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SORBY HILLS SILVER PROJECT PRE-FEASIBILITY RESULTS KBL Mining Limited has completed the Pre-Feasibility Study for Stage 1 of the Sorby Hills silver project, located in the north-east Kimberley region of Western Australia. Post-tax net present value of $88 million Negative cash cost of $(30.70) per ounce of silver after lead credits Less than two year payback period with an initial 10 year operating mine life Approximately 4 million ounces of silver and 100,000 tonnes of lead produced in first five years Final environmental approval expected by June 2013 Development expected to commence in FY2014 KBL Mining Limited Level 3, 2 Elizabeth Plaza NORTH SYDNEY NSW 2060 T: +61 2 9927 2006 F: +61 2 9927 2050 ACN 129 954 365 ASX: KBL and KBLGA www.kblmining.com.au [email protected] For personal use only
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Page 1: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

SORBY HILLS SILVER PROJECT PRE-FEASIBILITY RESULTS

KBL Mining Limited has completed the Pre-Feasibility Study for Stage 1 of the Sorby Hills silver project, located in the north-east Kimberley region of Western Australia.

Post-tax net present value of $88 million

Negative cash cost of $(30.70) per ounce of silver after lead credits

Less than two year payback period with an initial 10 year operating mine life

Approximately 4 million ounces of silver and 100,000 tonnes of lead produced in first five years

Final environmental approval expected by June 2013

Development expected to commence in FY2014

KBL Mining Limited Level 3, 2 Elizabeth Plaza

NORTH SYDNEY NSW 2060 T: +61 2 9927 2006 F: +61 2 9927 2050

ACN 129 954 365 ASX: KBL and KBLGA

www.kblmining.com.au [email protected]

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Page 2: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

has confirmed the robust economic viability of its 75%-owned Sorby Hills Silver Project (Sorby Hills

Project), positioning the company to take the project into the next phase of development.

Based on the PFS modelling, the post-tax net present value (NPV) of Sorby Hills is $88 million (all

monetary amounts are in AUD unless otherwise stated).

PFS MODELLING RESULTS

LOM Cash Surplus AUDm 201

Project NPV before Tax AUDm 132

Project NPV after Tax AUDm 86

Project IRR before Tax % 58

Project IRR after Tax % 49

Payback Period years 1.7

CAPEX AUDm 70

C1 Cash Costs $/oz Ag -30.70

C1 Cash Costs $/lb Pb -0.11 Table 1: PFS Results for Stage 1. Inputs and Assumptions are set out in Appendix 1.

Sorby Hills Background

The Sorby Hills Project is located 50 kilometres, by sealed road, north-east

of the Kimberley regional centre of Kununurra in Western Australia.

Figure 1: Location and geological map for the Sorby Hills Silver-Lead Project

Sorby Hills is a major undeveloped, near surface silver-lead deposit which has been well defined by

extensive exploration. The shallow nature of the deposits will allow for the extraction of ore by open

cut mining. The ore will be then be processed by conventional flotation to produce a silver-lead

concentrate, ready for exportation through existing facilities at Wyndham Port, some 160 kilometres

away by sealed road.

“Our confidence in the

potential of the Sorby Hills

project has been both

validated and strengthened

by the results of the Pre-

Feasibility Study.

“The PFS modelling has

demonstrated that the C, D

and E deposits at Sorby

Hills are quality open pit

prospects, with both strong

technical fundamentals and

robust economics over an

initial 10-year mine life.”

Trangie Johnston

Chief Executive Officer

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Page 3: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

KBL holds 75% of the Sorby Hills Project, with 25% held by the Australian subsidiary of Henan

Yuguang Gold & Lead Co. Ltd (HYG). HYG is China’s largest gold, silver and lead group, incorporating

mining and smelting operations.

