14.10.2010 bayan airag gold project, john wyche

KERRY MINING

Bayan Airag Gold Project

October 2010


• Kerry Mining acquired the Bayan Airag gold / copper exploration tenements in late 2008 as part of the Mongolian portfolio developed by the Canadian company QGX.

• QGX had identified a number of prospective areas and selected the Central Valley Zone (CVZ) as the first area to be explored in detail.

• By the end of 2007 QGX had drilled over 100 holes in the CVZ, developed oxide and sulphide resource models, conducted preliminary metallurgical test work and completed a prefeasibility study based on an opencut mine to extract the oxide gold resource.

Central Valley Zone (CVZ)


• Since Kerry Mining’s acquisition of QGX Mongol Llc in late 2008:

– Over 100 new holes have been drilled, mainly to define the CVZ oxide gold resource.

– Ore samples have been sent to Australia for extensive metallurgical testing of the oxide gold ore and preliminary testing of the sulphide resource.

– Geological, geotechnical, mining, process, infrastructure, environmental, water, logistics and permitting studies have been commissioned and are either complete or at an advanced stage.


Following reviews of the QGX Canada work and

preliminary assessment of exploration results

across over 2,000 km2 of tenements, Kerry

Mining concluded that the oxide gold section of

the CVZ is well enough defined to progress to a

detailed study but the sulphide zone and the

other exploration targets so far defined require

further work.


A three part definition and development program was proposed:

•Project 1 – CVZ Oxide Gold. A detailed feasibility study is being prepared by a team of Australian geologists, mining engineers, metallurgists, process and infrastructure engineers and environmental specialists. This is designed to lead to early development of the oxide gold project.

•Project 2 – CVZ Sulphide Zone. Metallurgical test work is being done in Australia. Preliminary mining and process studies will be prepared to assess development of the Sulphide Zone as the oxide resource is depleted.

•Project 3 – Near Mine Targets. Four targets defined by geophysics and scout drilling are currently being drilled to provide oxide gold and sulphide copper/gold resource additions.

Bayan Airag Gold ProjectFeasibility Study Team:

• Hellman & Schofield – Resource Geology

• Pells Sullivan Meynink - Geotechnical

• Australian Mine Design and Development - Mining

• Peter Lewis and Associates -Metallurgy

• Arccon – Process and Infrastructure

• SMEC – Water Supply and Environment

• Metcon, Optimet, Outetec, Delkor, Ammtec – Process test work

• Kappes Cassiday snd Associates–Heap Leach testing and design

Project 1

CVZ Oxide Gold Orebody

• The Central Valley Zone (CVZ) contains the first exploration target to be defined to a commercial status.

• Oxide resource is the weathered top 50 metres of a the larger underlying sulphide copper / gold resource.

• Currently defined oxide resource of 450,000 oz of gold and 2.3 million oz of silver at a cut off grade of 0.8 g/t Au.

CVZ Oxide Gold Resource


• Defined by 211 drill holes with 39,400 metres of drilling which is mostly core.

• Exploration drilling and interpretation by QGX Mongol. Assays by SGS and others in Mongolia.

• Resource modelling by Hellman & Schofield (Australia).

• Resource compilation and verification procedures in compliance with Australian JORC Code and Canadian NI43-101.


Category Tonnes (Mt) Gold g/t Silver g/t Au ozs Ag ozs

Indicated 5.4 2.42 12.4 422,000 2,154,000

Inferred 0.4 1.94 11.3 28,000 162,000

Total 5.8 2.39 12.3 450,000 2,316,000

(recoverable gold cut of = 0.8g/t; average density 2.31t/m3; use of significant figures does not imply precision)

CVZ Oxide Gold Mine

• Mine planning by Australian Mine Design and Development (Australia).

• Geotechnical modelling by Pells Sullivan Meynink (Australia).

• Opencut mining of oxide gold resource with pit shell defined by Whittle pit optimisation.

• Standard mining system using hydraulic excavators and off highway dump trucks.

CVZ Oxide Gold Mine

Oxide Gold Processing

• Process test work shows very low gold recovery by gravity so process must be by cyanide leaching.

• Process options are:

– Carbon in Leach (CIL) on finely ground ore

– Heap leach on coarsely crushed ore

• Most of the work to date has been on CIL but a heap leach column test gave a high, rapid gold recovery.

• A comparison study based on this result shows heap leach may have much higher value than CIL.

• A study program has commenced to bring heap leach up to the same level of confidence as CIL.

