Gascoyne Resources : GCY - June 17 Quarterly Activities and Cash Flow Report, 2.8 MB

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During the quarter significant progress was made towards development of the Company's 100% Dalgaranga Gold Project, as well as continuation of an ongoing aggressive exploration and resource drilling programme. Activities have included:

• Execution of the Engineering, Procurement and Construction (EPC) Contract with GR Engineering Services Limited (ASX:GNG) in relation to a new 2.5Mtpa gold processing facility. The contract will be undertaken on a guaranteed maximum price (GMP) basis. Design and engineering is 44% complete.

• All regulatory approvals received to construct the Dalgaranga Gold Project.

• 240 room Dalgaranga accommodation village construction is 80% complete.

• Bulk Earthworks Contract awarded and construction is underway.

• The Dalgaranga mine plan, schedule and Ore Reserve have been updated:

  • Material within the mine designs and schedule increased to 15.3Mt @ 1.3 g/t for 623,000oz, excluding the Sly Fox deposit.

  • 244,000 ounces of production expected within the first two years.

  • Proved and Probable Ore Reserve increased to 14.3Mt @ 1.27 g/t for 581,000oz.

• Maiden Sly Fox Mineral Resource completed 1.5Mt @ 1.6 g/t for 77,000oz.

• Ongoing exploration outside of the Sly Fox resource has intersected significant mineralisation including:

  • 12m @ 3.0 g/t gold from 20m o 12m @ 1.1 g/t gold from 28m o 8m @ 1.1 g/t gold from 48m
  • 3m @ 3.0 g/t gold from 80m to EOH
  • 3m @ 2.3 g/t from 24m to EOH
  • 4m @ 1.8 g/t gold from 28m
  • 4m @ 1.3 g/t from 20m
  • 4m @ 2.6 g/t from 56m
  • 8m @ 1.2 g/t gold from 12m

• Metallurgical testwork completed confirms that the Sly Fox deposit can be treated

  at the Dalgaranga plant with high overall recovery and low reagent consumption.

• Debt financing process continues with the Independent Technical Expert's (ITE) report issued and financiers preparing credit approved terms. The debt financing schedule is in accord with the overall development schedule.

  GLENBURGH PROJECT:

  A 30 hole RC drilling programme has commenced at the Company's +1.0 million ounce Glenburgh Gold Project targeting:

• Resource Extensions to the Icon, Tuxedo, Apollo, Mustang and Torino Deposits

• Initial drill testing of regional surface sample anomalies to the North West of the known high grade Zone 126 Deposit

CORPORATE:

During the quarter, Sally-Anne Layman was apointed to the Board of Directors as a Non- Executive Director. Sally-Anne is a well-regarded and highly experienced director and advisor, with over 23 years expertise in mining and finance.

At the end of the quarter, the Company's cash reserves were $42 million after spending approximately $10.2 million on exploration, development and corporate activities during the quarter.

CORPORATE DETAILS

ASX Code: GCY

Shares: 377M Share Price: 39.5c

Market Cap: $150M Enterprise Value: $110M Debt: Nil

ASSETS

Cash: $42 million

Dalgaranga (100%) 1.31M oz Gold Glenburgh (100%) 1.0M oz Gold Egerton (100%) 24,000oz Gold

BOARD

Non-Executive Chairman Mike Joyce

Managing Director Michael Dunbar

Non-Executive Directors John den Dryver Gordon Dunbar

Sally-Anne Layman Stan Macdonald Graham Riley

CONTACT DETAILS

Telephone: +61 8 9481 3434

Facsimile: +61 8 9481 0411

Email:admin@gascoyneresources.com.au Web: www.gascoyneresources.com.au

REVIEW OF OPERATIONS

Figure 1: Gascoyne Resources Project Locations in the Gascoyne and Murchison Regions

M59/749 & L 59/141, 142, 151, 152, 153 & EL59/2150 - 100% Gascoyne

E59/1709, 1904, 1905, 1906 &, EL21/195 - 80% Gascoyne

Activities at the Dalgaranga project have accelerated with exploration and the ongoing development activities.

DEVELOPMENT ACTIVITIES

The Dalgaranga Feasibility Study (FS) was completed (and announced to ASX) in late 2016. Driven by near-mine exploration success and improvements from the original FS, the development plans and activities have advanced during the quarter.

