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Executive Summary

PreFeasibility Study for Belaya Gora and Blagodatnoye Gold Project

Report Prepared for

JSC «Mnogovershinnoe»

Report Prepared by

SRK Consulting (Russia) Ltd.

Project Number RU00557

January 2018

SRK Consulting Belaya Gora & Blagodatnoye PFS – Executive Summary

RU00557 - BG_BD_Executive Summary.docx January 2018

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Table of Contents

Executive Summary ........................................................................................................... 4

1 Introduction .................................................................................................................. 4

2 Project Description ....................................................................................................... 5

2.1 Project History ..................................................................................................................................... 5

2.2 Project Location .................................................................................................................................. 5

2.3 Licence ................................................................................................................................................ 6

2.4 Mining history ...................................................................................................................................... 7

2.5 Geology and Mineral Resources ......................................................................................................... 7

2.6 Geomechanics .................................................................................................................................. 15

2.7 Hydrogeology .................................................................................................................................... 16

2.8 Mining and Ore Reserves ................................................................................................................. 17

2.9 Ore Processing ................................................................................................................................. 22

2.10 Tailings Storage Facility .................................................................................................................... 24

2.11 Infrastructure ..................................................................................................................................... 25

2.12 Environmental and social aspects .................................................................................................... 29

2.13 Project Economic Analysis ................................................................................................................ 29

2.14 Ore Reserve Statement .................................................................................................................... 33

List of Tables Table 2-1: Belaya Gora mining and processing statistics ............................................................................. 7

Table 2-2: Mineral Resource Statement for Belaya Gora and Blagodatnoye deposits as of January 1, 20181.2.3 ...................................................................................................................................... 15

Table 2-3: Belaya Gora Pit Design Inventory .............................................................................................. 18

Table 2-4: Blagodatnoye Pit Design Inventory ............................................................................................ 18

Table 2-5: Annual Mine & Plant Feed Schedule ......................................................................................... 19

Table 2-6: Maximum Equipment Requirements .......................................................................................... 20

Table 2-7: Unit Operating Cost .................................................................................................................... 21

Table 2-8: Belaya Gora and Blagodatnoye cashflow model ....................................................................... 31

Table 2-9: NPV of the project at different discounting rates (after taxes) ................................................... 32

Table 2-10: Ore Reserve Statement for Belaya Gora and Blagodatnoye, Effective 1 January 2018 ........... 33

List of Figures Figure 2-1: Belaya Gora and Blagodatnoye deposit location ......................................................................... 6

Figure 2-2: Belaya Gora database visualisation and mineralisation wireframes ......................................... 10

Figure 2-3: Blagodatnoye database visualisation and mineralisation wireframes ....................................... 11

Figure 2-4: Belaya Gora block model classification and the resource pit .................................................... 14

SRK Consulting Belaya Gora & Blagodatnoye PFS – Executive Summary


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Figure 2-5: Blagodatnoye block model classification and the resource pit .................................................. 14

Figure 2-6: Belaya Gora layout ..................................................................................................................... 26

Figure 2-7: Blagodatnoye layout ................................................................................................................... 28

Figure 2-8: Operational costs during mine life by main categories .............................................................. 30

Figure 2-9: Net annual cash flow of the project during mine life .................................................................. 32

Figure 2-10: Cumulative net cash flow of the project ..................................................................................... 32

Report.doc – Executive Summary


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Executive Summary

1 Introduction SRK Consulting (Russia) Limited (hereinafter referred to as SRK) was commissioned by

JSC Mnogovershinnoye to develop a Pre-Feasibility (PFS) and Mineral Resource and Ore

Reserve estimates in accordance with JORC Code 2012 for the Belaya Gora (Stockwork zone)

and Blagodatnoye Projects located in Khabarovsk Region of the Russian Federation.

This report should be considered in conjunction with the Mineral Resource Estimation Report

for Belaya Gora Gold Project (2015), which declared Mineral Resources in accordance with the

Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

(JORC Code, version 2012), and with the Geotechnical Slope Stability Assessment for open

pit slopes and benches, and waste dumps.

This report contains the results of SRK's studies in geological modelling of both deposits, mining

studies of combined consecutive development of Belaya Gora and Blagodatnoye deposits, and

geotechnical studies for Blagodatnoye deposit. The report also contains a Statement of Mineral

Resources and Ore Reserves for the Belaya Gora and Blagodatnoye deposits.

As part of the Prefeasibility Study, SRK conducted studies in the following disciplines:

Mineral Resource Estimation for both deposits;

Open pit design and combined mining schedule for both deposits;

Study of geotechnical properties and estimation of bench parameters for the open pit at Blagodatnoye deposit;

Financial model for the combined mining program of both deposits.

For the remaining disciplines of the PFS, the studies were carried out by the contractors of

JSC Mnogovershinnoye and were presented in the Mine Design for Belaya Gora Project and

in the separate studies for Blagodatnoye. These studies are listed below and were reviewed by

SRK for compliance with the PFS level as presented in the report:

Hydrogeological information for Belaya Gora deposit was obtained from the Report titled "TEO of permanent exploration standards and resource estimation for Belaya Gora Gold Project as of January 1, 2016" prepared by JSC Naen-Consult;

Hydrogeological study report for Blagodatnoye deposit, Licence KHAB 02316 BR prepared by Nizhneamurskaya Mining Company LLC;

Geotechnical studies and open pit parameters are presented in the Mine Design for Belaya Gora Project;

Processing studies were conducted and the processing flowsheet, including capital and operating costs estimation, was prepared by TOMS Engineering;

The environmental impact assessment for both deposits, including rehabilitation cost estimation, was conducted by ZabaikalZolotoProyekt LLC;

Studies of infrastructure for Blagodatnoye, including capital and operating costs estimation, were conducted by TOMS Engineering;

Tailings Storage Facility studies, including operating cost estimation, were conducted by CJSC Mekhanobr Engineering;

SRK's opinion presented herein are valid as of January 1, 2018. This opinion is based on

information provided by the Company by this time, and on the studies completed as part of the

report preparation. In turn, all of the received information reflects the specific technical and



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economic conditions as the time of writing. Given the nature of the mining business, these

conditions can change significantly over relatively short periods of time.

This report contains technical data that inherently involve a degree of rounding, which SRK

does not consider to be material.

SRK is not an insider, associate or affiliate of the Company. SRK has not acted as advisor to

the Company or its affiliates in connection with the Belaya Gora and Blagodatnoye projects.

The results of the technical review by SRK are not dependent on any prior agreements

concerning the conclusions to be reached, nor are there any undisclosed understandings

concerning any future business dealings. SRK will be paid a standard fee for the services, which

has no impact on the results.

2 Project Description Belaya Gora is an active mine. The mining operations were slowed down in early 2017 and

stockpiled ore was processed whilst studies were undertaken to improve operating efficiency.

Blagodatnoye is located near Belaya Gora though has a different geological environment. The

strategy is to mine the remaining reserves at Belaya Gora first, which are expected to be

completed by 2024, then move the mining activity to Blagodatnoye which is expected to operate

for a further 8 years. The main infrastructure for ore processing and tailing storage will be

located at Belaya Gora, though a crusher will be installed at Blagodatnoye as the ore is much

harder than the Belaya Gora ore and requires additional comminution. Ore from Blagodatnoye

will be transported by on-highway trucks along a road which will comprise partly an existing

municipal road and partly a new road which will be built by the Company.