Carbon in Leach Option

• Higher gold and silver recovery (83.9% for gold, 83.5% for silver).

• Standard, proven technology.

• Operates 12 months per year.

• More expensive to build (approx US$40 million) and operate (>US$22 per tonne of ore).

Carbon in Leach Option

Preliminary

Process Plant

Layout

CIL Cyanide Management• A major feature of the Bayan Airag CIL process

plant design is the tailings treatment and

handling system.

• Once the gold and silver is extracted most of

the water and cyanide will be recovered for re-

use when the liquid is separated from the

tailings in the the thickener. The tailings report

to the thickener underflow at about 35% to

40% moisture.

• These tailings are subjected to cyanide

destruction using either the Inco process or

Caro’s Acid to lower the cyanide level to 1

ppm. This is lower than most gold plants

around the world.

• The biggest difference in the Bayan Airag

plant will be that the detoxified tailings will

then be filtered to produce a dry (21%

moisture) filter cake which can be stored

permanently in the mine waste rock

emplacement.

CIL Cyanide ManagementThe full cyanide management system proposed is:

1. Cyanide destruction by Inco Process on the thickener underflow reduces cyanide level to less than 1 ppm.

2. Detoxified tailings filtered to remove remaining free moisture and produce dry filter cake (215 moisture).

3. Filter cake stored in waste rock heap to prevent dust generationand minimise potential for re-wetting of tailings. Any remaining cyanide breaks down in the heap.

4. Monitoring bores and final trap dam below the waste rock dump as final safeguard to ensure that if the above measures fail no cyanide leaves the site.

This will possibly be the most rigorous cyanide management system at any mine in the world.

Heap Leach Option• Higher gold and silver recoveries

than expected from column test (80% for gold, 65% for silver reduced to 75% and 60% for heap modelling).

• Rapid leaching (7 days in column, 8 weeks assumed for real heap)

• Standard, proven technology.

• Gold heap leach operations have been successfully operated in similar cold environments.

• Less expensive to build (approx US$26 million) and operate (approx US$12.50 per tonne of ore).

• May not be able to leach gold during the four coldest months each year.

Heap Leach StudiesWork in progress to confirm heap leach results:

1. Column test program on 1 tonne of drill core samples to confirm recovery and leach time results at different crush sizes and gold grades.

2. Operational analyses to assess “scale up” from columns to actual heaps.

3. Heap design options to minimise affected area.

4. Assessment of cold weather operation.

5. Cyanide management and heap closure strategies to achieve same level of safety and environmental security as CIL plan.

6. Engineering to reach +- 20% on capital and operating costs.

CIL / Heap Leach Trade Off Study

Process CIL Heap Leach Difference RelativeMill Throughput tpa 750,000 890,000 140,000 119%Metal PricesGold US$/oz 950.000 950.000 0 100%Silver US$/oz 13.000 13.000 0 100%

Transport and Refining CostsGold US$/oz 5.000 5.000 0 100%Silver US$/oz 0.500 0.500 0 100%

Opencut tonnes and Grades (preliminary)Cut off Grade g/t Au 1.00 0.70 0 70%Ore tonnes tonnes 3,800,000 4,500,000 700,000 118%Gold Grade g/t Au 2.93 2.62 -0.31 89%Silver Grade g/t Ag 13.82 13.04 -0.78 94%Waste tonnes tonnes 19,300,000 18,600,000 -700,000 96%Total tonnes tonnes 23,100,000 23,100,000 0 100%Waste : Ore Ratio 5.08 4.13 -0.95 81%Project operating life years 5 to 6 5 to 6

Cost and Recovery IndicatorsGold Process Recovery 83.9% 75.0% -8.90% 89%Silver Process Recovery 75.0% 60.0% -15.00% 80%Process Cost US$/tonne of ore 22.50 12.50 -10 56%Annual Fixed G&A Costs US$ 5,100,000 5,100,000 0 100%Mining Cost Ore and Waste US$/tonne 2.60 2.40 -0.20 92%Total Capital Costs (preliminary only) US$ 67,000,000 58,000,000 -9,000,000 87%

ResultsGold Produced oz 300,400 284,000 -16,400 95%Silver Produced oz 1,410,000 1,180,000 -230,000 84%Gold Equivalent oz 319,695 300,147 -19,547 94%Operating cost per Au oz (net of Ag credits) US$ 523 446 -77 85%

Oxide Gold Project

Infrastructure• Water supply

– Low total usage (<25 litres per second)

– Adequate groundwater supply located 10 km from process plant.

