Company Profile

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• The Company owns the Adelong Gold Project (see Figure 1) containing a gold resource estimate defined in accordance with the JORC Code, an existing adit that accesses high grade underground gold ore, an ore crushing plant and a gold recovery mill (Plant).
• The Company owns freehold land and Crown lease title over the area where the Plant is located and initial mining and treatment is taking place.
• The Company has been issued with all necessary approvals to commence mining operations, including a Mining Lease (ML 1435 – see Figure 2 and 3), Development Consent, Native Title Agreement, Environmental Protection Licence, Water Licence and Mine Operations Plan.
• The Company has utilised the significant knowledge and expertise of its Directors and senior management to develop a Mine development plan and to oversee the construction of the Plant to date.
• The Plant employs a simple gold recovery system and will be commissioned by processing gold bearing mullock that was produced from historic gold mining. Once completed, the Company will have the necessary approvals to process ore produced from its mining operations.
• Once the Plant is commissioned, underground mine operations will commence on the Challenger Deposit in order to produce underground ore with higher gold content. The Company intends to expand the Plant production capacity as ore volume increases however, at today, the Company does not have reasonable grounds to establish whether or not that will be achieved.
• Appraisal work will be conducted on the nearby Currajong, Victoria, Donkey Hill, Gibraltar and Saw Pit gold deposits with the aim of bringing them into gold production.
• International Base Metals Limited has joined the Company as a major shareholder with a $10 million cash investment (which was originally structured as a Convertible Note and converted in July 2016). Accordingly, the Company is well funded for its planned operations in the short to medium term.
• The Company is raising additional funds of $3.6 million for working capital, and to increase the number of its Shareholders to meet ASX’s requirements for admitting the Company to the Official List.

This capital raising of $3.6 million combined with the existing funds of approximately $10 million will provide sufficient capital to:
• develop the Mine;
• expand the capacity of the Plant, subject to obtaining necessary approvals;
• fund operations towards commercial production;
• complete a two year appraisal drilling programme to increase gold resource estimates aiming to develop new mining centres close to the Plant; and
• repay shareholder loans and interest that funded the Plant construction.

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The Mine can be developed at a relatively low cost given:
• the availability of extensive gold bearing mullock dumps of partially crushed rock for immediate treatment;
• existing gold resource estimates (that have been defined under the JORC Code) derived from high density drilling on the Challenger Deposit; and
• the gold bearing ore requires an uncomplicated gold recovery system which has now been constructed in the form of the Plant, planned to be commissioned in mid September 2016.

The Company aims to be able to commence ore treatment in mid September, 2016 as part of the commissioning of the Plant, followed by ore mining once the Plant has been successfully commissioned. Once production has commenced any surplus funds that are generated will be used for:
• appraisal and mine development of the adjacent gold deposits ie. Currajong, Victoria, Donkey Hill, Gibraltar and Saw Pit;
• Mine and Plant expansions following successful appraisal work;
• an ongoing exploration program targeted at proving a significantly larger gold resource estimates which will be based on ground magnetic survey data which has proven to be a successful, newly developed exploration tool; and
• payment of dividends to Shareholders.

Appraisal drilling will commence within the year following ASX listing using existing funds, subject to requisite approvals, to confirm past positive drill results in five adjacent areas (Currajong, Victoria, Gibraltar, Donkey Hill and Sawpit) where sufficient past drilling exists to indicate gold resource estimates and mine development potential.

A major exploration program is planned on targets already identified, to test for other Challenger-type ore bodies as well as potential stock-work deposits similar in style to Gibraltar.

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Business Overview


The Company aims to become a gold producing company once it has successfully commissioned its newly constructed gold processing Plant. The Company does not have reasonable grounds to establish that it will be able to do so at today. Commissioning is planned to commence in mid September, 2016.

The immediate aim now is to develop the high-grade underground gold resources already accessible via the existing adit at the Mine. An extensive appraisal and exploration program has been designed to prove additional gold resource estimates within the Tenements in order to feed the Plant.