2.1 Project History

Gold mineralization in the Belaya Gora deposit area was first identified at the end of the 19th

century with the discovery of placers in the surrounding watercourse basins. Some exploration

was conducted in the 70s and 80s, with the last detailed exploration stage undertaken between

2006-2008. Production started in 2010 with ore processed at the Mnogovershinnoe plant (some

70 km away). In 2013 a processing plant was constructed at Belaya Gora and production rates

increased to planned 2.2 Mtpa. The original TEO of Permanent Conditions was prepared in

2008 and was updated in 2016.

Systematic exploration at Blagodatnoye started in 2010 with detailed exploration and drilling

undertaken between 2011-2012 and again in 2016. No mining has taken place. The TEO of

Permanent Condition was submitted for approval in 2018.

2.2 Project Location

Both deposits are located in Nikolaevsky district of Khabarovsk Territory on the left bank of the

Amur River. The regional city centre of Nikolaevsk-on-Amur is 45 km from Blagodatnoye and

50 km from Belaya Gora. The deposits are located 39 kilometres apart and are connected by

a municipal road. The location of the assets is shown in the figure below. The Mnogovershinnoe

mine is located about 70 km from Belaya Gora and 100 km from Blagodatnoye.



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Figure 2-1: Belaya Gora and Blagodatnoye deposit location

2.3 Licence

JSC Mnogovershinnoe and LLC Belaya Gora are the part of Highland Gold Mining Ltd.

JSC Mnogovershinnoe owns licence HAB 02316 BR for development of Blagodatnoye

deposits. LLC Belaya Gora owns licence HAB 14987 BE and HAB 02316 BR for development

of the Belaya Gora.

The Belaya Gora license is valid until December 15, 2030 and the Blagodatnoye licence until

December 31, 2029. Both licences are for mining and assumes all construction of surface

Field road

Winter road

Belaya Gora deposit

Blagodatnoye deposit

GOK Mnogovershinnoye

Nikolaevsk-on-Amur airport

Sea and River ports and harbors

Gas-oil pipelines

Federal highways

Improved roads

High road

Dirt road

Power lines



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facilities and waste rock dump will be within the mining license boundaries which should be

determined based on the mine Proekt..

2.4 Mining history

Production at Belaya Gora deposit started in 2010 at a limited production rate with the ore

transported ~70km to the Mnogovershinnoe processing plant. In 2013 a processing plant was

constructed at Belaya Gora. In 2017 only 30% of total ore was mined from the pit the remaining

ore came from the low grade stockpile (Table 2-1). The mining rate peaked at 2.2 Mtpa of ore

in 2015 whilst the processing rate peaked at 1.7 Mtpa of ore in 2017.

Table 2-1: Belaya Gora mining and processing statistics

Year Ore Mined Ore Processed

ore, mln t au, g/t au metal, t ore, mln t au, g/t au metal, t

2010 0.001

2011 0.42 2.11 0.88 0.06 4.03 0.25

2012 0.28 1.63 0.45 0.05 2.83 0.14

2013 1.80 1.36 2.40 0.30 1.22 0.36

2014 1.10 1.43 1.50 1.20 1.58 1.90

2015 2.20 1.45 3.20 1.50 1.64 2.54

2016 1.56 1.23 1.91 1.64 1.21 2.00

2017 0.30 1.26 0.38 1.69 1.11 1.88

There is no mining history at Blagodatnoye deposit.

2.5 Geology and Mineral Resources

Historical Resource and Reserve Estimates

The official resource estimate for Belaya Gora deposit was performed in accordance with GKZ

(State Committee for Resources) methodology and approved in 2016. Resources with gold

grades greater than 0.3 g/t within the pit were classified as both On-Balance and Off-Balance.

Resources outside of the pit were classified as Off-Balance. Minimum mineralization thickness

was 5 m, maximum thickness of waste interlayers was 5 m. The approved resources amounted

to 12.1 Mt of ore with average grade of 1.89 g/t.

The previous Mineral Resource Estimate prepared in accordance with the JORC Code was

estimated by Micromine in 2010 at 14 Mt of ore with average grade of 2.2 g/t for the Stockwork

zone and 1.3 Mt at the average grade of 3 g/t for the Pologaya zone.

Additional drilling has been undertaken since these resource estimates were declared.

No On-Balance resources have been declared for the Blagodatnoye deposit to date, and this

report will declare the first JORC Mineral Resource estimates for the deposit.

Geology

Belaya Gora

The genesis of Belaya Gora mineralisation corresponds to the same name extrusion which is

developed east from the deposit. The mineralisation is hosted by volcanogenic and



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volcanoclastic rocks which been altered hydrothermally and transformed into secondary

quartzites.

Three mineralisation zones have been defined at the deposit: Stockwork, Pologaya and North-

East. The Pologaya zone has already been mined out.

Mineralization has a veinlet-disseminated, pocket character and is associated with quartz

veinlets and veins. Gold distribution is extremely irregular and enriched areas are sporadic and

unrelated to each other.

Grain size distribution analysis of technological samples showed that native gold in ores is

distributed non-uniformly, and is mainly represented by -0.25+0.74 mm size with individual

grains up to 0.8 mm.

The ore texture and structure are similar for all zones while Pologaya and North-East ores are

dominated by kaolinite and smectites due to more active hypergenesis processes

Blagodatnoye

The deposit is located in the monoclinically lying tuffs and tuff-sandstones situated in the

western exocontact zone of the Gyrmansky granitoid massif, which experienced low-intensity

but widespread hornfelsing.

Mineralization is represented by several joined ore bodies. The location of these bodies is

controlled by:

A series of sub-latitudinal tectonic structures, which often transfer into cleavage zones;

West-north-west faults which apparently feather the sub-longitudinal fault

Mineralisation is presented by stockworks. Veinlets that form these stockworks are mostly

smooth, from a millimetre to few centimetres thick. The amount of veinlet-ore material varies

from a trace to rarely more than five percent. The shape of bodies is close to isometric or is

elongated with sub-vertical dip. The vertical span of mineralization is 250-280 m. The gold of

the deposit is fine with 80% grains less than 0.071 mm.

Data Volume and Quality

A large quantity of data has been collected over many years of exploration at both Belaya Gora

and Blagodatnoye. The exploration data provided to SRK in electronic format included all drill-

holes drilled at Belaya Gora since 1980 (3362 exploration and grade control holes) and at

Blagodatnoye since 2011 (174 exploration holes). In total, the database contains information

on 108,945 sampling intervals for Belaya Gora and 32,426 intervals for Blagodatnoye. SRK has

checked the data and not found any material errors.

All laboratory samples were checked in accordance with industry standard requirements (OST-

41-08-272-04) and included internal and external control checks. SRK has checked the quality

control results and did not find any errors that could materially affect the Mineral Resource

estimate.

A program of geometallurgical mapping has been carried out at both deposits. The program

has included collection and analysis of the samples for hardness and ore recovery (gravity,

leach and total recovery).

