OKVAU GOLD DEPOSIT

In November 2019, Emerald critically examined and pursued improvements in all aspects of the Okvau Gold Project economics applied to the May 2017 Definitive Feasibility Study (“DFS”) for the development of a 2.0Mtpa operation at its 100% owned Okvau Gold Project located in the Mondulkiri province of eastern Cambodia. The DFS was completed to +/-15% level of accuracy. 

 

KEY OUTCOMES

• Initial Ore Reserve of 14.3Mt @ 2.0g/t Au for 907,000oz at an average AISC of US$754/oz over an initial 7 year Life-of-Mine (‘LOM’) operating period;
• 2.0Mtpa plant to produce approximately 106,000oz pa on average over the initial operating LOM of over 7 years;
• Mineral Resource estimate of 17.7Mt @ 2.0g/t gold for 1.14Moz  (at 0.7g/t cut-off) with 1.01Moz as Indicated and 0.13Moz as Inferred;
• Single open pit with waste:ore ratio of 5.8:1;
• Using US$1,450/oz Au gold price:
• NPV(5%) US$337M pre-tax and US$238M post-tax;
• IRR 69% pre-tax and 57% post-tax;
• Payback ~1.4 years pre-tax and 1.7 years post-tax.

Updated NPV and IRR as at 26 November 2019

An extensive internal evaluation of the original key assumptions relating to the DFS on the Okvau Gold Project have resulted in a significant increase in the NPV(5%) to US$337M (from US$223M) pre-tax and US$238M (from US$160M) post-tax and an outstanding Internal Rate of Return (IRR) of 69% (from 48% pre-tax) and 57% (from 40% post-tax).

The DFS was completed on the development of a 2.0Mtpa operation at the Okvau Gold Project to +/-15% level of accuracy and confirmed an initial operating LOM of over 7 years, producing approximately 106,000 ounces of gold per annum on average, with an average LOM AISC of US$754/oz.  The estimated development costs remain at US$91M with a further US$7M in establishment costs and pre-production mining costs.  The development costs include a US$4.4M allowance for spare parts and first fills. The previous assumptions were based on a gold price of US$1,250/oz and other than the key assumptions outlined in Table 3, the following original assumptions as announced on 1 May 2017 are appropriate and remain unchanged.

 

Table 1 | Okvau Mineral Resource Estimate

Okvau Mineral Resource Estimate
Cut-off (Au g/t)	Indicated Resource			Inferred Resource			Total Resource
	Tonnage (Mt)	Grade (g/t Au)	Contained Au (Koz)	Tonnage (Mt)	Grade (g/t Au)	Contained Au (Koz)	Tonnage (Mt)	Grade (g/t Au)	Contained Au (Koz)
0.70	15.11	2.08	1,008	2.57	1.61	133	17.68	2.01	1,141

The Project has a JORC Ore Reserve (Probable) estimate of 14.26Mt @ 1.98g/t Au for 907,000 ounces gold (refer Table 2).

 

Table 2 | Okvau Ore Reserve Estimate

Okvau Ore Reserve Estimate
	Tonnage (Mt)	Grade (g/t Au)	Contained Au (Koz)
Probable Ore Reserve	14.26Mt	1.98g/t Au	907koz

The key assumptions revised in line with the uplift in the gold price and advanced discussions with inter-ministerial departments to achieve the revised NPV and IRR are as follows:

 

Table 3 | Key changes to underlying assumptions

			Original	Revised
Spot price		US$	1250/oz	1450/oz
Exchange Rate		US$	0.7525	0.69
Government Royalty			2.50%	3.00%
Diesel Price Assumption¹		US$	0.57/ltr	0.74/ltr
Grid Power Cost²		US$	0.118/kwh	0.114/kwh
Tax rate first 5 years			30%	25%
Excess Profit Tax			nil	Included in updated model ³
1	All other mining cost assumptions remain unchanged other than the diesel price assumption as noted above.
2	All other processing cost assumptions remain unchanged other than the grid power assumption as noted above.
3	The Excess Profit Tax (“EPT”) is calculated based on a ratio of cumulative revenues over cumulative costs of the project however the EPT, if any, is calculated based on profit in each 12 month tax period.  The EPT tax to be paid at a US$1,450 gold price is not expected to have a material impact to the project economics with an estimated annualised EPT amount of US$1m over the life of the project.  At an US$1,600 gold price assumption, the annualised amount is estimated to be US$2m over the life of the project.

 

Table 4 | Key Operating and Financial Results (Revised DFS) 

Development Capital Costs²		US$91M
Mining Contractor Capital & Pre-Production Mining		US$7M
		US$98M
LOM C1 Cash Costs³		US$658/oz
LOM AISC⁴		US$754/oz
Operating Cash Flow (pre-tax)		US$554M	A$803M
Project Cash Flow After Capital (pre-tax)		US$435M	A$630M
NPV (5%)(pre-tax)		US$337M	A$488M
NPV (5%)(post-tax)		US$238M	A$345M
Payback (pre-tax)		17 months
Payback (post-tax)		20 months
IRR (pre-tax)		69% p.a.
IRR (post-tax)		57% p.a.
1	All economics are 100% attributable to Emerald. Exchange rate of A$0.69.
2	Includes US$4.4M of capital spares and first fills.
3	C1 Cash Costs include site based mining, processing and admin operating costs plus transport and refining costs.
4	Includes C1 Cash Costs plus royalties, sustaining capital costs and rehabilitation & closure costs.

