Gascoyne Resources : March 17 Quarterly Activities and Cash Flow Report, 3.5 MB

MARCH 2017 QUARTERLY REPORT‌

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SUMMARY OF ACTIVITIES

CORPORATE:

During the quarter a capital raising was completed to fund the equity portion of the Dalgaranga Gold Mine development costs, exploration at both of the Company's 100% owned +1.0 million ounce gold projects and provide additional working capital.

The fundraising was completed via a $50 million private placement that was heavily oversubscribed by a number of leading domestic and international institutional and professional investors and a $5 million Share Purchase Plan to allow existing shareholders to participate.

At the end of the quarter, the Company's cash reserves were $53 million after spending approximately $8.0 million on exploration, development and corporate activities during the quarter.

DALGARANGA PROJECT:

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:

• Signing of a Conditional Letter of Intent with GR Engineering Services Limited (ASX:GNG) for the award of an engineering, procurement and construction contract in relation to a new 2.5Mtpa gold processing facility. The contract will be undertaken on a guaranteed maximum price (GMP) basis.

• Regulatory approval to construct the village for the project, and acquisition of a 240 person camp.

• The Mineral Resource for the project was updated to include the Gilbeys South extensional drilling completed in December and includes a 30% increase to the oxide portion, a 49% increase to the transitional Resource and a 7% increased to the fresh Mineral Resource of the Gilbeys Deposit

• The updated Measured, Indicated and Inferred Mineral Resource now stands at 29.6Mt @ 1.3 g/t for 1.23Moz of contained Gold, including 755,000oz in the Measured and Indicated categories.

• Metallurgical Testwork completed early in the quarter confirmed that the Gilbeys

  South mineralisation can be recovered with the same flowsheet as proposed at

  Dalgaranga plant with high overall recovery and low reagent consumption

• Confirmation of the Sly Fox Discovery with RC drilling intersecting near surface, wide zones of mineralisation including:

  • 26m @ 1.8g/t gold, including 15m @ 2.4 g/t o 30m @ 1.5g/t gold, including 14m @ 2.6 g/t o 23m @ 1.6g/t gold, including 11m @ 2.7 g/t o 27m @ 1.6g/t gold, including 9m @ 3.1 g/t

  • 19m @ 1.5g/t gold, including 10m @ 2.45 g/t

  • 16m @ 1.5g/t gold o 13m @ 1.2 g/t gold o 29m @ 1.1 g/t gold

  • 32m @ 1.0 g/t gold, including 16m @ 1.5 g/t

  • 14m @ 1.0 g/t gold, including 7m @ 1.6 g/t

GLENBURGH PROJECT:

Soil sampling of a number of regional targets was undertaken during the quarter. A number of new targets have been identified and are currently being assessed with initial drill testing the priority targets expected in the current quarter.

CORPORATE DETAILS

ASX Code: GCY

Shares: 377M Share Price: 50.5c

Market Cap: $190M Enterprise Value: $140M Debt: Nil

ASSETS

Cash: $53 million Glenburgh (100%) 1.0M oz Gold Dalgaranga (100%) 1.23M 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 Graham Riley Stan Macdonald

CONTACT DETAILS

Telephone: +61 8 9481 3434

Facsimile: +61 8 9481 0411

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

CORPORATE

As announced on the 17th of February, a capital raising was undertaken to raise $55 million (before costs) to fund the equity portion of the Dalgaranga Gold Mine development costs, exploration at both of the Company's 100% owned +1.0 million ounce gold projects and provide additional working capital.

The fundraising was completed via a two tranche $50 million private placement (100 million shares at 50c per share) that was heavily oversubscribed by a number of leading domestic and international institutional and professional investors, and a $5 million Share Purchase Plan (SPP) to allow existing shareholders to participate at the same price resulting in 10 million shares being issued.

The Tranche 1 placement shares were issued using the Company's placement capacity under listing rule 7.1, and additional shareholder approved capacity. Tranche 2 placement shares were issued following a shareholder meeting on 10 March at which shareholders overwhelmingly supported the placement.

As a result of the placement and SPP, the Company currently has 377 million shares on issue and at the end of March had cash reserves of approximately $53 million.

REVIEW OF OPERATIONS

Details of the progress during the quarter include:

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

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DALGARANGA PROJECT

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 two drill rigs active on the project for most of the quarter, and numerous development activities ongoing.