Geological Modelling and Block Model Parameters



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Three-dimensional geological modelling was performed using LeapFrog software. The

wireframes were developed from a manual selection of intervals obtained from the pre-defined

requirements. SRK used a cut-off grade of 0.4 g/t to delineate the mineralization at Belaya Gora

(Error! Reference source not found.) and 0.3 g/t at Blagodatnoye (Error! Reference source

not found.). In defining the wireframes, SRK took into account a minimum mineralized

intersection thickness of 5 m and maximum waste interlayer thickness of 5 m.

3D plan

Section 1

Section 1

Section 2



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Section 2

Figure 2-2: Belaya Gora database visualisation and mineralisation wireframes

Section 1

Section 2



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3D view

Section 1

Section 2

Figure 2-3: Blagodatnoye database visualisation and mineralisation wireframes

Block models were developed separately for each deposit. Block size in the models was

10m (X) * 10m (Y) * 5m(Z).

Statistical and Geostatistical Analysis

Statistical analysis was performed in Isatis software. SRK used 2m sample composites for

Belaya Gora and 1m composites for Blagodatnoye in the statistical and geostatistical analysis

of skarn areas and in the interpolation of grades during block modelling.

Geostatistical analysis was performed on sample composites within mineralization boundaries

estimated for each element. The analysis was aimed at estimation of optimal parameters that

would be used in the consequent grade interpolation in the block model. The resulting grade

distribution data were analysed based on variogram maps of directional and omnidirectional

variograms.



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Grade Interpolation and Model Validation

Grade interpolation in the block model was performed using the ordinary kriging method with

search ellipses orientated along strike and separate search ellipses for each mineralization

zone. To populate all blocks in the model, interpolation was performed in several runs with

different search ellipse sizes using dynamic ellipse.

SRK has validated the resulting model using various methodologies: visual comparison against

plans and cross-sections, comparison of statistical parameters of the model against the initial

composites and development of validation plots.

The validation did not identify any consistent errors in the estimate and confirmed an acceptable

degree of data smoothing in the resulting model.

Recovery parameter interpolation into the model

Belaya Gora

For Belaya Gora SRK developed a grade recovery model based on the results of

geometallurgical mapping 2017 and core sample testing. Gold recoveries from gravity and

cyanide leach tests based on 13 metallurgical samples tests were used. In addition, the arsenic,

sulfur and ferrum content was also modelled.

The recovery parameters for gravity and total recovery were interpolated into the block model

based within three wireframes which were constructed by SRK based on the metallurgical

testing results: refractory ore zone, transitional and non-refractory.

Blagodatnoye

Based on the metallurgical sampling the ore recovery parameters were found to be quite similar

for all the samples collected at the deposit. Therefore, the same recovery was applied for the

whole deposit which did not require additional modelling.

Mineral Resource Estimation

To meet the requirement demonstrate potential economic viability, SRK developed an

optimized pit for each deposit based on the gold price of USD 1500/ounce to define the Mineral

Resources. The Mineral Resource estimate for open pit mining used a cut-off grade of 0.4 g/t



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for Belaya Gora and 0.5 g/t for Blagodatnoye (Figure 2-4 and

Blue-indicated, green - inferred

Figure 2-4: Belaya Gora block model classification and the resource pit




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Figure 2-5).


Figure 2-4: Belaya Gora block model classification and the resource pit


N

N



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Figure 2-5: Blagodatnoye block model classification and the resource pit

SRK classified the Mineral Resources based on exploration grid spacing, initial data quality,

reliability of mineralization boundaries for each deposit area, and results of statistical and

geostatistical characterization.

The Mineral Resource estimate for Belaya Gora is based on the open pit surface as of January

01, 2018. The Mineral Resource statement for Belaya Gora and Blagodatnoye deposits are

presented in Table 2-2 below.

Table 2-2: Mineral Resource Statement for Belaya Gora and Blagodatnoye deposits as of January 1, 20181.2.3

Category Ore Grade Gold

Mt g/t koz

Belaya Gora

Indicated 12.1 1.52 590

Inferred 0.15 2.2 11

Blagodatnoye

Indicated 19.2 1.25 776


Belaya Gora & Blagodatnoye

Indicated 31.3 1.40 1366


Note:

1. Mineral Resources are presented on assumption of 100% project ownership as of January 01, 2018. 2. The Mineral Resources are inclusive of Ore Reserves. 3. The Mineral Resource Estimation was conducted based on the cut-off grade of 0.4 g/t for Belaya Gora

deposit and 0.5 g/t for Blagodatnoye deposit within the optimized pit shells.

2.6 Geomechanics

Belaya Gora

SRK used the existing data presented in the Mine Design for Belaya Gora to estimate the

stability of open pit slopes and benches, which were designed based on the inputs such as

slope angles and berm parameters. SRK notes that although the studies at Belaya Gora are at

engineering level, the geotechnical data corresponds only to PFS level when compared to

international approaches. The stability assessment has shown that the designed slopes and

benches would be stable when using reasonable assumptions. SRK considers this approach

acceptable for the Pre-Feasibility Study, though recommends undertaking additional studies to

optimize the slopes and bench/berm parameters.

Blagodatnoye

SRK has completed the following geotechnical studies for Blagodatnoye deposit:

Existing geotechnical data review;

Additional geotechnical studies:

o collecting rock mass rating parameters from core photographs and geological logs;

o additional sampling for the missing types of laboratory testwork, preparing recommendations for the testwork;

Development of a lithological structural model for geotechnical assessment;



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Processing and analysis of geotechnical properties for lithological units and contacts;

Kinematic Stability Analysis;

Justification of bench / berm stability parameters by domains;

Verification of pit slopes stability;

Macro wedge stability analysis;

Stability verification for external dumps.

The stability analysis for open pit slopes and benches and for external waste dumps for

Blagodatnoye Project (Khabarovsk Region) has shown that the design of the final pit and two

external waste dumps proposed by SRK based on the mining study would be stable with certain

assumptions, which are acceptable for the Pre-Feasibility Study level.

2.7 Hydrogeology

Belaya Gora

SRK reviewed the hydrogeological data presented in the report titled “TEO of Permanent

Exploration Conditions and Estimation of Reserves at Belaya Gora deposit, 2016” and used

this information to develop a preliminary groundwater flow model for the deposit. SRK then

used this model to make an independent analysis of water inflows into the planned open pit,

assessed the water supply aspect of the operation and came to the following conclusions:

SRK does not foresee any risks to deposit development related to water inflows into the

design pit. According to preliminary SRK estimates, inflow of water at the end of the mine

life may amount to 11,700m3/day.

SRK believes that the operation should not expect significant influence of pore water

pressure (fracture pressure) on slope stability, due to potentially deep location of

groundwater levels in the wallrock.

SRK feels that there will not be any significant impact from interception of groundwater by

the open pit on surface water balance, as mining area is located in the vicinity of the

watershed.

Waste dump seepage water will mostly flow into the open pit, consequently, the impact on

the quality of surface and ground water will be minimal.