 

Table 4A | Study Results (Revised DFS)

Ore Reserve		14.3Mt @ 2.0g/t gold for 907koz contained
LOM Strip Ratio (waste t: ore t)			5.8:1
Throughput			2.0Mtpa
Life of Mine			7.2 years
Processing Recovery			84%
Recovered Ounces			762koz
Average Annual Production			106koz
Pre-Production Capital Costs²			US$98M
Sustaining Capital Costs³			US$23M
Gold Price		US$1,250/oz	US$1,450/oz	US$1,600/oz
Gross Revenue		US$952M	US$1,104M	US$1,219M
LOM Net Revenue (net of royalties⁴ and refining)		US$906M	US$1,051M	US$1,160M
Operating Cash Flow pre-tax		US$408M	US$554M	US$663M
Project Cash Flow pre-tax		US$290M	US$435M	US$544M
NPV(5%) pre-tax		US$217M	US$337M	US$426M
NPV(5%) post-tax⁵		US$155M	US$238M	US$296M
Payback pre-tax		2.2 years	1.4 years	1.2 years
Payback post-tax		2.4 years	1.7 years	1.3 years
IRR pre-tax		48%	69%	85%
IRR post-tax5		40%	57%	70%
LOM C1 Cash Costs⁶		US$658/oz	US$658/oz	US$658/oz
LOM All-In Sustaining Costs ('AISC')⁷		US$745/oz	US$754/oz	US$761/oz
1	All economics are 100% attributable to Emerald.
2	Includes US$4.4M of capital spares and first fills and US$7.0M of mining capital and pre-production mining costs.
3	Includes US$14.4M of rehabilitation and closure costs.
4	Royalties include Government royalty of 3.0% gross and a third party royalty of 1.5% gross (capped to A$22.5M).
5	Taxation is based on the Mining Investment Agreement and includes tax incentives for the first 5 years.
6	C1 Cash Costs include site based mining, processing and admin operating costs plus transport and refining costs.
7	Includes C1 Cash Cost plus royalties, sustaining capital costs, contributions to environmental & community funds and rehabilitation & closure costs.

It is reasonable to expect that the increased gold price may result in an increase to Ore Reserves which may increase mine life and further enhance financial returns from the Project. The NPV has been calculated at Project level.

 

DFS Study Consultants

The DFS has been managed by Emerald with a number of experienced and highly qualified specialist consultants engaged to cover each of the key disciplines (refer Table 5).

 

Table 5 | DFS Consultants

Consultant	Input
Mintrex	Plant Design, Infrastructure, Capital and Processing Costs
EGRM Consulting Pty Ltd, B Gossage	Mineral Resource Estimate
ACG (Australian Centre for Geomechanics), PM Dight	Geotechnical
Earth Systems Environmental	Environmental
Philip Luckett	Metallurgical Test Work
ATC Williams, R Holding	Tailings Storage Facility, Waste Rock and Water Treatment
EGC Engineering	Power and Electrical
KH Morgan and Associates, KH Morgan	Hydrology and Hydrogeology
Mining Resources Pty Ltd, G Williamson	Ore Reserves, Mining Costs, Optimisations, Mine Design and Scheduling

 

Geology and Mineralisation

Regional Geology

A large sectin of Indo-China, western Laos, Cambodia and southern Vietnam is underlain by Permo-Carboniferous metamorphosed shallow marine to upper arc volcanic rocks referred to as the Kontum Metamorphic Complex or Kontum Massif.  This metamorphic complex was formed in rifting conditions following the Indo-Sinean collision in the Carboniferous.

The Indo-China Block is separated from the South China Block by the Jinshajiang Aillaoshan Suture Zone.

The Kontum Massif is bounded to the north by the Troung Son Fold Belt and to the south by the Loel Fold Belt. These fold belts contain volcano-sedimentary sequences with andesite and minor limestone.

The Kontum Massif, now a tectonic stable plate, was intruded in Cretaceous by small to medium sized dioritic to granitic bodies. The rhyo-dacitic intrusives are often associated with copper and gold mineralisation such as at Sepon in Laos.

The various lithologies in these intrusives are considered to result from fractionation from a common magna source. Some of these intrusives such as at the Okvau Deposit have significant hornfelsic haloes.

A major part of the region is overlain by Jurassic-Cretaceous sediment deposited in the Khorat sag basin. These sediments, in places, are overlain by Neogene-Quaternary basalt flows.