The aim of the Adelong Gold Project is to generate cash flow within the first year of operation from a low cost mine to sustain all future costs associated with appraisal, exploration, Mine and Plant expansions as may be required and to eventually pay dividends to its Shareholders. The Company does not have reasonable grounds to establish that it will be able to do so at today. Whether or not cash flow is generated within the first year is dependent on the successful commissioning of the Plant, successful development of the Mine and gold price being at a level which makes the operation of the Plant viable.


The Company was formed as an Australian unlisted public company in November 2010 to invest in gold projects. In January 2011, it acquired for cash consideration Challenger Mines Ltd (now Challenger Mines Pty Ltd) (“CML”) which holds a number of mining tenements covering the majority of the Adelong Gold Field.

The Adelong Gold Field was a prolific producer of gold over almost a century from around 1857 to 1940. Almost 25 tonnes of gold was produced (approximately half from alluvial operations and half from hard rock operations) before the field was abandoned during World War II. The value of that production would be approximately $1.3 billion at a gold price of $A1,600 an ounce.

By any standards, the Adelong Gold Field was significant yet, unlike many other abandoned fields across Australia, Adelong has not been revitalised in the modern era. The explanations for Adelong’s long period of quiescence are complex but largely relate to management and investment timing, coupled with marginal gold prices at key decision times. The Company believes that past appraisal and exploration for additional gold resources was hampered by a limited understanding of the geophysics and an inability to correlate the enormous amount of historical geological and mine data. The recent acquisition by the Company of new
ground magnetic surveys has developed a proven appraisal/exploration tool for recognition of the Adelong gold bearing veins.

Since the early 1970s the Adelong Gold Field has been explored by companies, large and small. Although a mineable resource was defined, those companies did not progress to mining. The outstanding feature of these exploration efforts is their concentration on the Challenger Deposit, and, to a lesser extent, the Currajong Deposit. Considering the many kilometres of vein-system strike length within the Adelong Gold Field, and the significant gold production from elsewhere in that vein system, it is surprising how little drilling has taken place along strike away from these two deposits.

Earlier exploration efforts were sufficient to define a gold resource estimate in accordance with the JORC Code, as reported in the link “Project”, “Adelong Gold Project”, “Geologist’s Report” and as summarised below:

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CML holds EL 5728 (under renewal application), ML 1435 and sixteen MCLs. EL 5728 covers the vast majority of the Adelong Gold Field, and almost all of the old, abandoned hard rock mine workings. ML 1435 covers, amongst others, the Challenger, Challenger Extended, Currajong, Donkey Hill and Sawpit Deposits. The sixteen MCLs cover the most significant of the old mine shafts and their associated mullock dumps.

The mullock dump gold content affords the Company mining flexibility and early cash flow, with low cost processing options during the initial stages of the Adelong Gold Project.

Additionally, ML 1435 carries with it a current Development Consent, issued by Tumut Shire, the initial application having been made by a former owner of ML 1435 in the early 1990’s for the processing of ore at a rate of 100,000 tonnes per annum. Further, CML holds the EPA Licence for operation of an open cut mine with approval to crush and grind ore and extract gold by use of gravity, flotation, and cyanide leaching technologies. CML also holds a licence issued by the NSW Office of Water to extract and utilise water, and a registered Indigenous Land Use Agreement, further details of which are set out in the sections headed “Tenement
Title Report” and “Summary of Material Contracts”. The Company has reviewed and updated where necessary, all approvals and commenced development of the Challenger Deposit in accordance with the Company’s development program in early 2015. The updated Mine Operations Plan has been approved by the NSW Department of Industry. Once production has stabilised and operations settled into a routine the Company intends to apply for a modification of the Development Consent to allow for the processing of ore at a rate of 200,000 tonnes per annum.

The Company owns 17 freehold properties and holds several Crown leasehold properties which cover the majority of ML 1435, the underground mine portal, the processing plant location and road access to the workings.

Mine Development

In 2013, the Company had planned an open pit mine based on studies carried out by previous owners of the Challenger and Challenger Extended Deposits. That mining method would have entailed extracting ore from near-surface parts of the deposit that are lower in grade before accessing the deeper, higher grade ore at depth. Capital cost would have been high in the first two years and the environmental impact over the life-of-mine would have been significant.