In order to obtain more reliable data, which meets Feasibility Study requirements, SRK

recommends drilling three additional hydrogeological wells within the deposit area and

performing a comprehensive set of hydrogeological tests. The resulting information would be

used to develop a more detailed assessment of groundwater flow using numerical modelling,

which takes account of geological and structural conditions at the deposit, to specify the water

inflow levels and to get a better understanding of the impact of mining on the flows and quality

of surface and ground, as well as on stability of open pit benches and slopes. SRK does not

expect the inflows to be material.

Blagodatnoye

SRK reviewed the information contained in the “Report on Hydrogeological Setting at

Blagodatnoye Deposit” and used it to create a preliminary groundwater flow model for

Blagodatnoye deposit.

Based on review outcomes, SRK concludes that hydrogeological conditions at the deposit will

not influence mining activities at Blagodatnoye for the following reasons:



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Estimates show that cumulative inflow of groundwater and surface runoff will amount to 730 m3/day (surface water inflow of 465m3/day, groundwater inflow of 265m3/day). SRK believes that no active dewatering actions will be required, and the pit can be drained with the help of in-pit dewatering system.

The impact of water on slope stability is mixed. Host rocks are generally competent, however, there are fault zones, where the material is highly fractured and underwent secondary alteration. Therefore the groundwater may reduce the stability near the fault zones and SRK recommends studying this in more detail at the next stage of studies

2.8 Mining and Ore Reserves

Mine Operations

The Belaya Gora and Blagodatnoye deposits are planned as open pit operations using the

conventional drill, blast, load and haul mining method.

The mine plan uses the current equipment at Belaya Gora: PC2000 excavator, PC750

excavator, EKG-5 electric shovel and CAT990 front-end loader with Belaz 7555B 55t trucks,

though a PC1250 will replace the PC750 and the EKG-5 in 2020/2021 and the CAT990 will not

be replaced. Belaya Gora trucks will haul ore directly to the crusher, while at Blagodatnoye the

plant feed will be stockpiled at the run-of mine (“RoM”) stockpile and then transported to the

Belaya Gora processing facility using on-highway trucks.

Pit Optimisation

SRK used the regularisation method to estimate ore loss and dilution. This was done using a

block size of 5 m x 5 m x 5 m. The average values within the engineered pit designs are 4.6%

loss and 2.6% at Belaya Gora and 14.8% loss and 1.1% dilution at Blagodatnoye.

Pit optimisation was undertaken using the regularised models and the following parameters:

Selling price: US$1,300/oz;

Royalty: 6%

General and administrative cost: US$3.74/t milled;

Mining cost: US$1.10/t mined (Belaya Gora) and US$1.40/t mined (Blagodatnoye);

Incremental mining cost: US$0.04/t/10m;

Processing cost: US$11.90/t milled (Belaya Gora) and US$14.56/t milled (Blagodatnoye);

Processing recovery: variable (Belaya Gora) and 90% (Blagodatnoye); and

Transportation cost at Blagodatnoye: US$6.87/t milled.

A cashflow analysis was undertaken to select the optimal shell to use as the basis for pit

designs, with the US$1,025/oz pit shell selected at Belaya Gora and the US$1,050/oz pit shell

selected at Blagodatnoye.

Mine Design

The mine designs were based on the Belaz 7555B trucks and the geotechnical slope

parameters. The pit inventory is shown in Table 2-3 and Table 2-4. High grade material will be

sent to the plant for processing, while low grade will be stockpiled separately to the waste.



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Table 2-3: Belaya Gora Pit Design Inventory

Parameter Unit Value

Total (Mt) 69.0

Waste (Mt) 56.9

High Grade (Mt) 9.9

(g/t Au) 1.45

(koz Au) 460

Low Grade (Mt) 2.2

(g/t Au) 0.50

(koz Au) 36

Strip Ratio (t:t) 6.0

Notes:

1. High Grade cut-off grade: variable depending on processing recovery (ranging from 0.44 to 2.05 g/t Au)

2. Low Grade cut-off grade: 0.40 g/t Au

Table 2-4: Blagodatnoye Pit Design Inventory

Parameter Unit Value

Total (Mt) 56.3

Waste (Mt) 41.4

High Grade (Mt) 10.2

(g/t Au) 1.43

(koz Au) 472

Low Grade (Mt) 4.6

(g/t Au) 0.61

(koz Au) 90

Strip Ratio (t:t) 4.5

Notes:

1. High Grade cut-off grade: 0.77 g/t Au

2. Low Grade cut-off-grade: 0.40 g/t Au

Mine schedule

A mill rate of 1.5 Mtpa is planned for Belaya Gora and 1.35 Mtpa for Blagodatnoye. Belaya

Gora will be mined first until completion, 7 years, followed by Blagodatnoye for approximately

8 years. The mine schedule is shown Table 2-5.

SRK Consulting Belaya Gora & Blagodatnoe Executive Summary

RU00557 - BG_BD_Executive Summary.docx

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Table 2-5: Annual Mine & Plant Feed Schedule

Units Total 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Belaya Gora Blagodatnoye

Total

Total (kt) 125,217 9,106 11,395 12,115 12,940 10,540 10,176 4,655 10,972 11,532 9,187 6,654 6,361 4,835 3,793 956

Waste (kt) 98,294 7,395 9,764 10,196 11,037 8,589 8,507 2,951 8,851 9,437 7,124 4,695 4,516 2,973 1,956 302

High Grade (kt) 20,100 1,365 1,261 1,500 1,500 1,500 1,500 1,473 1,350 1,350 1,350 1,350 1,350 1,350 1,350 551

(g/t Au) 1.44 1.43 1.28 1.25 1.33 1.43 1.71 1.66 1.47 1.38 1.41 1.33 1.45 1.54 1.39 1.64

(koz Au) 932 63 52 60 64 69 82 79 64 60 61 58 63 67 60 29

Low Grade (t) 6,823 346 370 419 402 452 169 231 771 744 713 609 496 512 487 103

(g/t Au) 0.57 0.53 0.48 0.54 0.49 0.50 0.41 0.56 0.61 0.60 0.60 0.61 0.61 0.60 0.62 0.63

(koz Au) 125 6 6 7 6 7 2 4 15 14 14 12 10 10 10 2

Strip Ratio (t:t) 5.2 5.7 8.0 7.1 7.6 6.0 5.8 2.2 7.1 7.5 5.8 3.9 3.7 2.6 1.8 0.7

Plant Feed

Total (t) 20,100 1,365 1,261 1,500 1,500 1,500 1,500 1,473 1,350 1,350 1,350 1,350 1,350 1,350 1,350 551

(g/t Au) 1.44 1.43 1.28 1.25 1.33 1.43 1.71 1.66 1.47 1.38 1.41 1.33 1.45 1.54 1.39 1.64

(koz Au) 932 63 52 60 64 69 82 79 64 60 61 58 63 67 60 29

Recovery (%) 88 67 88 86 87 88 91 93 90 90 90 90 90 90 90 90

Recovered (koz Au) 820 42 46 52 56 61 75 73 58 54 55 52 57 60 54 26



of 34

Equipment & Labour Requirements

The equipment and labour requirements were developed based on a first principles approach and

using the current equipment at Belaya Gora. The maximum equipment requirements are shown in

Table 2-6. The PC750 & EKG5 be replaced in 2020 and 2021 accordingly. Table 2-6: Maximum