 

Okvau Local Geology and Mineralisation

The Okvau Deposit is largely hosted in a Cretaceous diorite intrusion emplaced within an upper Triassic metasedimentary host rock package. Gold mineralisation is contained in a north-east trending fracture set in a narrow off-shoot or apophyses from a larger diorite intrusion however extends beyond the diorite contact into the metasediments as shown in Figure 1.  

Gold mineralisation is concentrated along a network of brittle/ductile shears and arsenopyrite-rich sulphide veins. The mineralized shears typically comprise 10 to 50 metre wide core of strongly altered, fractured, and/or sheared rock locally with a weak planar fabric, surrounded by 0.5 to 2 metre wide less intensely altered halos which retain relict diorite texture. Variably deformed pyrrhotite, arsenopyrite and/or pyrite-rich layers up to 10 metres wide also commonly occur in the core of the shears.

The greater width of the alteration haloes around the shears, and textural evidence of movement along the shears implies they, rather than the narrow veins, were the principal fluid conduits within the Okvau Deposit. Gold-bearing fluids presumably accessed the fracture mesh which hosts the auriferous sulphide veins via the more strongly altered shears.

Figure 1 | Okvau Deposit Geology

The principal controls on the mineralisation are interpreted to be parallel to the western diorite contact with the metasediments however the low angle dipping planar shears (metasediment bedding parallel) also exert influence on the 3D distribution of the mineralisation.  Gold grade continuity is therefore best defined as parallel to low dipping shears within the diorite which have an orientation in a shallow to moderate dipping plane to the south-east.

 

Mineral Resource Estimate

The Okvau Mineral Resource estimate used for the DFS was prepared by independent resource consultants EGRM Consulting Pty Ltd (Principal Geologist, Brett Gossage) of Perth, Australia in April 2017 and is reported in accordance with the guidelines defined in the 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012 Edition). Mr Gossage is a geologist and resource estimation specialist with over 27 years of experience including substantial experience working on applicable deposit types. A site visit was completed by Mr Gossage in December 2016. 

The Mineral Resource estimate for the Okvau Deposit, reported above selected cut-offs is summarised in Table 6.  A preferred lower cut-off grade 0.70g/t gold is selected to reflect the final economic cut-off determined based on the DFS parameters.

 

Table 6 | Okvau Mineral Resource Estimate

Okvau Mineral Resource Estimate
Cut-off (Au g/t)	Indicated Resource			Inferred Resource			Total Resource
	Tonnage (Mt)	Grade   (g/t Au)	Contained Au (Koz)	Tonnage (Mt)	Grade   (g/t Au)	Contained Au (Koz)	Tonnage (Mt)	Grade   (g/t Au)	Contained Au (Koz)
0.50	19.58	1.74	1,093	3.47	1.35	151	23.05	1.68	1,244
0.70	15.11	2.08	1,008	2.57	1.61	133	17.68	2.01	1,141
1.00	11.01	2.54	898	1.67	2.04	109	12.68	2.47	1,007

 

Drilling

The Okvau Deposit has been drill tested with a combination of Diamond (‘DD’) and Reverse Circulation (‘RC’) drilling. Figure 2 presents a drill hole plan with the gold mineralisation envelope.  The Okvau resource estimate covers approximately 500 metres of strike and 400 metres width of the mineralised vein system.

Figure 2 | Okvau Drill Hole Plan (DD red and RC green) and Mineralisation Outline

 

The Okvau Mineral Resource estimate is based on a database of 217 drill holes, for a total of 42,257 metres. The database is comprised of 112 DD holes for 31,447 metres and 105 RC drill holes for 10,810 metres.  Drilling at Okvau is typically spaced at 25 metres by 25 metres centres in the top 100 metres of the deposit.  Below 100m vertical the drill spacing widens to 25 metres drill sections and 50 metres on or along section 

 

Sampling Techniques and Analysis Methods

DD core was sampled using half-core where the core is cut in half down the longitudinal axis and sample intervals were determined by the geologist based on lithological contacts, with 80% of the sample intervals being 1 metre in length and an additional 15% of the sample intervals being 2 metres in length. RC samples were split through either a two or three tier riffle splitter at the drill rig and sampled on 1 metre intervals.

 

Estimation Methodology

The lithological constraints and oxidation surfaces were generated by Emerald technical staff and were applied to the grade estimation.  The modelled lithology includes diorite and metasedimentary (hornfels) host rocks.  An oxidation surface representing the top of fresh rock was also modelled.

The grade estimate is based on a mineralisation constraint (estimation domain) generated with indicator kriging using drill holes coded with a mineralisation interpretation generated by Emerald technical staff.  The mineralisation interpretation was completed using a 0.5g/t gold lower cut-off grade and includes a maximum 5 metres of internal dilution plus 2 metres of external dilution, and was generated using the known geological controls on gold mineralisation.  Figure 3 shows a typical section.

Figure 3 | Okvau Deposit Oblique Section

 

The Mineral Resource gold estimate was determined using Multiple Indicator Kriging (‘MIK’) within the mineralisation zone constraints.  MIK is a non-linear or ‘recovered resource’ grade estimation method which estimates grades and tonnages for a targeted selective mining unit (‘SMU’) block size, inclusive of dilution and ore loss.  Secondary variables (sulphur, arsenic, bismuth, antimony, copper, and tellurium) have been estimated using Ordinary Kriging (OK).  

