The Asia Miner

JAN-FEB 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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28 | ASIA Miner | Volume 15 • Issue 1 | 2018 Indonesia SUMATRA Copper & Gold has formed an exploration alliance with Indonesia gold producer Merdeka Copper Gold covering the Tembang Gold-Silver Project in South Sumatra. The strategic alliance will see Merdeka fund ongoing exploration with the aim of extending mine life and increas- ing production. Merdeka will initially invest US$1.5 million until mid-2018. Sumatra will in turn issue CDIs to Merdeka in tranches based on its exploration spend during each three month period and within one month of quarter end, with the first quarter concluding on Novem- ber 30, 2017. Ultimately Merdeka intends to invest in stages for up to US$10 million under similar terms for each successive approved explo- ration program, subject to ongoing explo- ration success and appropriate corporate approvals. Merdeka is a Jakarta Stock Exchange list- ed mining company that operates the Tujuh Bukit Gold-Copper Project in East Java and has an experienced executive team headed by Colin Moorhead, a former director of ex- ploration for Newcrest in Indonesia. In this role he was responsible for the multi-million ounce Gosowong mine and Newcrest's past joint venture with Sumatra at Tandai. Merdeka is expanding its mining foot- print in Indonesia and Sumatra believes if offers a strong balance sheet and techni- cal expertise. At Tembang two exploration drill drives will be established at the Belinau underground mine between Levels 11 and12, which is the current base of planned development, to drill for depth extensions to the ore body. Two specialised diamond drill rigs have been ordered for this program, which was expected to commence in the December quarter. Sumatra's chairman Jocelyn Waller said, "The potential to increase resource and reserves at Tembang has long been rec- ognised but to date the company's focus has been on production. "With this strategic alliance with Merdeka the company now has a strong local part- ner to enable the discovery process to be expedited." Guidance for production in 2018 has been set at between 45,000 and 55,000 gold equivalent ounces. In its quarter three 2017 report, Sumatra said guidance for 2017 had been reduced to between 30,000 and 32,000 gold equivalent ounces. This was primarily due to delays asso- ciated with mud in the Berenai open pit. Stoping has commenced at the Belinau underground mine with production steadily increasing. THE restructured Kingsrose Mining is con- tinuing a turnaround at the Way Linggo Gold-Silver Project in Sumatra, with pro- duction increasing and strong progress made on several potential growth options. Increasing production at Way Linggo open pit mine is driving the turnaround with the operation consistently producing high- grade, low-cost gold and silver. During the September quarter, there were 8791 ounces of gold produced, an increase of 74% on the previous quarter. Open pit activities have involved a se- ries of staged cutbacks aimed at safely recovering pillars and remnant ore located above the 1 Level of the original under- ground mine. As a result, Way Linggo is generating strong cashflow, as highlighted by its performance during the Septem- ber quarter, when it produced 24,224 tonnes at 9.1 g/t gold at a cash cost of just US$311. In addition, the Indonesian Mines Depart- ment has approved the final pit cutback at Way Linggo. The application for the Pinjam Paki (borrow and use forestry permit) is ex- pected to be approved in February 2018, in line with Kingsrose's development timeta- ble. Approval of the cutback means Kings- rose will continue to generate solid produc- tion and cash flow. At the nearby Talang Santo underground mine production continues to be adversely impacted by the inflow of groundwater and poor ground conditions. There has also been a reduction in mineable areas as a result of delays in developing the mine to access the lower levels. This combination of factors has rendered the mine uneconomic and as a result, the company is progres- sively suspending underground operations. Kingsrose believes significant potential re- mains at Talang Santo and has commenced a scoping study to consider options to re-engineer the mine. This would involve modern mechanised underground mining methods resulting in greater production and lower costs. In addition, Kingsrose has commenced a study into the suitability of an ore sorter for Talang Santo and test work is under way. The sorter has potential to significantly in- crease the high grades and reduce dilution from any future mining operations. In parallel, Kingsrose is completing a fea- sibility study on an open pit operation at Talang Santo, where, similar to Way Linggo, there is a significant high-grade portion of the resource remaining in the upper levels of the mine. Turnaround at Way Linggo continues Sumatra exploration alliance with Merdeka Sampling water quality in a stream at the Tem- bang project in South Sumatra.

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