Equipment Requirements

Equipment Make Model Description Maximum

PC2000 Komatsu PC 2000BH 12 m3 excavator 2

PC1250 Komatsu PC 1250 6 m3 excavator 2

PC750 Komatsu PC 750 4 m3 excavator 1

EKG-5 IZ-KARTEX PC2000LS-8 5 m3 electric shovel 1

CAT990 Caterpillar 990H 8.5 m3 front end loader 1

RoM Loader CAT 966 4 m3 front-end loader 1

Haul Truck Belaz 7555B 55 t haul truck 20

Drill (SBSH 250) SBSH 250 Electric drill 250 mm 2

Drill (D65) Atlas Copco FlexiRoc D65 Drill 110 mm - 203 mm 3

Drill (D55) Atlas Copco FlexiRoc D55 Drill 90 mm - 152 mm 2

Drill (L8) Atlas Copco ROC L8 Drill 110 mm - 203 mm 1

Medium Dozer Komatsu D155AX Track dozer 354 hp 1

Small Dozer (180hp)

CAT D6 Track dozer 180 hp 1

Large Dozer (405hp)

CAT D9 Track dozer 405 hp 2

Snow Plow Kirovets K-700 1

Plant FEL 988H CAT 988H Plant front end loader 1

Plant FEL 988F CAT 988F Plant front end loader 1

Plant FEL 980H CAT 980H Plant front end loader 1

Primary Grader Komatsu GD825-A Motor grader 280 hp 1

Secondary Grader Komatsu GD705A-4 Motor grader 250 hp 1

Tertiary Grader Terex DZ-98 Motor grader 230hp 1

Water Truck 1

Service Truck 1

Fuel Truck 2

Explosives Truck 1

Truck with Crane 1

Lighting Plant 8

Light Vehicle 4

Crew Bus 2

Fire Truck 1

The maximum labour requirements for each area are: mine operations 190, mine maintenance 39,

and technical services 13.



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Capital & Operating Costs

A mining cost model has been developed from first principles to determine the mining capital and

operating expenditures based on an owner-operation. The capital cost estimate has been completed

to a PFS level. The cost estimate is in US$ and has been developed by SRK based on quotes obtained

from local manufacturers and suppliers, SRK’s internal cost database and the 2016-2017 Infomine

cost database1. An exchange rate of 60 RUB: US$ has been used for the cost estimate.

Capital costs are 4.4 US$m in year 1 (2018) and total 49.1 US$m over the life of the project. The

average life of mine operating costs are 1.23 US$/t mined and the breakdown is shown in Table 2-7.

Table 2-7: Unit Operating Cost

Component Units Unit Cost

Operating Costs (US$/t) 1.23

Labour (US$/t) 0.17

Maintenance (US$/t) 0.24

Fuel (US$/t) 0.51

Power (US$/t) 0.01

Lubricants (US$/t) 0.06

Tires (US$/t) 0.07

Wear Parts (US$/t) 0.04

Explosives (US$/t) 0.13

Activity Units Unit Cost

Operating Costs (US$/t) 1.23

Mine Staff (US$/t) 0.01

Loading (US$/t) 0.18

Hauling (US$/t) 0.50

Drilling (US$/t) 0.14

Ancillary (US$/t) 0.26

Blasting (US$/t) 0.15

Risks & Opportunities

The following risks were identified as part of the PFS:

No pre-splitting has been assumed for either deposit. There is a minor risk that should the face

angles on the final be difficult to achieve, that additional drill and blast measures may be required,

which will lead to additional drill and blast costs; and

The rock at Blagodatnoye is considered very hard, and lower than average penetration rates have

been assumed for the PFS; however, should these need to be decreased further, additional drilling

costs will be required.

The following opportunities were identified as part of the PFS:

The Blagodatnoye pit is mined in one stage bench by bench. There is an opportunity to delay

some waste stripping by dividing the pit into two stages; and

The mill feed in year 2 could be increased up to the target of 1.5 Mtpa if additional load and haul

equipment is made available in year 1.

1 Infomine, 2016-2017. Equipment Cost Calculator. [online] Available at: <http://costs.infomine.com/> [Accessed February,

2017].



of 34

2.9 Ore Processing

Introduction

The development of the process flowsheet for treatment and recovery of gold from Blagodatnoye and

Belaya Gora ores has been undertaken by a number of companies. MPH Minerals Consultancy (MPH)

has acted for the client for testwork definition, supervision and interpretation and for process plant

development. The project design documentation was developed by the TOMS Institute LLC (“TOMS”)

according to the Russia regulations for approval by the appropriate Russian authorities and this

documentation has been used and adapted to prepare the PreFeasibility study (PFS) sections. The

following companies are responsible for the following work streams:

Metallurgical testwork and reporting - TOMS;

Metallurgical supervision and interpretation - MPH;

Geometallurgical study - TOMS;

Flowsheet development - TOMS and MPH;

Sample selection - SRK and MPH;

PFS reporting (metallurgy and process) - MPH;

PFS collation and editing - SRK

Where appropriate, sub-contractors responsible for sub-streams of major work streams are identified

in the full PFS report.

Test-work

The test-work program for each deposit included collecting samples for the following studies for both

Belaya Gora and Blagodatnoye:

Metallurgical test-work – a bulk composite sample

Hardness testing – 19/20 samples

Variability tests:

Diagnostic leach – 32/16 samples

Gravity and bottle roll testing – 32/16 samples

E-GRG – 5/4 samples

The hardness tests and hardness modelling has shown that the hardness of the Belaya Gora ore

significantly increases with depth and this has been factored into the future tonnage projections which

is why these are lower than the existing operation.

The hardness tests for Blagodatnoye has shown that the ore of the deposit is very hard comparing to

Belaya Gora. As a direct consequence, Blagodatnoye ore requires the addition of the three-stage

crushing circuit to crush the ore to 10mm in conjunction with conversion of the existing SAG mill to a

Grate Discharge ball-mill in order to sustain the production volume at 1.35 million t/y.

The variability tests have shown the existence of refractory zones at Belaya Gora based on both gravity

and bottle roll tests. For Blagodatnoye the variability test has confirmed that the ore type and therefore

recovery parameters do not vary significantly with depth or location.



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Processing

The optimum processing option for the processing of Blagodatnoye and Belaya Gora ores is to utilise

the existing Belaya Gora plant and infrastructure as much as is practically possible to avoid duplication

of processing capital expenditure at Blagodatnoye unnecessarily.

The existing process plant at Belaya Gora will be modified to process ores from both Belaya Gora and

Blagodatnoye to recover gold by grinding, gravity concentration, cyanide leaching and carbon

adsorption, elution, electrowinning and smelting.