A ‘parent’ block size of 20 metres x 25 metres x 10 metres was used followed by a change of support estimate to a 5 metre x 5 metre x 5 metre SMU. The model was constrained by a topographic survey and the geological model.

The MIK estimate was generated using a multi-pass estimation approach, with the high confidence sample search parameters (estimation pass 1 with a sample search of 50 metres x 50 metres x 20 metres) expanded by 100% for each subsequent pass to estimate blocks not originally estimated in prior high confidence estimation passes.  The majority of categorised blocks were estimated searching to a maximum distance of 100 metres from data with the sample searches optimised based on geostatistical investigations and variography generated for both gold and indicator variables. 

The grade estimates are based on 2 metre down-the-hole composites of the RC and DD drilling.  High grade cuts were variously applied to the composite data to limit the influence of high grade outliers.  High grade cuts have been determined via outlier analysis studies with a high grade cut of 20g/t gold and 40g/t gold applied to the fresh hornfels and diorite domains respectively.  A 10 g/t gold high grade cut was applied to the oxide diorite domain composites and no high-grade cut applied to the hornfels oxide composites. To further limit extrapolation of high grade, additional high grade cuts of 6.98g/t gold and 8.88g/t gold were applied to the hornfels and diorite domains composites respectively for estimation passes 2 and 3. 

A bulk density data set of 9,371 determinations were collected throughout the deposit via the immersion method of core billets.  Based on the average bulk density grouped into fresh and oxidised samples and subdivided by lithology, bulk density was assigned to the block model for tonnage reporting.  Bulk densities have been assigned to four domains as shown in Table 7.

 

Table 7 | Okvau Bulk Densities

Lithology	t/m3
Diorite Oxidised	2.82
Diorite Fresh	2.87
Hornfels Oxidised	2.76
Hornfels Fresh	2.78

 

Classification

The Okvau Deposit grade estimates have been classified in accordance with the guidelines set out in the JORC Code, 2012 Edition. The assessment of confidence levels of the key categorisation criteria, including the confidence of the resource development data, the geological interpretation, the drilling density and gold grade estimation is summarised in Appendix One.  The resource classification is based solely on the gold estimate.

In summary, high confidence estimates that are within approximately 30 metres of drilling or better were considered as Indicated Mineral Resources.  Inferred Mineral Resources were blocks that were not considered Indicated Resources but still within the interpreted mineralisation zone and within 75 metres of drilling (when estimated with pass 1 or 2) or within 40 metres of drilling for estimation pass 3.  A cross sectional interpretation was completed using criteria listed above and a wireframe solid produced to capture those blocks that could be considered as Indicated and Inferred Resources.  Figure 4 shows a long section displaying the classification.

Figure 4 | Mineral Resource Classification (Red is Indicated Resources and Green is Inferred Resources)

 

Geotechnical and Hydrology

Geotechnical

The Australian Centre for Geomechanics (ACG) was engaged to complete a geotechnical study for the DFS. The assessment undertaken was an update to previous works undertaken by Renaissance Minerals Limited.

The geotechnical analysis process comprised structural analysis, kinematic assessment on bench and batter scale, probabilistic analysis of wall stability and limit equilibrium numerical modelling on overall slope geometry. Based on the analysis conducted, the following pit design parameters were chosen:-

• Berm interval: 20 metres -30 metres;
• Berm width: 7.6 metres -10 metres;
• Batter angle: 78°;
• Inter-ramp angle: 59.3°- 61.30;
• Overall slope angle: 52°.

The geotechnical study shows that the likelihood of a seismic event is extremely low.

 

Hydrogeological

KH Morgan & Associates was engaged to undertake hydrogeological studies for the DFS. Total water supply requirement for mining and processing of gold ore at Okvau is estimated to be 2.261Mm3 per annum. Water supply will be obtained from a combination of rainwater catchment tailings decant and pit dewatering with dry season supplement from the adjacent Prek Te River.  Supply from the Prek Te has been assessed as being available at all flow conditions.

Water balance indicates that mill water supply can be drawn entirely from the TSF pond from May to end of October each year without call for abstraction from the Prek Te.

Except for rain runoff, groundwater input from the mining area is very low resulting from the very low hydraulic conductivity of the saprolitic regolith and extremely low conductivity of the underlying crystalline rocks.

The total water balance for the Project is shown below in Table 8.

