24 August 2012 Page 1 Letter to Shareholders Please be advised that Mutiny Gold (ASX: MYG) has produced a letter to all shareholders updating them on the Company’s recent activities, including the release of a Bankable Feasibility Study for the Deflector Project, the successful granting of a number of permits for the Deflector development and a Deflector resource upgrade, as announced to the ASX on July 3, August 10 and August 21, respectively. A copy of the Shareholder Letter is attached and it can also be accessed via the Mutiny Gold website at www.mutinygold.com.au. For further information please contact: John Greeve David Tasker Managing Director PPR Mutiny Gold Limited Tel: +61 (0)8 9388 0944 Tel: +61 (0)8 9368 2722 Mob: +61 (0)433 112 936 Em: mgl@mutinygold.com.au Em: [email protected]For personal use only
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24 August 2012
Page 1
Letter to Shareholders
Please be advised that Mutiny Gold (ASX: MYG) has produced a letter to all shareholders updating them on the Company’s recent activities, including the release of a Bankable Feasibility Study for the Deflector Project, the successful granting of a number of permits for the Deflector development and a Deflector resource upgrade, as announced to the ASX on July 3, August 10 and August 21, respectively. A copy of the Shareholder Letter is attached and it can also be accessed via the Mutiny Gold website at www.mutinygold.com.au. For further information please contact: John Greeve David Tasker Managing Director PPR Mutiny Gold Limited Tel: +61 (0)8 9388 0944 Tel: +61 (0)8 9368 2722 Mob: +61 (0)433 112 936 Em: [email protected] Em: [email protected] F
Perth-based explorer Mutiny Gold (ASX: MYG) is well on track to achieving its vision of becoming the next big Australia-based gold mining company, with the recent Bankable Feasibility Study (BFS) highlighting the robust, low cost nature of its flagship Deflector project.
The company, which listed on the Australian Securities Exchange
back in July 2006, has moved ahead considerably from entering
into the agreement to acquire the Gullewa tenements in the
South Murchison region of Western Australia just over two years
ago from Canadian company Red Hill Resources, then called ATW
Gold Corp.
The Gullewa tenements, which lie some 450 kilometres north
of Perth and some 160 km east of the port city of Geraldton,
contains the Deflector mine, five partially mined open pits, five
areas of historical underground workings and numerous untested
soil geochemistry, gravity and aeromagnetic anomalies.
At the time, Mutiny was confident it could ramp up the resources
at Gullewa with a focus on Deflector.
Jump forward two years and Mutiny has been true to its word. It
completed the acquisition with $11m funding from Credit Suisse.
The Deflector resource currently stands at 2.87 million tonnes
grading at 6.4 grams per tonne gold, 6.8gpt silver and 0.95%
copper for 591,000 ounces gold, 628,000oz silver and 27,000t
copper.
Of the total resources, 2.2Mt grading at 6.7gpt gold, 6.8gpt
silver and 0.9% copper for 521,000oz gold, 515,000oz silver
and 22,000t copper are in the measured and indicated resource
categories.
Since acquiring 100% of the project, Mutiny has conducted
successful drilling campaigns and last year released findings
of the Scoping Study which confirmed Deflector to be a robust
and profitable project. In a bid to improve project metrics, Mutiny
conducted a further series of drilling programs and extensive
metallurgical test work over the project.
This led to Mutiny recently updating the market on results from
the BFS which has confirmed Deflector to be a highly profitable,
low cost, premium gold-copper project.
The BFS is based on an initial mine life of seven years commencing
with a two year open pit followed by five years of underground
operation.
Production will begin in the open pit at 480,000 tonnes per
annum followed by 360,000tpa from years 3 to 7 in the
underground mining operation, resulting in total metal production
over the seven years of 382,000 ounces of gold equivalent,
including 314,475oz gold, 14,432 tonnes of copper and
344,604oz of silver.
On the financial front, the project generates an initial net
operating cash flow of $341 million and net profit after capital
costs, interest and tax of $171 million.
A message for our shareholders from John Greeve Managing Director
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Earnings before interest tax depreciation and amortisation
(EBITDA) came in at $323 million, while Net Present Value (NPV)
was estimated at $103 million.
Deflector also boasts low average cash cost per ounce coming in
at $617 per ounce of gold equivalent, creating a healthy margin
based on current gold prices of around $1700/oz.
The BFS estimated capital costs to be $87 million with plant
construction costs coming in at $66 million and mine construction
costs at $21 million, while operating costs were estimated to be
$308 million with mining costs to tip in at around $187 million.
“Deflector is our flagship project and we have been working really
hard to get the BFS out,” Mutiny managing director John Greeve
said.
“It makes the whole project eminently bankable and it shows that
it is a very robust premium project with a lot of production upside.”
Open pit mining will use selective drill and blast methods utilising
100 tonne hydraulic excavators for overburden and ore removal
and 55 tonne trucks for ore and waste haulage. Ore will be drilled,
blasted and excavated on 5 metre benches.
For underground mining, Mutiny will use the conventional jumbo
development and long hole open stoping method. Stoping will
follow a top-down sequence and rib pillars will remain between
adjacent stopes to maintain mine stability.
The method reduces development metres and provides quick
access to ore, requiring minimal capital to be spent upfront while
maximising recovery of the ore body.