The proposed flowsheet includes crushing, two-stage grinding, gravity concentration of the combined

mill discharge to produce a gravity concentrate which will be treated in an intensive cyanidation leach

reactor to produce a gold rich solution that is further processed by electrowinning and smelting. Gravity

circuit tailings are classified by hydrocyclone with the underflow recycled to the second ball mill and

the cyclone overflow at 80% passing 75 microns passing to a leach feed thickener. Thickened

underflow at 50% solids by mass will be pumped to the 5-stage cyanide leach circuit and gold will be

recovered from the pulp in a 7-stage Kemix Pump Cell (“carousel”) carbon-in-pulp (CIP) gold

adsorption unit. Gold will be extracted from the CIP loaded carbon by a 5 tonne Zadra elution circuit

and gold recovered by electrowinning followed by smelting in the gold room to produce a high grade

doré gold bar. CIP tailings will be treated to remove cyanide by a hypochlorite system prior to discharge

to a tailings dam.

Blending of Blagodatnoye ore with Belaya Gora ore is technically feasible, but was discounted as the

Belaya Gora ore is more economically attractive. Further developmental studies are also required at

Blagodatnoye to bring it to a Feasibility level of study.

For Belaya Gora ore the existing crusher and SAG mill will be used. For Blagodatnoye ore, the Belaya

Gora SAG mill will be converted to a grate discharge ball mill and a new, 3-stage crushing circuit will

be commissioned to produce a -10mm product that will be trucked to the Belaya Gora plant.

The optimum flowsheet proposed by TOMS and MPH is to re-utilise the existing grinding and gravity

circuits together with the existing Outotec 38m diameter thickener, all upgraded to deal with the

additional throughput. The major new equipment that will be required is five new 1,100m3 leach tanks

located outside on a concrete slab, construction of a new building to house the new 7-stage Kemix

CIP circuit for adsorption of gold onto carbon together with a 5 tonne/day elution and carbon

regeneration plant. The utilisation of the existing building has been considered but was not pursued

as the loss in gold revenue due to closure of the existing secondary gravity CIL circuit whilst retrofitting

the plant outweighs the estimated cost of the new building and the incremental operating costs.

The estimated cost of all necessary capital works associated with the improvement in gold recovery at

Belaya Gora is US$11.8 million. This excludes any tailings dam capital costs.

Grinding studies conducted on variability samples, specifically selected to identify the effect of depth,

lithology and %quartz, have shown that the existing crushing and SAG mill – ball mill circuits are fit for

purpose provided that the SAG mill critical size is returned to the SAG mill and not directed to the ball

mill as is currently the case. The installation of a new bucket elevator is included in the capital costs to

correct this sub-optimal flowsheet configuration. The study shows that the hardness of the Belaya Gora

ore increases with depth and the hydromicas or sticky clay material, reduce with depth in the main

zone increasing the competence of the ore though the hydromicas increase in the North-East zone.

As a consequence, an average throughput rate of 1.5 million tonnes/annum is proposed for the

remaining life of Belaya Gora and the circuit design is based upon this figure. If necessary, the existing

Jaw Crusher already installed at Belaya Gora can be used to assist with crushing the ore as it becomes



of 34

harder in order to maintain the planned production rate.

The Blagodatnoye ore is basaltic and consequently was found to be extremely hard. The existing

crushing and grinding configuration proposed above for Belaya Gora would constrain the tonnage of

Belaya Gora to around 800,000 to 850,000 tonnes/annum and this has a detrimental effect on the

project NPV. As a consequence, more intense blasting will be used in the Blagodatnoye pit followed

by crushing to 10mm prior to milling at Belaya Gora. The finer feed will necessitate conversion of the

SAG mill at Belaya Gora in to a ball mill allowing it to operate at an increased ball loading and power

draw making better utilisation of the installed mill motor power. Using this more intense blast, crush

and ball milling circuit, the annual throughput is estimated to increase from 850,000 to 1.35 million

tonnes/annum. This has a significant beneficial effect on NPV for Blagodatnoye.

A 3-stage crushing circuit is proposed for construction at Blagodatnoye at an estimated capital cost of

US$5.45 million in readiness for processing Blagodatnoye ore in 2024. High Pressure Grinding Rolls

“HPGR” is another potential solution but this option was rejected at this stage due to the lack of the

necessary testing required to prove its viability. It is proposed that this is tested as part of the feasibility

study. The crushing circuit has been strategically located at Blagodatnoye to reduce the incremental

power impact on the overall power infrastructure at Belaya Gora which is already constrained and

needed to for the proposed Belaya Gora leach-CIP circuit. It will also assist the loading and wear and

tear on trucks.

Based on 1.5 million tonnes/annum for Belaya Gora and 1.35 million tonnes/annum for Blagodatnoye,

the estimated average LOM operating costs are US$13.15/tonne for Belaya Gora and US$15.48/tonne

for Blagodatnoye. The operating costs have been developed mainly based upon known costs provided

by HGML in conjunction with new known reagent and grinding steel/liner costs that have been

developed as part of the metallurgical test-work study. The higher unit power usage for Belaya Gora

ore as it becomes harder with depth and the subsequently treatment of the much harder Blagodatnoye

ore has been taken into account. Further testing of the abrasion index to identify the likely changes in

Belaya Gora steel and steel liner consumptions are proposed as part of the feasibility level study. The

cyanide and hypochlorite reagents costs are one of the biggest opex costs and are based upon

leaching at 40% solids. It is proposed that in practice a leaching pulp density of 50% solids is used as

this should have a beneficial effect on reagent usage and reduce operating costs.

The gold recovery used for Belaya Gora, is initially around 73%, based upon existing operating

statistical relationship between gold recovery and plant feed grade. The gold recovery thereafter is

based upon block model outputs based upon the Geometallurgical study that was performed following

the discovery of a refractory gold (1- 5 micron gold particles encapsulated mainly in pyrite and often

also with quartz) anomaly within the main Belaya Gora pit. This anomaly has had to be further drilled

and studies to provide greater understanding of its extent and in doing so, a relationship was developed

between %S, %As and %Fe in sulphide form in the ore and gold recovery. As a consequence, these

three assays have proven to be a reliable chemical proxy for identifying problematic areas within the

main pit and this technique is also being utilised successfully in the North East Extension ore body.

This technique should be further developed in line with development of both main pit and North East

Extension ore bodies. The current financial model gold recoveries range between 86% and 91%

depending upon how much of the refractory or partially refractory zones are being mined.

The gold recovery for Blagodatnoye used in the financial modelling was fixed at 90% over the life of

mine.

2.10 Tailings Storage Facility

SRK has reviewed the PFS design by Mekhanobr (2011, 2012 and 2017 editions of TSF design),



of 34

updated and commented on this design of Tailings Storage Facility in accordance with the international

PFS requirements.

Mekhanobr’s previous designs including the latest 2017 update were amended to meet the PFS level

for the international pre-feasibility study with a condition that some additional geotechnical data needs

to be collected using international laboratory and field testing protocols to be fully compliant with

international study standards.

Due to some deficiency in geotechnical data, SRK is of the opinion that the base option proposed by

Mekhanobr for PFS should be supplemented by additional options in future studies in case further

geotechnical investigations prove that some buttressing of existing and future slopes is required. As

a result, SRK recommends three options should be considered:

Option 1: Raise the existing TSF using the upstream method up to elevation 105 m;

Options 2a and 2b: Raise the existing TSF using the upstream method up to elevation 99 m and small (volume of 0.15 Mm3) or large (volume of 2.88 Mm3) waste rock buttress;

Option 3: Construction of new TSF downstream of the existing TSF. This option was not studied in detail.