 

Table 8 | Project Water Balance

		Uses					Sources
Month		Processing	Dust suppression	Potable elution	Total	Decant  from TSF	Pit dewatering	Pit rain catchment	TSF rain catchment balance	Total	Site water generation	River sourcing requirement
January		285.39	60	8.3	353.69	85.62	30	2.37	-	117.99	-	235.7
February		285.39	60	8.3	353.69	85.62	30	5.89	-	121.51	-	232.18
March		285.39	60	8.3	353.69	85.62	30	8.19	-	123.81	-	229.88
April		285.39	60	8.3	353.69	85.62	30	43.8	-	159.42	-	194.27
May		285.39	50	8.3	343.69	85.62	30	103.1	108.7	327.42	-	16.27
June		285.39	40	8.3	333.69	85.62	30	117.7	406.2	639.52	305.83	-
July		285.39	40	8.3	333.69	85.62	30	146.9	340.9	603.42	269.73	-
August		285.39	40	8.3	333.69	85.62	30	155.3	376.7	647.62	307.93	-
September		285.39	40	8.3	333.69	85.62	30	160.9	463.4	739.92	406.23	-
October		285.39	50	8.3	343.69	85.62	30	85.3	120.8	321.72	-	21.97
November		285.39	60	8.3	353.69	85.62	30	28.8	-	144.42	-	209.27
December		285.39	60	8.3	353.69	85.62	30	6.8	-	122.42	-	231.27
*	Mill water replacement requirement. All numbers expressed as m³h-¹

A significant conclusion from the water balance study is that the Project processing facility will not generate water excess that will require discharge to the environment.

 

Mining and Ore Reserves

Mining Resources Pty Ltd completed all mining aspects of the DFS and compiled the Ore Reserve for the Project.

The Okvau Deposit will be mined via conventional open pit mining methods from a single pit which will be mined in stages to maintain a relatively constant mining rate whilst providing adequate ore for processing at consistent ore grades. Mining will be undertaken by drilling and blasting ore and waste with load and haul using mining contractors. The proposed core mining fleet is made up of 120 tonne class excavators and 91 tonne class mine haul trucks.

 

Pit Optimisation & Design

A number of Whittle optimisations were completed on the April 2017 Mineral Resource model and included all Resource categories including Inferred resources.  The results from the optimisations were considered in context of sensitivities, risks, contained ounces, mine life and total project size. The pit shell selected as a basis for the mine design was optimal in terms of maximisation of profitability based on the input parameters. It was chosen on the basis of stripping ratio, grade and contained gold and limitation of the operating cost risk in high strip ratio waste removal.

The results of the selected pit shell are listed in Table 9.

 

Table 9 | Selected Optimised Pit Shell

	Selected Pit Shell
Mineralisation	14.49Mt
Grade	1.95g/t Au
Contained Gold	911koz
Waste	79.44Mt
Total Material	93.94Mt
Strip Ratio (t:t)	5.5:1

The final pit design was prepared to enable practical and efficient access to each bench and took into consideration the geotechnical design criteria. The final pit design has approximate dimensions of 650 metres by 600 metres to a maximum depth of 350 metres.

Table 10 provides a comparison of the final pit design with the optimized pit shell.

 

Table 10 | Comparison of Final Pit Design to Optimised Pit Shell

	Selected Pit Shell	Final Mine Design	Difference
Mineralisation	14.49Mt	14.42Mt	-0.5%
Grade	1.95g/t Au	1.97g/t Au	+1.0%
Contained Gold	911koz	914koz	+0.3%
Waste	79.44Mt	82.31Mt	+3.6%
Total Material	93.94Mt	96.73Mt	+3.0%
Strip Ratio (t:t)	5.5:1	5.7:1	+4.1%

Inferred material accounted for only 7,000 ounces of gold or less than 1% of the total contained gold ounces and was excluded for the purposes of the DFS.

The final pit design based on Probable Ore Reserves (Indicated Resources) only at a cut-off of 0.625g/t gold is shown in Table 11.

 

Table 11 | Final Pit Design Based on Indicated Mineral Resources at a Cut-Off of 0.625g/t Gold

	Final Mine Design (Indicated Resources Only)
Mineralisation	14.26Mt
Grade	1.98g/t Au
Contained Gold	907koz
Waste	82.47Mt
Total Material	96.73Mt
Strip Ratio (t:t)	5.8:1

 

Figure 5 | Open Pit Design

 

Ore Reserve

The Ore Reserve for the Project has been completed in accordance with the JORC Code, 2012 Edition. The Ore Reserve is based on Indicated Mineral Resources and as such is stated as Probable Ore Reserves.

Table 12 provides the Ore Reserve estimate.

 

Table 12 | Ore Reserve Estimate

	Tonnes	Gold Grade	Contained Gold
Probable Ore Reserve	14.26Mt	1.98g/t Au	907koz

The cut-off grade used in the estimation of the Ore Reserve is the non-mining, break-even gold grade taking into account modifying factors of mining recovery and dilution, metallurgical recovery, site operating costs, royalties and revenues. All these factors have been estimated to a DFS level. For reporting of Ore Reserves the calculated cut-off grade is 0.625g/t gold. The Ore Reserve estimate is reported within the open pit mine design prepared as part of the DFS.

 

Mining Costs

Mining activities will be undertaken by an experienced mining contractor. Emerald sought indicative costs for load & haul and drill & blast from a highly reputable Australian mining contractor for use in the DFS. Allowance has been made for an owner’s team retaining responsibility for technical services including mine planning, scheduling, grade control, surveying and management of the mining contract. Estimated mining costs are shown in Table 13.