The Sorby Hills tenements cover a total area of 12,612.4 hectares. Within these tenements, a total of

13 individual mineralised deposits have been delineated by exploration to date. The ore deposits

form a linear belt (trending north-south) over an eight kilometre long and up to one kilometre wide

strike length on the eastern margin of the Pincombe Inlier. The Sorby Hills global Indicated and

Inferred Resource is 16.7 million tonnes at 4.5% lead and 52g/t silver (Resources are presented in

detail in Appendix 2). The tenements flank the eastern boundaries of the Ord River Stage 2 Project

(Ord 2) and the Joint Venture Manager is working closely with the Ord 2 development authorities to

ensure that Ord 2 and the Sorby Hills development can operate in harmony.

Sorby Hills Pre-Feasibility Study Overview

An initial mining operation (Stage 1) at Sorby Hills, covering 27% of the global Indicated and Inferred

Resource, is expected to have an operational mine life of at least 10 years. Subject to necessary

government approvals, there is substantial scope to expand the initial mine life and size of the

project.

Stage 1 is contained within an area covering 1,787.27 hectares, and covers 1.5 kilometres of the

eight kilometre strike. Stage 1 comprises three mineralised deposits (C, D and E) with a combined

Indicated and Inferred Resources of 4.432 million tonnes at 4.29% lead and 44g/t silver at a 2.5%

lead cut-off.

Figure 2: Outline of C, D and E Deposits at Sorby Hills overlain on gravity image.

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Page 4: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

The most technically and financially viable mining arrangements for Stage 1 were found to be

400,000 tonnes per annum (tpa) open pit mining operations, with a waste-to-ore (strip) ratio of 3.6,

to a maximum depth of 70 metres. Average production for the first five years is planned to be

800,000oz p.a. of silver (Ag) and 20,000tpa of lead (Pb) in concentrate. Ore Reserves for Stage 1 are

expected to be released before the end of March 2013.

Metallurgical work to test recoveries and concentrate grades achievable from the proposed

concentrator has shown that Pb and Ag recoveries of 91% and 87% respectively are achievable.

The concentrator uses a conventional crushing, grinding and flotation circuit. CAPEX, excluding

mobile plant and equipment, is estimated at $70 million including a 15% contingency.

The PFS has demonstrated the potential to schedule average mine grades of 5.6% Pb and 70 g/t

Ag from these deposits for the first 4.5 years of the initial 10 year operation. Importantly, the

subsequent strong cash flow generated during this period will payback the capital expenditure of

$70 million within the first two years of operation.

After this period, the remainder of the Resource would be upgraded in a heavy media plant to

ensure a constant metal output – this would be subject to regulatory approval. Testwork on this

option has found the Resource to respond well to the heavy media separation method, with high

recovery rates of both Pb and Ag to the sink product and a high rate of non-mineralised waste

rejection. The heavy media plant would function to upgrade the lower grade Resource to provide

a higher grade feed to the concentrator.

It is estimated that 40 construction personnel and 64 on-going mining, processing and

administration personnel will be needed for the project. This workforce will be based in

Kununurra, the regional centre for the East Kimberley region, which is serviced by an airport and

has high quality community facilities and services.

The environmental assessment for the Sorby Hills project is currently progressing through the WA

Environment Protection Agency (EPA) processes. These involve the imminent publication of a

Public Environmental Review and consideration of public comments, leading to a report and

recommendation by the EPA to the WA Minister for the Environment. Final approval is expected

to be received by the final quarter of the 2013 financial year. This should enable development to

commence during the 2014 financial year.

For further information, please contact:

Anthony (Trangie) Johnston Ed Newman Investor Relations and Media

Chief Executive Officer Project Manager Ron Cameron / Tara Prowse

KBL Mining Limited KBL Mining Limited Mercury Consulting

P: +61 2 9927 2000 P: +61 2 9927 2010 P: +61 2 8256 3308

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Page 5: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

About KBL Mining

KBL Mining is an Australian resource company listed on the ASX (KBL and KBLGA) with a focus on

precious and base metals. KBL’s main assets include the Mineral Hill copper-gold-silver-lead-zinc project

near Condobolin in New South Wales and Sorby Hills lead-silver-zinc deposit in Western Australia. The

Company has been operating the refurbished processing plant at Mineral Hill since October 2011 to

produce copper concentrates. Sorby Hills (KBL holds 75% with Henan Yuguang Gold & Lead Co. Ltd

(HYG&L) holding 25%) is one of the world’s largest near surface undeveloped lead deposits, close to port

infrastructure and a short distance from Asian markets. Environmental approvals are currently being

sought for development of the Sorby Hills deposit.