Considering the cost impact, Option 2b with the large buttress, has been chosen as a base option for

PFS. The optimization of this option in the future may reduce the cost of the construction of the buttress

and the tailings disposal.

2.11 Infrastructure

Belaya Gora

Belaya Gora is an active gold mine with processing facilities on site. All infrastructure facilities are

currently in place. No additional capital expenditures on infrastructure are expected in future. The

layout (Figure 2-6) shows:

Final position of the pit,

Existing waste dump

Proposed waste dump(s)

Low grade stockpile

Tailings storage facility

Raw water supply intake

Power supply connection point

Future site roads

Plant and infrastructure area.



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Figure 2-6: Belaya Gora layout

Operating costs were estimated based on actual annual costs. Infrastructure support costs form a part

of G&A costs.



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Blagodatnoye

From a site infrastructure and utilities perspective, the project development is relatively modest and

will rely on the existing infrastructure at Belaya Gora. The project is located in close proximity to

existing power supply infrastructure and national roads for access to both Belaya Gora and the regional

town of Nikolaevsk. The main issues are surface water management, development of on-site roads,

and development of the RoM haulage road to access the regional roads, as well as the locality driven

challenges of temperature and snowfall, which are accounted for in the design. A study of RoM haul

road alignments has been completed to assess various options and a preferred option selected.

The collection of base geotechnical survey data would have assisted in the Pre-Feasibility design and

should be undertaken at the next stage of study.

SRK considers that the estimated capital and operating costs for site infrastructure and RoM haulage

to be reasonable.

The proposed Blagodatnoye site layout is provided at Figure 2-6.



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Figure 2-7: Blagodatnoye layout



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2.12 Environmental and social aspects

An assessment of environmental and social aspects was carried out based on information provided

and with consideration of some additional data obtained from public sources. Key risks that were

identified at the current stage of the project include stakeholder engagement, noncompliance with

environmental and social considerations required for international financing, as well as risks

associated with transportation of materials and reagents. An action plan aimed at assessment and

management of risks was developed for the Feasibility Study stage of the project.

2.13 Project Economic Analysis

All capital and operational cost estimates were current as of 2017 Q4. Operational costs for mining

were estimated on the basis of cost model prepared by SRK. Operational costs of processing were

estimated by direct accounting of the quantity and cost of reagents, payroll, cost of electric power, etc.

These costs were provided partially in US dollars and partially in Russian roubles and converted into

US dollars at the exchange rate of 60 roubles per dollar.

Various categories of capital costs were estimated at different times by the Clients based on the actual

operational data and by contracted organizations: CJSC Mekhanobr Engineering, TOMS Engineering

and ZabaikalZolotoProekt and were later checked by SRK.

At the stable production level the life of mine with account of opencast operations will be 7 years for

Belaya Gora and 8 years for Blagodatnoye.

SRK used long-term real sales price of gold based on consensus projections agreed with the Client,

in the amount of 1250 USD per ounce for the period 2019-2032 and 1200 USD per ounce for 2018

based on the Company’s budget program. SRK considers this value to be acceptable for use in the

long-term.

Capital costs used in technical-economic model were obtained from different sources, from the Client,

and from Mekhanobr Engineering, TOMS Engineering and ZabaikalZolotoProekt, with the major costs

verified by SRK. Contingency costs in the amount of 10% of total capital costs were added.

The main capital costs are spent during the first two years of project realization, namely:

$32 M (excluding VAT) during the first 2 years of which the major part is spent on reconstruction of processing facilities ($11.8 M) and mining facilities ($7.4 M);

$21.7 M (excluding VAT) in 2023 for the closure of Belaya Gora mine, the purchase of an additional crushing circuit at Blagodatnoye, road construction and equipment replacement.

Operational costs include the cost of waste stripping, ore production, transportation of ore to the

processing plant, ore processing, transportation of doré bullion to the refinery, refining, general and

administrative costs and product-related taxes.

Operational costs for mining were estimated by SRK. The costs for other activities were estimated by

the relevant engineers and checked by SRK, namely: TOMS Engineering for processing, Mekhanobr

Engineering for tailings, ZabaikalZolotoProekt for ore transportation and infrastructure for

Blagodatnoye. The G&A costs are based on the current mining statistics for Belaya Gora. The G&A

costs are assumed to be constant for Belaya Gora and Blagodatnoye up to the end of production.

According to the decision of the JSC Mnogovershinnoe, the transportation of the ore will be performed

by sub-contractors. The annual operating costs split by major activity is given in Figure 2-8.



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Figure 2-8: Operational costs during mine life by main categories

Economic assessment

Technical-economic estimates were done for the entire period of reserves extraction by opencast

method. The model is a real terms model with no allowance for inflation. The economic analysis is

based on annual periods, in USD, includes all taxes and excludes financing costs. A discount rate of

10% real was provided by the Client, which is consistent with other international investment projects.

Table 2-8 provides the information on the annual revenue, capital and operating cost, and net cashflow

for the combined mining of Belaya Gora and Blagodatnoye deposits.

Table 2-9 shows NPV of the project at different discounting rates. Figure 2-9 and Figure 2-10 show

annual and cumulative cash flow of the project during the mine life, respectively.

SRK notes that the project is economically very robust as it is in effect the restart of an established

mine with relatively low capital investment required to correct the process flowsheet.

0

500 000

1 000 000

1 500 000

2 000 000

-

10.00

20.00

30.00

40.00

50.00

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

ton

nes

mln

USD

Operational cost

Mining Processing Ore transportation to plant

Infrastructure costs G&A Refinery

Ore



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Table 2-8: Belaya Gora and Blagodatnoye cashflow model

Items Total 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Revenue

Saleable product (oz Au) 814 234 46 121 37 600 51 842 55 480 60 576 74 953 72 786 57 442 53 899 55 000 51 991 56 575 59 879 53 957 26 133

Gold Price ($) 1 247 1 200 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250 1 250

Revenue (mln. $) 1 015.5 55 47 65 69 76 94 91 72 67 69 65 71 75 67 33

Operational costs

Mining (mln. $) 154.06 10.98 13.32 14.63 15.76 13.67 12.88 7.94 10.73 10.87 9.76 8.26 8.23 7.47 6.85 2.71

Processing (mln. $) 280.97 14.20 13.11 19.73 19.73 19.72 19.72 19.95 20.90 20.90 20.90 20.90 20.90 20.90 20.90 8.53

Ore transportation to plant (mln. $) 40.99 0.99 5.40 5.40 5.40 5.40 5.40 5.40 5.40 2.20

Tailings (mln. $) 14.53 0.6 2.0 1.7 2.1 1.2 0.5 1.2 0.4 1.4 0.2 1.4 0.2 1.4 0.2 0.2

Infrastructure costs (mln. $) 4.46 0.18 0.59 0.59 0.59 0.59 0.59 0.59 0.59 0.15

G&A (mln. $) 87.90 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 2.49

Refinery (mln. $) 1.52 0.08 0.07 0.10 0.10 0.11 0.14 0.14 0.11 0.10 0.10 0.10 0.11 0.11 0.10 0.05