Studies carried out by previous owners of CML and by the Company indicated that the Challenger Deposit would also support development of an underground mine.

To reduce upfront capital expenditure, the Company has reassessed the approach and decided to establish an underground mine instead of an open pit. Higher grade ore is available via the existing adit and underground resources will be extracted from there. The added advantage of this change in mining method is a significantly lower environmental impact.

Utilising the knowledge and expertise of its Directors and senior managers, and after engaging appropriately qualified consultants, the Company has developed the underground mine development programme which will entail enlarging the existing decline, rehabilitating the current 1380 production level and developing a decline to the lower 1360 level, and later to the 1340 level (see Figure 5). This programme will require installation of ground support, ventilation infrastructure, and secondary egress. Initially, the Company will supplement mullock mill feed using underground ore. The aim of this work is to double the mill head grade in the short term by using a combination of mullock and underground ore, then triple the head grade when the mill progresses to all underground feed.

The mine is designed for underground ore production to supply to, and to process in, a 200 tonnes per day plant operating 24 hours per day and 7 days per week.

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Mining will be highly selective with an estimated average blended mill grade of 5.0 grams of gold per tonne of ore. The higher grade underground ore will initially be blended with lower grade old mine mullock dump material until such time as the total ore supply can be sustained entirely from high grade underground ore.

A highly selective mining method will be used on the narrow vein systems. The wider vein (>2m) structures will be mined using long hole stoping methods with remote bogging systems. The narrower veins (<2m width) will be mined using air-leg and more manual methods to recover the super grade zones within the narrow veins. The underground mine concept design (see Figure 5) shows the production levels in relation to the access decline and existing vertical shafts. Primary access underground will be through a 3.5m x 4.0m ramp decline with a 14% grade. The decline is currently developed down to the RL 1380 production level. The decline will be extended to the lowest known production level at RL 1320. Underground mine development will be scheduled in stages with the immediate priority to develop and produce from the Challenger Deposit. Stage two will involve the underground development and production from the Currajong Deposit to the west of the Challenger Deposit and the rest of the Challenger Deposit. The current mine plan is based on initially processing ore from the main Challenger Deposit and old mine mullock dump material. As the Currajong Deposit and the remainder of the Challenger Deposit are developed, daily production rates are intended to be increased in line with expansion.

Plant Development

The Plant design was developed following numerous independent metallurgical testwork by previous owners of the Adelong Gold Project. The Company conducted an internal study, leveraging the experience of previous owners to develop the Plant design, and commenced Plant construction in 2015. That is expected to culminate with the commissioning of the Plant in mid September, 2016, subject to all approvals for operations being obtained by that time. The Plant has the capacity to treat up to 100,000 tonnes of ore per annum. Whether or not that capacity is achieved is subject to the ability of the Company to be able to optimise the Plant, minimise downtime, and having a sufficient amount of ore available from its mining activities to feed the Plant. In the first year of production, the Company will use a combination of underground high grade ore and mullock (because of its very low mining costs).

Plant Design
A number of treatment routes were considered and evaluated by previous owners of the Adelong Gold Project, through the engagement of independent metallurgical consultants and process design companies. As the ore within the Challenger Deposit is a simple binary material of hard gangue and gold-pyrite, the process design principle adopted by the Company is to separate the material utilising the coarse liberation size and the difference in grindability and surface properties between these components.

Previous studies considering using the gravity process and whole ore cyanidation process, found that gold recovery by gravity to a low yield product was too low, and that whole ore cyanidation with grinding to P80 135 microns gave satisfactory gold dissolution. Accordingly, the Company believes, after consultation with appropriately qualified consultants, that it is possible to achieve similar or better gold recovery to whole ore cyanidation, by way of a low cost gravity-flotation plant. The advantages of the gravity-flotation process over whole ore cyanidation are:
• reduced grinding by recovering gold-pyrite at a coarse size;
• improved OH&S;
• production of cyanide-free fine aggregates (tailings) for construction use;
• reduced power consumption;
• reduced environmental impact as a result of the smaller chemical footprint;
• lower operating and capital costs; and
• increased gold recovery.