As a result of these changes, the debt financing has not yet been completed. The independent technical expert has completed their report for the potential funders.

A number of banks have provided indicative funding proposals and are in the process of confirming their proposals through their internal processes. It is expected that the Company will receive credit approved terms from the banks shortly, allowing the bank(s) to be mandated in August, well in advance of the scheduled first debt drawdown scheduled for late Q4 2017.

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As a result of the updated Mineral Resource announced to ASX on 15th of March 2017, the mine plan, mine design and schedule have been updated to align the production with the increased throughput rate that modelling has shown to be achiveable while processing soft oxide and transitional ore in the early years.

The new mine design for the Gilbeys deposit has resulted in the Dalgaranga Production Target being increased to 15.3Mt @ 1.3 g/t gold for 623,000 ounces within the Gilbeys (including Gilbeys South) and Golden Wings open pits (see ASX annoucnement 21st June 2017). This production target is based on 94.4% Measured and Indicated Mineral Resources (and the resulting Proved and Probable Ore Reserve) and 5.6% Inferred Mineral Resources within the pit designs. The Dalgaranga Ore Reserve has been updated for the new Gilbeys Mineral Resource and currently stands at 14.3Mt @ 1.27 g/t for a total of 581,000 ounces.

Table 1 - Breakdown of Material within the Gilbeys and Golden Wings Mine Designs

Totals may not add due to rounding

As a result of the revised mine design and schedule, along with the increased throughput in the early years of the operation, a revised Production Target has been developed. The new production schedule sees the project produce 244,000oz in the first two years of operation, representing an increase of over 35,000 ounces in the first two years of production when compared to the Feasibility Study, which provides a significant positive improvement to the project economics. (See Figure 2)

Figure 2: Dalgaranga Gold Project Production

(excludes Sly Fox that is expected to improve year 3&4)

This production profile, schedule and Reserve EXCLUDES the recently discovered Sly Fox deposit (see below for details), which adds a further 77,000oz to the Resources base, and is expected to improve the production profile. The exact impact of including Sly Fox resources into the mine schedule is yet to be determined as exploration is ongoing in the region and the JORC modifying factors yet to be fully determined. Goetechnical drilling has been completed and, once anlysis of this drilling has been finalised, an Initial Ore Reserve will be estimated.

A Further update to the Ore Reserve will be completed once the Golden Wings Mineral Resource is updated and the Sly Fox pit optimisation and mine design is completed. This is expected to be completed in Quarter 3, 2017.

The following regulatory approvals for the development of the project have now been received. The approvals outline the conditions which must be followed for the development and closure. All of these conditions are industry standard and no specific conditions have been imposed on the development. The approvals include:

• The Mining Proposal

• The Mine Closure Plan

• The Works Appoval

• Water Extraction licences

  Dalgaranga Village Construction:

  As with all developments, a critical path activity is the accomodation village for construction. With the early purchase of the entire 240 person camp, the permanent village is being built early to accommodate all construction personnel.

  Village construction is progressing well, with all of the accomodation units and the kitchen diner complex in place. The kitchen has been commisioned and is fully operational.

  A number of the ancillary items for the village have been commissioned, including the reverse osmosis water treatment plant, the waste water treatment plant and associated evaporation ponds and the temporary power station.

  The village is approximately 80% complete, with completion scheduled for the end of August, well ahead of the ramp up of construction personnel on site.

  Process Plant Engineering and Procurement:

  As previously announced,GR Engineering has been engaged to design and build the 2.5Mtpa processing plant. The construction is being undertaken on a guaranteed maximum price basis (GMP) and the scope of work covers appoximately 60% of the total capital cost of the project, significantly reducing the risk of cost escalation for the whole project.

  The EPC contract has been signed and the agreed construction schedule results in first gold production in Q2 2018.

  The overall design progress is 44% complete and is on schedule. See Figure 3 below for a 3D isometric of the process plant arrangement.

  A number of long lead items were identified as being key to project delivery. The following items have been ordered and are scheduled for delivery to site inline with the project schedule:

• 7.2m diameter by 7.4m EGL SAG Mill

• 6.5 MW Mill Motor and VVVF

• CIL Tank Agitators

• CIL Tank Steel Plate

• Wet Screens

• Process Plant RO unit

• Cyclone Cluster

• Intensive Leach Reactor

• Gravity Concentrator

• Elution Heater

• High Voltage Electrical Equipment

• Communication Equipment