Property tax (mln. $) 6.38 0.26 0.49 0.51 0.46 0.51 0.76 0.63 0.52 0.47 0.44 0.35 0.34 0.28 0.22 0.14

Royalty (mln. $) 60.93 3.32 2.82 3.89 4.16 4.54 5.62 5.46 4.31 4.04 4.12 3.90 4.24 4.49 4.05 1.96

Other taxes (mln. $) 1.50 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10

Total operation costs (mln. $) 653.25 35.7 38.0 46.7 48.5 46.0 45.9 42.6 49.2 49.9 47.7 47.1 46.2 46.8 44.5 18.5

Capital costs

Equipment Capital (mln. $) 14.90 1.02 4.61 2.30 3.60 - 0.39 0.99 0.65 - 1.34 - - - - -

Equipment Replacements (mln. $) 34.19 3.40 4.03 4.69 1.33 7.08 1.65 0.47 0.84 2.76 1.43 - 4.20 1.32 0.99 -

Road (mln. $) 3.14 3.1

Auxiliary infrastructure (mln. $) 4.33 4.3

Plant (mln. $) 17.15 5.9 5.9 5.5

FS report preparation (mln. $) 6.60 3.3 3.3

Closure cost (mln. $) 10.51 4.7 5.81

Miscellaneous (mln. $) 1.00 0.8 - - - - 0.1 - - - - - 0.1 - - -

Contingency - 10% (mln. $) 9.18 1.4 1.4 0.7 0.5 1.0 2.0 0.1 0.1 0.3 0.3 - 0.4 0.1 0.1 0.6

Total capital costs (mln. $) 101.00 15.8 15.9 7.7 5.4 11.4 21.7 1.6 1.6 3.0 3.0 - 4.8 1.5 1.1 6.4

Profit and depreciation

EBITDA (mln. $) 362.24 19.7 9.0 18.1 20.9 29.7 47.8 48.3 22.6 17.5 21.0 17.9 24.5 28.0 22.9 14.1

Depreciation (mln. $) 75.20 1.1 3.3 5.6 7.2 7.9 7.6 6.5 6.5 5.4 4.2 3.8 4.5 4.2 3.7 3.7

EBIT (mln. $) 287.04 18.6 5.8 12.5 13.6 21.8 40.2 41.9 16.2 12.1 16.8 14.1 20.0 23.9 19.2 10.4

Cumulative EBIT (mln. $) 1 437.08 18.6 5.8 12.5 13.6 21.8 40.2 82.1 98.3 110.3 127.2 141.3 161.2 185.1 204.3 214.7

Profit tax rate % 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

Profit tax (mln. $) 57.41 3.7 1.2 2.5 2.7 4.4 8.0 8.4 3.2 2.4 3.4 2.8 4.0 4.8 3.8 2.1

Net profit (mln. $) 229.64 14.9 4.6 10.0 10.9 17.5 32.2 33.5 12.9 9.7 13.5 11.3 16.0 19.1 15.4 8.3

Free Cash flow

Revenue (mln. $) 1 015.49 55.3 47.0 64.8 69.4 75.7 93.7 91.0 71.8 67.4 68.7 65.0 70.7 74.8 67.4 32.7

Operational cost (mln. $) 653.25 35.7 38.0 46.7 48.5 46.0 45.9 42.6 49.2 49.9 47.7 47.1 46.2 46.8 44.5 18.5

Profit tax (mln. $) 57.41 3.7 1.2 2.5 2.7 4.4 8.0 8.4 3.2 2.4 3.4 2.8 4.0 4.8 3.8 2.1

Capital expenditures (mln. $) 101.00 15.8 15.9 7.7 5.4 11.4 21.7 1.6 1.6 3.0 3.0 0.0 4.8 1.5 1.1 6.4

Total FCF (mln. $) 203.83 0.2 -8.1 7.9 12.7 14.0 18.0 38.4 17.8 12.0 14.6 15.1 15.7 21.8 18.0 5.7

Financials

FCF (Free Cash Flow) (mln. $) 203.83 0.21 -8.06 7.91 12.74 13.96 18.04 38.37 17.76 12.00 14.62 15.10 15.74 21.81 17.99 5.65

FCF (Free Cash Flow) Cumulative (mln. $) - 0.21 -7.85 0.05 12.79 26.75 44.79 83.16 100.92 112.92 127.54 142.64 158.38 180.19 198.18 203.83

Discounting rate % 10% 1.00 0.91 0.83 0.75 0.68 0.62 0.56 0.51 0.47 0.42 0.39 0.35 0.32 0.29 0.26

FCF (Free Cash Flow) Discounted (mln. $) 97.28 0.21 -7.33 6.54 9.57 9.54 11.20 21.66 9.11 5.60 6.20 5.82 5.52 6.95 5.21 1.49

FCF (Free Cash Flow) Cumulative (mln. $) - 0.21 -7.12 -0.58 8.98 18.52 29.72 51.38 60.49 66.09 72.29 78.11 83.63 90.58 95.79 97.28

NPV (mln. $) 97.3

IRR % 142%



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Table 2-9: NPV of the project at different discounting rates (after taxes)

Discounting rate NPV (MUSD)

6% 121.1

8% 103.2

10% (base scenario) 97.3

12% 76.2

15% 66.0

Figure 2-9: Net annual cash flow of the project during mine life

Figure 2-10: Cumulative net cash flow of the project

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

- 10.00

- 5.00

0.00

5.00

10.00

15.00

20.00

25.00

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

g/t

mln

USD

Net Annual cash flow an gold grade

FCF (Free Cash Flow) Discounted Au grade

- 20.00

0.00

20.00

40.00

60.00

80.00

100.00

120.00

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

mln

$

Total Net Cashflow

FCF (Free Cash Flow) Discounted FCF (Free Cash Flow) Cumulative



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2.14 Ore Reserve Statement

The Ore Reserves were estimated within the designed pit for each deposit based on a combined

production schedule and taking into account discrete modifying factors for each deposit. The Ore

Reserves for the Belaya Gora and Blagodatnoye deposits have been reported using the guidelines of

the JORC Code 2012. The Ore Reserve statement for the Belaya Gora and Blagodatnoye deposits is

presented in Table 2-10.

Table 2-10: Ore Reserve Statement for Belaya Gora and Blagodatnoye, Effective 1 January 2018

Quantity Au Grade Au Contained

Category (Mt) (g/t) (koz)

Belaya Gora 9.9 1.45 460

Proven - - -

Probable 9.9 1.45 460

Blagodatnoye 10.2 1.43 472

Proven - - -

Probable 10.2 1.43 472

Total Proven & Probable 20.1 1.44 932

Notes:

1. Ore Reserves are included in the Mineral Resource Estimate dated 1 Jan. 2018.

2. Ore Reserves are reported at a variable cut-off grade for Belaya Gora (between 0.4 and 2.05 g/t Au) and

0.77g/t Au for Blagodatnoye within an engineered pit design.

3. Includes ore loss and dilution as reported from a regularised block model at 5 m x 5 m x 5 m, which has an

average ore loss and dilution of 4.6% and 2.6% at Belaya Gora and 14.8% loss and 1.1% dilution at

Blagodatnoye.

executive summary prefeasibility study for belaya gora and ... · executive summary prefeasibility...

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