Process selection and plant design was finalised in consultation with independent, experienced and appropriately qualified metallurgical engineers. The process is a conventional, albeit micro scaled, and modelled on the same principles and criteria as larger conventional gold processing plants in the industry today.

Despite extensive testing of the ore within the Challenger Deposit, there is always some residual risk associated with the possibility of changes in the ore metallurgy. This usually occurs in complex ores with various elements that may inhibit or affect gold recovery compared to that achieved in the laboratory testwork. While the Challenger Deposit ore is considered a ‘clean’ type ore due to its lack of complex sulphides, it is inherent in this type of deposit for this to vary to some degree. The selected process has the flexibility to accommodate changes in metallurgy.

Figure 6 contains the flowsheet for the Plant process. The processing sequence is comprised of two main parts:
• crushing plant; and
• gold mill.
The crushing plant will crush the mined ore and mullock to a top size of 10 mm at a nominal 80 tonnes/hour. The crushing plant is planned to be operational only during daylight hours, crushing to a
stockpile for 24 hour supply to the gold mill. The gold mill consists of a ball mill, gravity, flotation and leach circuits. The gold mill is planned to operate continuously for approximately 8,000 hour /year at a nominal throughput of 10 tonnes/hour. Crushed ore will be fed into a horizontal ball mill for grinding to a particle size of P80 = 150 microns at a nominal rate of 10 tonnes/ hour. The ground ore slurry will then be pumped to the gravity circuit firstly to the “Knelson Concentrator“and then to the classifying cyclones.

A “Russell Jig” and “Wilfley Table” follow the “Knelson Concentrator”. The gravity concentrate will be removed and direct smelted.

Gravity circuit rejects will then pass through the flotation circuit to recover a gold/pyrite concentrate that will be thickened and leached in an intensive 3-stage Carbon In Leach (“CIL”) plant. The leached gold will be collected using granular activated carbon and recovered through a conventional pressure “Zadra ADR” (adsorption, desorption, recovery) plant. The “ADR” product (Electrowinning sludge) will be smelted to produce doré ingots for off-site refining and sale. Tailings from the CIL (1.3 tonnes/hour) will be subject to a metabisulphite detox process before filtration and dry stacking. The flotation tails (8.7 tonnes/hour) will be thickened before filtration and dry stacking.

Plant construction
The plant and equipment supplied for the project consist of second hand equipment refurbished to good operating condition. The condition of equipment supplied varied according to age and source, and this may affect availability and reliability of the Plant. To compensate for the availability, the equipment selected includes redundant capacity. The reliability issue is addressed by ensuring that adequate spares are readily available in the event of breakdowns or can be fabricated on site as required.

To date, all major plant components have been supplied and installed and are at the final stage of electrical and piping installation. Before the Company can commence the processing of ore in the Plant, it needs to obtain the following approvals:
• approval from the New South Wales Department of Resources and Energy (“DRE”) of its cyanide management plan – the cyanide management plan has been completed and submitted to the DRE for approval; and
• approval from the Environmental Protection Agency (“EPA”) of the Company’s Design and Construction Quality Assurance report detailing the design and quality assurance measures that were followed for the establishment of the tailings storage pad and the chemical storage and processing areas (“DCQA Report”). The DCQA Report is in draft form and will be finalised once Plant construction is completed and final inspection is undertaken by an independent engineer. Once the DCQA Report is finalised, it will be submitted to the EPA for approval. During such approval period, the Plant can be dry and wet tested, without feeding gold ore.

The Plant is expected to begin commissioning trials in mid September, 2016 after approval certificates have been received. Once plant construction has been completed, and until such time as the Company has obtained approval of its cyanide management plan from the DRE, and its DCQA Report from the EPA, the Company is able to commence commissioning of the Plant utilising the gravity circuit only. Once the necessary approvals have been obtained, the Company will then commence commissioning the carbon in leach plant. Whilst the Company is aiming to keep the commissioning period of the Plant relatively short, there is no guarantee that there will not be delays in the commissioning of the Plant, whether as a result of failure of second hand or untested equipment, and the consequent time delays in repairing or replacement such equipment, or otherwise. Any such delays are likely to result in cost overruns.

