Strategy

A series of successful drilling programmes during the 2009-10 year resulted in the discovery and delineation of the high grade Pearse gold deposit, located less than 1 kilometre from KBL Mining’s Mineral Hill processing plant and within the current mining leases.  The first Proven & Probable Ore Reserve for the Pearse Project open cut mine were completed in September 2010 and estimated at 235,240 tonnes @ 6.92 g/t gold and 71.7 g/t silver at depths of less than 100 metres from surface providing additional impetus for the reactivation of the Mineral Hill plant. The environmental approval process for the Pearse open cut mine was commenced in February 2011.

During the 2011 financial year additional diamond drilling was undertaken at the Parkers Hill underground mine, which confirmed the quality of the ore body to produce a copper concentrate, additional upside along strike and below the ore body and generated an initial mining Reserve of 836,600 tonnes in June 2011.Ore Reserves are upgraded with mine development.

The Resource definition at Pearse and Parkers Hill enabled the economic commencement of refurbishment of the nominal 200,000 tonnes per annum Mineral Hill plant in August 2010. Completion of the refurbishment was set for mid-2011. During the refurbishment program, plant upgrades were identified and installed, raising the plant capacity to 250,000tonnes per annum. Importantly, former key Mineral Hill employees enabled identified additional opportunities to further improve the plant based on their experience before the plant was shut down in 2005.

The refurbishment and upgrade program was completed in June 2011, within the stated time period, and commissioning commenced for full production in the September 2011 quarter.

Concurrent with work on the plant, a decision was made to move ahead with the rehabilitation of the fully permitted Parkers Hill underground mine. Earlier plans had been based on a sequential development with Pearse gold-silver ore being treated first, over a period of approximately 18 months, followed by treatment of the high grade parts of the Parkers Hill deposit.  However, a reassessment of the Parkers Hill resource, subsequent development of a mining plan for that deposit (for which underground access on three levels had previously been developed), and Pearse approval delays demonstrated that Parkers Hill ore could be available for treatment prior to Pearse ore.

Mining contractor, Pybar, was mobilised to the site in December 2010. Rehabilitation of Parkers Hill included the reinstallation of ventilation, power and other services together with dewatering and ground support. By June 2011, underground development was on track for extraction of high grade copper ore from July 2011.

During the year, priority mineralisation targets were established to extend resources at Mineral Hill mine and to commence exploration at the nearby Iron Duke prospect to enable the production of copper concentrate and gold and silver dore production beyond Parkers Hill and Pearse.

In September 2011 KBL Mining released a resource for the high grade Eastern-Southern Ore Zone, which is an area adjoining the access decline from the Eastern Ore Zone to the Southern Ore Zone. The Eastern-Southern Ore Zone has the potential to increase gold credits in copper concentrate production, with a forecast 50:50 blend with Parkers Hill ore that will add 10,000oz of gold credits. Dewatering the access to the Southern Ore Zone and rehabilitation of the development to and within the Southern Ore Zone will enable mining operations to commence at both these zones during the 2013 calendar year.

Mining of the Pearse open cut is expected to occur from mid-2013.

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Mineral Hill Processing Plant