More information can be found on KBL’s website at www.kblmining.com.au.

Competent Persons Statement

The information in this report that relates to Exploration Results and Mineral Resources is based on

information compiled by Anthony Johnston, MSc (Hons), who is a Member of the Australasian Institute

of Mining and Metallurgy and is a full-time employee of the Company. Anthony Johnston has sufficient

experience which is relevant to the style of mineralisation and type of deposit under consideration and to

the activity which he is undertaking 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

Johnston consents to the inclusion in the announcement of the matters based on his information in the

form and context that the information appears

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Page 6: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

Appendix 1: Pre-Feasibility Study Parameters

Table 2: PFS modelling inputs and parameters

Table 3: Assumptions for PFS modelling

YRS 1-5 LOM

Mining Inventory mt 2.2 6.2

Strip Ratio x 3.6 3.7

Throughput tpa 400,000 625,000

Initial Mine Life years 5 10

Average Ag Grade g/t 70 50

Average Pb Grade % 5.30 4.20

Average Ag Recovery % 87 80

Average Pb Recovery % 91 86

Average Silver Produced ozpa 830,000 715,000

Average Lead Produced tpa 20,000 20,500

Mining Costs $/t mined 11.50 11.50

Processing Costs $/t mined 20.00 18.00

Capital Costs AUDm 70 80

STAGE 1 INPUTS

Lead Price USD/t 2,094

Silver Price USD/oz 30

Exchange Rate AUDUSD 0.90

Discount Rate % 10

ASSUMPTIONS

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Page 7: For personal use only - ASX · For personal use only. ACN 129 954 365 ASX: KBL, ... KBL Mining Limited (ASX: KBL and KBLGA) is pleased to announce that its Pre-Feasibility Study (PFS)

ACN 129 954 365

ASX: KBL, KBLGA Level 3, 2 Elizabeth Plaza, Nth Sydney NSW 2060. PO Box 98, Nth Sydney NSW 2059

6 DECEMBER 2012

Appendix 2: Mineral Resources as released on 22 December 2011

Table 4: Indicated and Inferred Resource estimate for D & E Deposit at Sorby Hills at 2.5% Pb cut-off

Table 5: Indicated and Inferred Resource estimate for the C deposit at Sorby Hills at 2.5% Pb cut off

Table 6: Indicated and Inferred global Resource estimate for Sorby Hills at 2.5% Pb or Zn cut off.

Classification Ore Type Tonnes (kT) Ag g/t Pb % Zn % Pb+Zn%

Oxidised 311 40 4.3 0.3 4.5

Fresh 1,893 66 5.3 0.5 5.9

Total Indicated 2,204 62 5.1 0.5 5.6

Oxidised 105 41 4.6 0.3 4.9

Fresh 603 32 3.7 0.4 4

Total Inferred 708 33 3.8 0.4 4.2

Total Indicated & Inferred 2,912 56 4.8 0.5 5.3

Indicated

Inferred

Classification Ore Type Tonnes (kT) Ag g/t Pb % Zn % Pb+Zn%

Oxidised 140 22 3.3 0.2 3.5

Fresh 540 18 3.4 0.5 3.9

Total Indicated 680 18 3.4 0.4 3.8

Oxidised 80 19 3.1 0.3 3.4

Fresh 750 23 3.2 0.4 3.6

Total Inferred 840 22 3.2 0.4 3.6

Total Indicated & Inferred 1,520 21 3.3 0.4 3.7

Indicated

Inferred

Classification Tonnes (kT) Ag g/t Pb % Zn % Pb+Zn%

Indicated 4,674 63 4.7 0.4 5.1

Inferred 11,988 48 4.5 0.9 5.3

Total Indicated & Inferred 16,662 52 4.5 0.7 5.3

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