 

Table 13 | Mining Cost Estimate

Description	US$/bcm	US$/tonne
Variable Load & Haul	US$3.74/bcm	US$1.33/t
Drill & Blast	US$1.40/bcm	US$0.50/t
Grade Control	US$0.48/bcm	US$0.17/t
Fixed & Ancillary Costs	US$1.80/bcm	US$0.64/t
Mining Supervision	US$0.25/bcm	US$0.09/t
Environmental Management	US$0.08/bcm	US$0.03/t
Total Mining Costs	US$7.75/bcm	US$2.76/t

Diesel price assumption varied from US$0.57/hr to US$0.74/hr.

 

Processing & Metallurgical Test Work

The Okvau process development and plant design is a result of knowledge gained from testwork undertaken by Emerald and previous work undertaken by Renaissance Minerals Limited. Extensive metallurgical test work has been performed on the Okvau primary ore.  Gold extraction has proven to be predictable with the key determinants being grind size, gold grade, sulphur grade, arsenic grade, antimony grade and tellurium grade. The testwork undertaken demonstrates that an average gold recovery of approximately 84% is achievable based on LOM gold and sulphide grades.

This gold recovery will be achieved by coarse grinding and flotation, fine grinding of a low mass (8% mass pull) concentrate and conventional cyanide leaching of concentrate and flotation tails. The test work results confirm the Okvau primary gold mineralisation may be extracted through a conventional cyanide leach process circuit without any requirement for intensive oxidation.

Results of test work undertaken on a series of composite and variability samples has allowed an assessment of the metallurgical performance of the Okvau ore associated with grind size, leach time, reagent regimes and comminution characteristics. 

 

Gold Extraction & Recovery

Three phases of test work have now been undertaken on the Okvau ore. The initial two phases of test work were undertaken by Renaissance Minerals Limited. Phase one included testing on a Master Composite and 12 variability composites (represented by 12 different diamond drill cores). These 12 samples represented three major ore domains forming the Mineral Resource (northern diorite domain, southern diorite domain and western hornfels domain), and were represented by ore from down hole depths varying between 62 metres and 313 metres.

Phase two test work was undertaken on a further two Master Composites and 8 variability composites (represented by 8 different diamond core holes), ranging in down-hole depth from 11 metres to 253 metres and providing representative core across separate drill hole sections. The drill core was also selected to provide a reasonable spread of multi element head grades (Au, As, S, Te and Bi).

Phase three test work, conducted by Emerald, was undertaken on 1 bulk Master Composite, 6 Variability Composites and a further 3 New Composites assembled from selected intersections from 5 different diamond core holes. The intersections were selected to provide varying multi element head grades (Au, As, S, Te and Bi). The bulk Master Composite testwork undertaken targeted production of a bulk flotation concentrate for vendor thickener testwork and establishment of fine grinding power requirements.

A leach recovery algorithm (including allowance for soluble losses) has been generated based on the relevant test work results which takes into consideration; gold, sulphur, arsenic, bismuth, tellurium and antimony grades. The average gold recovery over the LOM is estimated to be 84%.

Total consumption of sodium cyanide is estimated to be 1.23kg/t of ore.

 

Comminution Testwork

Comminution test work has been completed utilising diamond core across various lithologies of the Okvau Deposit. Comminution testwork has been carried out on ten composite samples and included SAG Mill Comminution (‘SMC’), Unconfined Compressive Strength (‘UCS’), Crushing Work Index (‘CWi’), Ball Mill Work Index (‘BWi’) and Abrasion Index (‘Ai’) testing.

The test work indicated a reasonably hard ore in terms of SAG milling with an average A x b value of 29.0. The BWi at a closing screen size of 150 micron (reflecting the proposed primary grind size 80% passing 106 micron) was an average value of 17.5 kWh/t.  The maximum BWi value from testing was 18.6 kWh/t. The average Ai was moderate with a value of 0.286g which is considered a low to moderate abrasion value.

The comminution test work was characterised by low variability between composites, indicating a relatively homogeneous ore.

Figure 6 shows the simplified process flow sheet design.

Figure 6 | Process Flow Sheet

 

Figure 7 | Okvau Plant Site General Arrangement

Figure 8 | Okvau Plant Site Layout

 

Processing Costs

Processing costs have been estimated on the basis of 2.0Mtpa throughput on the process route described above and assuming grid power at 11.4 cents per kilowatt hour. A summary of processing costs is shown in Table 14.

 

Table 14 | Processing Cost Estimate

Description		US$/tonne
Crusher Feed¹		US$0.25/t
Labour		US$1.51/t
Reagents		US$4.93/t
Consumables & Maintenance		US$1.77/t
Power		US$5.47/t
Total Processing Costs		US$13.93/t
1	Crushed feed is for variable costs only, with fixed costs included in the mining costs.