DEVELOPMENT ACTIVITIES

As announced in November 2016, the Dalgaranga Feasibility Study (FS) was completed on the Dalgaranga Gold Project.

The FS was based on the development of two open cut pits, and a new conventional SAG milling circuit, gravity and carbon in leach processing plant with a nameplate throughput of 2.5Mtpa

Updated Mineral Resource

Since the FS was completed, the Gilbeys Mineral Resource has been updated to include the extensions to the south of the previous Gilbeys Resource (See ASX announcement dated 15th March 2017).

The Gilbeys Deposit Measured, Indicated and Inferred Mineral Resource now stands at 27.6Mt @ 1.3 g/t gold for 1,130,000 ounces of gold. The Measured and Indicated portion has increased to 16.4Mt @ 1.3 g/t gold for 685,000 ounces.

Importantly with the inclusion of the Gilbeys South extensions to the deposit the Oxide portion of the resource has increased by 30% and the transitional portion increased by 49%. This has the potential to make a material difference to the development of the project as it significantly increases the proportion of "soft mill feed" in the early portion of the mine's development.

With the Resource update to the Gilbeys Deposit, the overall Dalgaranga Gold Project Mineral Resource has increased to 1.23Moz (29.6Mt @ 1.3 g/t) with 755,000 ounces in the Measured and Indicated category (17.8Mt @ 1.3g/t).

Importantly the updated Mineral Resource EXCLUDES the recently discovered Sly Fox deposit, which is located approximately 1.8km from the proposed processing facility. See below for details on the Sly Fox exploration drilling.

Figure 2: Dalgaranga Site Layout

With the increase to the oxide and transitional resources at Dalgaranga, further mill modelling has shown that the proposed processing plant can treat this soft material at between 3.0 and 3.2Mtpa, well above the 2.5Mtpa rate used in the Feasibility Study. This increase in throughput has potential to significantly increase the production profile in the early years of development.

An updated mine plan and processing schedule is being developed using the updated Mineral Resource. It is expected that the updated production profile along with an updated Ore Reserve will be released in early May.

EPC Letter of Intent Signed:

The Feasibility Study completed in November envisaged an ECPM implementation strategy; however this would have come at a risk of cost overruns. The Board has decided to further derisk the development and implementation of the project by moving to an EPC style of implementation. While this has resulted in an increase to the initial project capital (up from ~$86 million to ~$92 million), the implementation and schedule risks are greatly reduced.

A conditional letter of intent (LOI) has been signed with GR Engineering Services Limited (ASX:GNG) for the award of an engineering, procurement and construction contract in relation to a new 2.5Mtpa mineral processing facility at the Company's 100% owned +1.2Moz Dalgaranga Gold Project.

The award of the contract under the LOI is conditional upon, amongst other things, final Gascoyne Board approval, receipt of final statutory approvals, Gascoyne obtaining the balance of its financing for the Project and finalising the Contract terms and conditions. The Contract will be undertaken on a guaranteed maximum price (GMP) basis.

The Company and GR Engineering are currently negotiating the formal Contract and subject to the satisfaction of the conditions referred to in the LOI, the Dalgaranga Gold Project is scheduled to commence ore commissioning in Q2 calendar 2018.

Further updates on the development activities are epected to be released in the coming weeks.

Financing

The Company is currently in discussions with six Australian and International banks to secure the debt funding for the development. With the recent increase in the Mineral Resource and the expected increase to the production profile that is expected as a result, the Company has elected to defer finalising the debt funding solution to ensure that the funding is undertaken with the most up to date information. This information is currently being compiled and is expected to be with the potential banks in the next week. While the debt funding is being finalised, the equity funding that was secured during the quarter allows development activities to progress.

With the current development schedule, the debt funding is not required to be drawn upon until mid-way through the last quarter of calendar 2017.

Other Development Activities

Sigificant progress has also been made with a number of long lead time items having been secured and tendered. This includes the purchase of a 240 person camp, tendering of the SAG Mill and detailed engineering underway.

Along with the exploration and resource work undertaken during the quarter, significant progress has been made on the permitting of the project. During the quarter the regulatory approvals for construction of the 240 person Dalgaranga accomodation village were received, with the construction of the village underway.

EXPLORATION UPDATE

Two drill rigs have been actively drilling at Dalgaranga for most of the quarter with the drilling designed to infill the Inferred Resources, extend the existing Resources, to test known prospects including the recently discovered Sly Fox deposit and further regional exploration.