Although the Plant has a throughput capacity of 100,000 tonnes per annum, the Company is only aiming to achieve a throughput of 75,000 tonnes per annum by the end of the first year. Existing funds of the Company have been allocated to improve efficiencies within the Plant and to increase capacity over the next two years to expand throughput and improve gold recovery. If a modification of the Development Consent and relevant approvals is granted, the Plant capacity will be increased to 200,000 tonnes per annum by installation of additional gravity, flotation, re-grind milling, additional leach and detoxification, and tailings filtration equipment. Additional electrical generation capacity will also be required. Increasing throughput will bring economies of scale to the operation, reducing operating costs, improving gold recovery and an overall improvement in efficiency.

Generally, the size and capacity of a plant adds a significant risk element. That is, a larger sized operation represents a bigger exposure in terms of capital and operating considerations. As the Plant is a compact modular designed system, it provides flexibility for modifications and future expansion as required.

Increasing Gold Resources

Since the early 1970s a number of companies have pursued exploration programs in and around the Adelong Gold Field, each adding to the database of information, but with no company advancing any of the gold deposits to mining, although Golden Cross Resources Ltd (“GCR”) came close to proceeding to mine development. There are many reasons why companies fail to complete mine development projects and these include funding constraints, insufficient resources to support mining at a scale sought, low gold/metal price at the time or the prospect is considered inferior to other exploration projects within a portfolio.

Over a period of almost forty years and at an estimated cost of over $10 million the mass of technical information accumulated for the Adelong Gold Field has not been fully evaluated and modelled by previous exploration companies. Although the geochemical association of different lines of lode has been known for a very long time and previous explorers have actually assayed for the geochemical markers in surface and sub-surface samples, little or no follow up of the targets has occurred.

However, two significant technical developments have occurred since that time:
• improved three dimensional modelling allowing for historic drilling data to be properly assessed in combination with the accumulated measured structural data; and
• the Company’s initiated ground magnetic survey work which has resulted in high fidelity definition of the major rock formations and clear recognition of the cross-cutting vein systems, many of which are known to be gold bearing.

The Company has been able to develop geological models using newly acquired ground magnetics data (part of the Company’s exploration effort over the past three years) and reinterpretation of vintage data. The new models greatly enhance the Company’s exploration efforts in the quest to find additional mineable resources.

Only the Challenger Deposit has been exhaustively drilled to define a gold resource estimate. The Currajong Deposit has sufficient drilling results to define the scale of its gold resource. Detailed examination by the Company of these data demonstrates that Adelong requires a three dimensional analysis incorporating all known geological and geophysical data. It is clear from the Company’s analysis of the data that many of the holes drilled beyond the Challenger and Currajong Deposits were ineffective in evaluating the gold potential of the field as a whole. There may be many deposits, similar in size to the Challenger Deposit, within the Tenements yet to be identified, lying between existing drill hole control. The Company considers that many of the existing drill holes did not effectively target the gold shoots contained within the reef system.

The Adelong reefs developed along structures associated with the Gilmore Suture are in favourable geological environments for deposition of gold. These reefs appear to have continuity at depths in excess of 300 metres and below the mining levels established by the early reef miners during the late 1800s and early 1900s. The Company’s modelling allows surface expressions of the quartz reefs to be correlated with isolated gold intersections at depth and to provide a model for targeting future drilling and increasing gold resources. New drilling targets have been prioritised to determine if mineable resources can be developed from these previously unrecognised resources. Much of EL 5728 (under renewal application) is effectively undrilled but the reefs clearly pass semi-continuously across the whole licence.

Why is the Adelong Gold Field undeveloped?

GCR, owner of the Adelong Gold Field from 2000 to 2007, built a comprehensive database of all the historical data and undertook additional drilling with the goal of starting gold production from the Challenger Deposit. When the gold price rose to above US$400/oz, Challenger was considered by GCR capable of supporting a commercially viable mining operation. The Challenger Deposit became GCR’s focus but that company did not develop a model for the rest of the Adelong Gold Field.

GCR worked through all the planning and approval processes at the time, but in 2007 sold the asset to Tasman Gold Fields Ltd (“Tasman”) during a period of financial uncertainties leading up to the global financial crisis in 2008. Tasman did very little work on the asset possibly due to funding considerations.