Project Infrastructure

The primary access to the Project will be via a road from Saen Monourom approximately 66km to the east of the Project as shown below in Figure 9. This road currently runs from Saen Monourom to approximately 15kms south-east of the Project site and currently services villages located between Saen Monourom and the Project. As part of the Project development, Emerald will upgrade this road where required to meet the required standards for operations and extend it the short distance to the Project site.

Figure 9 | Project Access

 

Power

Electricite du Cambodge (‘EDC’) generates, transmits, and distributes electric power to distribution systems and bulk power consumers in Cambodia.

EDC is currently constructing a High Voltage transmission line from the town of Kratie located approximately 80km to the west of the Project to the Okvau Gold Project. The provision of grid power is a critical step to production and is on track to be available prior to commissioning of operations.

EDC have advised Emerald they will supply power at 11.4 cents per kilowatt hour based on new tariffs set by the Electricity Authority of Cambodia (EAC), in force from 15 August 2019.

 

Tailings Storage Facility

Tailings from the process plant will be disposed of in a dedicated tailings storage facility (‘TSF’). TSF will be located within a broad shallow valley to the south-east of the open pit, comprising a primary embankment to the south and a saddle embankment to the west. The waste rock dump will be located to the north and north-west of the TSF and will abut the TSF embankment to enhance structural stability of the TSF.

The proposed TSF development concept contains the currently envisaged life of mine tailings as well as provision for freeboard to contain process water and stormwater inputs. Assuming a tailings settled density of some 1.40t/m³, tailings production of 14.3Mt would require a storage requirement of around 10,500ML (10.5 million m³). The TSF has been designed to accommodate 17,800ML including freeboard.

 

Accommodation

Emerald proposes building a permanent accommodation camp suitable to accommodate up to 207 people per day which allows for mining contractor personnel. The accommodation camp will be managed and operated initially (first year) by a third party service provider on a contract basis. After the first year of operation it is envisaged that the management and operation of the facility will be migrated to Emerald control.

The permanent accommodation camp will be adapted by room configuration to provide the required accommodation during the construction phase.

 

Other

Project infrastructure to support mining and processing including mine and process plant services facilities, fuel storage, administrative offices and maintenance workshops has been included within the capital development costs for the Project.

 

Environment & Social

Social, Environmental and Community

Earth Systems was appointed to assist Emerald with the execution of the Environmental and Social Impact Assessment (‘ESIA’) for the Project. Earth Systems has previous experience in Cambodia and the region and utilised the services of a local registered consultancy, E&A Consultants, in undertaking many of the studies and the preparation of the documents required for the development approvals.

Renaissance submitted its detailed ESIA to the Ministry of Environment in Cambodia and has received all necessary environmental approvals by way of an Environmental Contract signed in November 2017.

Emerald estimates that a permanent workforce of approximately 250 will be required to operate the Project. Employees will be sourced from the local and adjacent provinces in conjunction with a small number of highly skilled expatriates.

A Rehabilitation and Conceptual Mine Closure Plan has been prepared as part of the ESIA. The rehabilitation and closure costs associated with this plan have been incorporated into the DFS.

 

Relocation and Resettlement

The Project area is sparsely populated with ten dispersed villages containing approximately 5,000 residents identified within 20km of the Project.  The nearest significant village is the O’Khlor settlement of Pu Tung village located approximately 15km away.

The closest settlement area to the Project is the Okvau Village (established 2005) which is considered a sub-village of the Pu Tung Village and is located directly in the area of the Okvau Deposit. Emerald has successfully resettled 62 affected households located at the Okvau Village in accordance with Cambodian laws and regulation, as well as the International Finance Corporation’s (IFC) Performance Standards.

Resettlement costs have been factored into the DFS capital costs.

 

Operations

The mining and processing activities will be supported by facilities, systems, services and infrastructure that are sufficient in magnitude, fit for purpose and based upon models used by Emerald management at other gold operations within Australia and overseas. The senior organisational chart is shown below in Figure 10.

Figure 10 | Senior Organisational Chart

 

Staff at the operation, operations personnel and contractor’s personnel will work on a roster which includes fourteen work shifts followed by seven rostered days off with commute travel back to their point of origin provided by Emerald. In the case of expatriates, transport will be via helicopter to and from Phnom Penh and then international flights back to and returning from their point of origin. For local Cambodian workers, bus transportation will be provided back to their home towns of Saen Monourom, Snoul and Kratie.

 

Workforce

The breakdown of employees for operations by expatriate and local employees is summarised in Table 15.

Table 15 | Operating Workforce¹

Emerald
Expatriates		26
Local		206
		232
Mining Contractor
Expatriates		22
Local		76
		98
Total Operating Workforce		330
1	The workforce breakdown is an average for the early years of operations with a reduction in expatriate workforce expected over the LOM

Mining Contract

All mining operations will be carried out by a suitably experienced open pit mining contractor. This contractor will also be responsible for the mining-related construction activities, including Run of Mine (ROM) pad, haul road construction and maintenance during operations. As announced on 30 January 2019, an MoU has been signed with MACA Limited to supply earthmoving equipment and conduct contract mining services at the Okvau Gold Project.