The company is not planning to backfill the stope voids; however
there may be opportunities in parts of the mine to dispose of
waste rock in stope voids which would reduce truck haulage
requirements.
Greeve said the optimal mine rate over the life of the project was
500,000 tonnes which give Mutiny the opportunity to produce at
a rate of 75,000ozpa.
“If we can operate the underground operations in conjunction with
the open pit then we can have a mine producing somewhere north
of 130,000 to 140,000 ounces a year,” he said.
Mining at Deflector is expected to begin early next year, with gold
production tipped for October 2013.
Looking ahead, Mutiny is expecting the upgraded resource to
generate a new mining inventory model. That is currently being
developed in conjunction with Entech Mining Services.
Mutiny expects the current mine inventory and new resource will
be used to generate new mine programs, reserves and an ugraded
inventory.
“The expected outcomes of the new model are that we will get a
higher head grade so we will be processing fewer tonnes to get
more gold,” he said.
“Couple this with our plans to increase the actual tonnes mined
and the quantum of metal produced is getting very respectable.
Mutiny will take advantage of the historic Gullewa plant.
21 August 2012
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The Deflector resource now contains JORC-compliant mineral resources of 2.87Mt @ 6.41g/t gold, 6.82g/t silver and 0.95% copper for 729,000oz of Equivalent gold including 591,000oz gold, 628,000oz silver and 27,000t of copper using a 0.5g/t gold cut-off grade. (See Table 1 below) Table 1 Deflector Deposit Mineral Resources
Totals 2,865,000 6.41 591,000 0.95 27,000 6.82 628,000 729,000 A 0.5g/t gold cut-off grade was used for reporting purposes. Note – Totals may appear incorrect due to appropriate rounding. The Gold Equivalence Calculation represents total metal value for each metal assuming 100% recovery, summed and expressed in equivalent gold grade or ounces. The AUD metal prices used in the calculation were $1,500/oz Au, $7,100/t Cu, $25/oz Ag.
New Mining Study Entech Mining consultants have been commissioned to update the open-pit and underground mine designs, converting the updated resource to a new reserve. Early indications are the higher-grades have the potential to increase the metals production rate of gold and gold copper concentrate, with an associated positive impact on the Deflector project economics. The higher head grade should lead to a greater metals output per tonne of ore processed, potentially up to a 28% increase, and the resource model appears to lend itself to a greater overall increase in tonnes of ore mined leading to the expectation that that the deliverables from the new model will be a significant increase. Exploration Mutiny is targeting a Deflector Deposit resource of the order of 9 to 14 million tonnes at 4 to 8 g/t gold for 1.65 to 3.5 million ounces of gold and 40,000 to 80,000 tonnes of copper. Work has commenced on designing an aggressive exploration programme targeting extensions of Deflector along strike and at depth, as well as assessing anomalies within the Deflector Corridor. Targets will include:
Shallow, open-pit amenable gold-copper mineralisation to the north and south of Deflector, initially targeting the West, Central and Contact lode horizons;
Systematic testing of high-grade down-plunge extensions of Deflector to 500m below surface (see Figure 2); and,
Follow-up drilling of Spanish Galleon, Pieces of Eight and other isolated intersections within close-proximity to Deflector which warrant further testing.
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“We think that we will model this so that in reality we will go
into production producing above 60,000 to 70,000 ounces
and then escalate that rate in Year 2, but we will have to wait
and see what the outcome of that remodelling is to get a total
assessment.”
While working on delivering a new resource upgrade, Mutiny is
also busy locking in the finance to get Deflector up and running.
Recently, Mutiny deposited a $US4 million funding deposit on a
non-interest bearing commercial agreement.
The company is currently in discussions with investment bank
Credit Suisse on finalising project finance arrangements for
the Deflector project. Mutiny was initially provided with an $11
million facility by Credit Suisse last year to provide funding for
the company to the acquisition of Gullewa and the BFS.
Greeve said financing for the project was in line with the
company’s objective to minimise overly dilutive equity issues
while progressing Deflector.
“What we are working on is to get it fully funded without the
need to go into dilutionary equity raisings, particularly in these
tight markets,” he said.
“Once that funding package is complete we will then obviously
make the big push into production.”
And finally, on that topic, your company has achieved significant
success with the permitting process, with the granting of major
permits, including those for processing and mining already
complete.
Since announcing results of the BFS, shares in Mutiny have lifted
to around 12 cents per share. Mutiny currently has 464.4 million
shares on issue and market capitalisation of around $55 million.
DIRECTORSFrank Lawson – ChairmanJohn Greeve – Managing DirectorAllan Richard George Brown – DirectorBenedict Kusni – Director
ASX CODEMYG
PRINCIPAL OFFICE29 Charles Street SOUTH PERTH 6151 WA AUSTRALIA
T: (08) 9368 2722F: (08) 9474 3011
WEBhttp://www.mutinygold.com.au
Portions of the historic Gullewa processing plant will be utilised in the Deflector development.
Competent Persons Statement:
The Geological aspects in this report which relates to Mining Resource is based upon information compiled by Mr. Lynn Widenbar, Principal Consultant – Widenbar and Associates. Mr Widenbar is a member of the Australasian Institute of Mining and Metallurgy and has sufficient expertise and experience which is relevant to the style of mineralisation and to the type of deposit under consideration 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 Widenbar consents to the inclusion in the report of the matters based on his information in the form and context in which they appear.