Since the Company acquired the asset in 2011 the gold price has been consistently above A$1,200/oz and over the last year in excess of A$1,400/oz. The gold price as at the date of this Prospectus (over A$1,700/oz) underpins a development model of the Adelong Gold Field that is at the more favourable end of the development models that had been compiled by GCR.

Evidence for the existence of other gold deposits within EL 5728 (under renewal application) is indicated by newly acquired ground magnetic data and from within the Adelong geological database and historical records integrated into the Company’s structural reef model.

In 1916, Government Geologist, A. F. Harper, published a report on the Adelong Gold Field in the declining days of the Gibraltar Mine, where reefs were mined to depths beyond 300 m and extracted 141,500 oz of gold at an average grade of 35 g/t. Harper spent a year studying the underground workings and compiling his report and even constructed a 3D geological model of the Gibraltar Mine to help him understand the ore bearing structure. In one section of his report he states:
“Bearing this (faulting) in mind, and in view of the abrupt cessation of work in many of the old mines, it seems reasonable to assume that further bodies of ore could be found if the evidence afforded by a systematic examination and a careful diagnosis of events were acted upon.”

This same theme appears throughout his writing, yet the large underground exploration drive undertaken at the time by the Gibraltar Mine owners was just 65 m and most other drives were less than 30 m. No underground drilling was available at the time and manual tunnelling for exploration was very expensive. Today, modern drilling techniques are available to test far beyond the limits of deposits identified at the surface.

The historical mining records show that the Adelong gold reefs returned very high gold grades, with the Victoria Hill mine averaging 56 g/t and Fletchers/Donkey Hill averaging 41 g/t. In modern mines those high grades would be very profitable. There are unmined sections of reef remaining within each of these deposits, and in other deposits throughout EL 5728 (under renewal application), that were mined in “the old days”. The Company concludes that there is very high gold exploration potential within a 2 km radius of the Plant.

Exploration Plan

The Company considers that Tenements have considerable gold exploration potential and that through a planned appraisal/exploration program, the Company can increase its gold resource estimates in the near term. The reported gold resource estimates at the Challenger and Currajong Deposits represent a fraction of the number of previously mined areas within the Tenements.
The other prospects have been subjected to only cursory investigation by previous explorers, yet some of those prospects were historically larger gold producers than those that the Company is now developing. The Company considers that its proposed exploration program will substantially increase its current gold resource estimates. The results of the exploration will determine the mine development direction in the future.

The Company’s exploration approach can be summarised as follows:
> firstly, appraisal of the Challenger Deposit – the Company considers this deposit provides the earliest opportunity to increase the underground gold resources by in-fill drilling, exploration and modelling;
> secondly, appraisal of the Currajong Deposit – the Company considers this deposit is suitable for immediate evaluation by appraisal drilling to accurately define the four known gold veins and test other vein systems to the east to support a mine. The Company is aiming to double the size of the presently identified gold resource estimate and to establish gold reserves;
> thirdly, appraisal of other known deposits identified in the Geologist’s Report – the Company intends to model at least three known deposits (Victoria, Gibraltar and Donkey Hill) to establish additional gold resource estimates from existing data and to assess and rank these and other known deposits in order to identify the most prospective deposits and then explore the identified deposits through drilling;
> fourthly, exploration of the remaining areas within the Tenements – the Company intends to determine new exploration drilling targets by interpreting the new ground magnetics date and the older re-processed geophysics and all existing drilling data; and
> lastly, the Company will undertake trenching, reconnaissance and step-out drilling of all selected targets prioritising prospects for early production.

Appraisal drilling is planned to commence soon to increase the gold resource estimates of the Challenger and Currajong Deposits and plan for new mine developments (Victoria, Gibraltar and Donkey Hill) where sufficient past drilling exists to model their potential for defining gold resource estimates in accordance with the JORC Code.

That drilling program will be followed by a major exploration program on targets already identified, to test for other Challenger-type ore bodies as well as possible stock-work deposits as indicated at Gibraltar and Donkey Hill.