 

Capital and Operating Costs

Capital Costs

The capital cost for the process plant and associated infrastructure has been estimated by Mintrex with input from Emerald. The estimate is presented in US dollars (US$) to an accuracy level of +/-15% as at end of Quarter 1, 2017. 

The estimated pre-production capital cost is US$98.0M, inclusive of US$7.1M of mining contractor establishment costs and pre-production mining costs.  This cost includes all associated project infrastructure and indirect costs. It includes an allowance of US$4.4M of spares, plus first fills and commissioning.

Emerald has chosen not to include a contingency allowance to the capital cost estimate as it is believed that sufficient conservatism has been adopted through the cost estimation process. This approach reflects Emerald’s intention to manage construction of the Project with its own internal development team. Emerald will however ensure that sufficient funding be in place to cover the eventuality of a cost overrun to the magnitude that the Board of Emerald considers appropriate. 

No allowance has been made for the acquisition of the initial mining fleet given Emerald’s intention to utilise a mining contractor with the operating costs based on that operating strategy.

A breakdown of the major capital costs is shown in Table 16.

 

Table 16 | Capital Cost Estimate

Description
Treatment Plant	US$45.2M
Infrastructure (Road, Power, TSF, Camp, Plant Mobile Equipment & Process Plant Infrastructure)	US$26.6M
Earthworks and Construction Overheads	US$4.7M
EPCM and Commissioning	US$7.4M
Owners Costs, Spares, First Fills & Household Resettlement	US$7.0M
Estimated Capital Costs	US$90.9M
Mining Contractor Establishment & Mobilisation	US$2.2M
Pre-production Mining Costs	US$4.9M
Total Capital Requirement	US$98.0M

 

Operating Costs

Operating costs have been estimated on the basis of a treatment rate of 2.0Mtpa in conjunction with the process design, mechanical equipment list, metallurgical test work results, estimated personnel requirements and labour costs, fuel and reagent supply costs. Indicative mining costs were provided by a reputable Australian mining contractor. Emerald’s management team has also drawn on its past management of similar scale projects.

The average Life of Mine (‘LOM’) C1 Cash Cost is estimated at US$658/oz of gold produced. Operating costs include all direct operating costs comprising mining costs, processing costs, ancillary costs, general & administration costs and transport & refining costs.

Overall summary of operating costs over the LOM is shown below in Table 17.

 

Table 17 | C1 Cash Operating Cost Estimate

Description	LOM Cost	LOM Cost / Ore Tonne	LOM Cost / Ounce
Mining	US$262M	US$18.37/t	US$344/oz
Processing	US$199M	US$13.93/t	US$261/oz
General & Administration	US$37M	US$2.58/t	US$48/oz
Transport and Refining	US$3M	US$0.25/t	US$5/oz
C1 Cash Costs	US$501M	US$35.13/t	US$658/oz

 

All-In Sustaining Costs (AISC)

Under the MIA, the royalty payable to the Cambodian Government is fixed at 3% of gross revenue. In addition, a third party royalty of 1.5% of gross revenue is payable which is capped at A$22.5M.

The tailings storage facility (‘TSF’) has been designed to be developed in two stages, with the second stage to occur during the second year of operations at a cost of US$1.3M to provide adequate capacity for LOM tails. 

Additional sustaining capital includes maintenance of a Government owned access road to ensure it meets standards required for the Project, contributions to Environmental and Community Development Funds and an allowance for miscellaneous annual sustaining capital.

The total sustaining capital over the LOM is estimated at US$9M plus a further US$14M for rehabilitation and closure costs.

The average Life of Mine (‘LOM’) AISC is estimated at US$754/oz of gold produced. Overall summary of AISC over the LOM is shown below in Table 18.

 

Table 18 | All-In Sustaining Cost Estimate

Description	LOM Cost	LOM Cost / Ore Tonne	LOM Cost / Ounce
C1 Cash Costs	US$501M	US$35.13/t	US$658/oz
Royalties	US$50M	US$3.48/t	US$65/oz
Sustaining Capital	US$9M	US$0.63/t	US$12/oz
Rehabilitation & Closure Costs	US$14M	US$0.98/t	US$19/oz
All-in Sustaining Cash Cost	US$574M	US$40.22/t	US$754/oz

 

Project Finance

The Company and Sprott signed a Credit Agreement for the US$60 million Okvau Debt Facility.  The signing of the Credit Agreement was a significant milestone for the development of the Okvau Gold Project and follows the completion of an extensive due diligence process and preparation of all facility related documentation. Financial close and first draw down remains subject to customary conditions precedent which includes execution of all facility documentation and perfection of security.  Sprott's financing of the Okvau project will combine the strong development credentials of the Emerald team with the financial strength of the respected Sprott group.

On 20 January 2020 the Company announced a two tranche placement to raise A$75 million which combined with the US$60 million Okvau Facility, would provide the funding required for the development of the Okvau Gold Project.  The final tranche of the placement was successfully completed on 25 March 2020.