows 5 (1,244)
Net increase (decrease) in cash held
(28,081)
(64,858)
1.20 Cash at beginning of quarter/year to date 93,577 130,354 1.21 Exchange rate adjustments to item 1.20
1.22 Cash at end of quarter 65,496 65,496
Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities
Current quarter $A'000
1.23
Aggregate amount of payments to the parties included in item 1.2
263
1.24
Aggregate amount of loans to the parties included in item 1.10
1,416
1.25
Explanation necessary for an understanding of the transactions
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
2.2 Details of outlays made by other entities to establish or increase their share in projects in which the
+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 3
Financing facilities available Add notes as necessary for an understanding of the position.
Amount available $A’000
Amount used $A’000
3.1 Loan facilities
3.2 Credit standby arrangements
Estimated cash outflows for next quarter
$A’000 4.1 Exploration and evaluation
2,500
4.2 Development
22,000
4.3 Production
500
4.4 Administration
2,400
Total 27,400
Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.
Current quarter
$A’000
Previous quarter
$A’000
5.1 Cash on hand and at bank 64,165 92,439
5.2 Deposits at call 1,331 1,138
5.3 Bank overdraft
5.4 Other (provide details)
Total: cash at end of quarter (item 1.22)
65,496 93,577
Changes in interests in mining tenements Tenement
reference Nature of interest (note (2))
Interest at beginning of quarter
Interest at end of quarter
6.1 Interests in mining tenements relinquished, reduced or lapsed
6.2 Interests in mining tenements acquired or increased
+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 4
Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number quoted
Issue price per security (see note 3) (cents)
Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description)
7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions
7.3 +Ordinary securities
482,618,890 482,618,890
7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs
65,000
65,000
$014
$0.14
7.5 +Convertible debt securities (description)
7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 5
7.11 Debentures (totals only)
7.12 Unsecured notes (totals only)
Compliance statement 1 This statement has been prepared under accounting policies which comply with accounting
standards as defined in the Corporations Act. 2 This statement does give a true and fair view of the matters disclosed.
Sign here: Date 30 November 2010 (Company Secretary)
Print name: Russell Middleton
Notes 1 The quarterly report provides a basis for informing the market how the entity’s activities
have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining
tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
3 Issued and quoted securities The issue price and amount paid up is not required in items
7.1 and 7.3 for fully paid securities.
4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and
AASB 1026: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International Accounting
Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.