– Aquifer pump testing is in progress.

• Power options– Approximately 4 MW required for CIL option. Less for heap

leach.

– Small coal fired power plant being assessed as cheaper alternative to diesel generators.

• Camp– Site located in the valley adequate for over 400 people.

– Accommodation options being assessed.

• Freight logistics and permitting studies in progress.

Site Layout for CIL Option

Oxide Gold Project

Production Profile

• Final reserves for the CIL and heap leach options are close to completion.

• Pit optimisation work suggests that the CVZ oxide zone should support 55,000 to 60,000 oz of gold and 235,000 to 280,000 oz of silver production per year over a five year mine life.

• Initial operating cost estimates deliver a C1 cost of US$523 per oz of gold for CIL and US$446 per oz for heap leach (net of silver credits).

• Modelling based on test work and cost estimation in the current study.

Key assumptions:

•US$950/oz for gold

•US$13.00/oz for silver

•750,000 tpa mill feed rate CIL

•890,000 tpa crushed heap leach

Oxide Gold Project

Environmental Management

• ESIA being compiled by SMEC

• Social Aspects:– Community involvement

– Co-existing with existing land use

– Employment of Mongolians as priority

• Physical Aspects– Dust, water quality, noise,

contaminants, mine closure

Reserves Status• Process recoveries for CIL are based on extensive test work.

Heap leach recovery is based on limited testing but this is being upgraded.

• Mining, processing and other costs have been developed using Mongolian suppliers.

• A comprehensive geotechnical program has been conducted to define pit slopes.

• Pit shells have been defined using Whittle optimisation software.

• 97% of the contained metal in the studies to date is in at leastIndicated Resource status. The remaining 3% of Inferred can be readily upgraded to support a JORC or NI43-101 compliant Mineral Reserve.

• Schedules have been run to define equipment, labour and consumables and to confirm project viability.

Reserves – Next Steps• Complete heap leach test work and modelling to

support heap leach case.

• Select final process route.

• Finalise estimation of mining, process and administration costs.

• Finalise geotechnical report.

• Complete detailed pit and waste rock emplacement designs.

• Upgrade remaining Inferred resource in the pit to at least Indicated.

• Prepare formal JORC Reserves Statement.

Project 2

CVZ Sulphide Orebody

• The base of the oxide zone in the CVZ occurs as a sharp

transition from highly weathered with no copper to massive

sulphides with significant copper.

• Extensive lenses of low grade copper gold mineralisation have

been defined. Resource definition focuses on areas with

higher copper or gold grades which are more likely to support

the costs of mining and processing.

• Flotation tests are being conducted on a representative

sulphide sample at the Optimet laboratory in Adelaide,

Australia. Initial results indicate that it will be possible to

form a saleable copper gold concentrate with a standard

flotation system.

CVZ Sulphide Orebody

CVZ Sulphide Resource

Category Tonnes (Mt) Cu % Au g/t Ag g/t Cu tonnes Au ozs Ag ozs

Indicated 2.8 1.73 0.43 6.2 50,000 40,000 572,000

Inferred 4.1 1.90 0.48 5.6 78,000 63,000 742,000

Total 6.9 1.83 0.46 5.9 128,000 103,000 1,314,000

(copper cut off = 1%; average density 3.9t/m3; minor rounding errors)

CVZ Sulphide OptionsMining:

• Opencut by deepening the oxide gold

pit.

• Underground. More expensive but

recovers more ore.

Processing:

• All options would be flotation to

produce a copper / gold and possibly a

zinc concentrate for sale to smelters.

• Flotation banks could be built onto the

oxide gold CIL plant to share the

crushing and grinding circuit.

• If sufficient ore is defined it may be

preferable to build a separate

processing plant.

Project 3

Near Mine Exploration1. CVZ high grade gold telluride veins

– An Inferred resource estimate of 88,000 tonnes at 10.3 g/t Au has been assigned to these veins to give 29,000 oz of gold in addition to the oxide gold resource. However they are too discontinuous to model at a higher level of confidence and may not reach reserve status until they can be exposed in the operating opencut mine.

2. Copper Ridge North and South– Looking for extensions of the CVZ oxide and sulphide

mineralisation. First assays back from current drilling confirmadditional sulphide copper / gold.

3. 12921 and 12320– Drilling on geophysical targets. Initial results confirm

mineralisation but awaiting assays.

Project 3

Near Mine Exploration


The Start of a New Force in Asian Mining

14.10.2010 bayan airag gold project, john wyche

Business