I Agree - Macquarie Gold Limited

corporate Directory anD contents paGe

Directors Dennis J Morton Non-executive Chairman Edward P Ambler Non-executive Director Hugh I Thomas Non-executive Director Aidong Yang Non-executive Director company secretary Patrick W V M Sam Yue cHieF eXecUtiVe oFFicer Jordan G Li cHieF operatinG oFFicer Ramon Atayde

inVestiGatinG accoUntant Grant Thornton Corporate Finance Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au AFSL No. 247140 aUDitors Grant Thornton Audit Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

GENERAL MANAGER - MINE John R Lean reGistereD oFFice Export House, Level 2 18-22 Pitt Street Sydney NSW 2000 T +61 2 8298 3633 F +61 2 8298 3639

tenements consULtant Mining Title Services Pty Ltd 9 Kinsellas Drive Lane Cove North NSW 2066 T +61 2 9420 3591 E [email protected] soLicitors Piper Alderman Level 23, Governor Macquarie Tower 1 Farrer Place Sydney NSW 2000 T +61 2 9253 9999 F +61 2 9253 9900 W www.piperalderman.com.au asX coDes: Fully paid ordinary shares: MQX Options 15 July 2019: MQXO

contents Important Notices

1

Key Dates and Terms

2

Letter from the Chairman

3

Investment Highlights and Risks

4

sHare reGistry Boardroom Pty Limited Grosvenor Place Level 12, 225 George Street Sydney NSW 2000 T 1300 737 760 T +61 2 9290 9600 from outside Australia F +61 2 9279 0664 E [email protected] W www.boardroomlimited.com.au

Purpose of the Offer and Use of Funds

7

Details of the Offer

8

Business Overview, Mine Development and Increasing Gold Resources

11

Directors and Senior Management

20

Geologist’s Report

22

Investigating Accountants’ Report

119

Financial Information

126

GeoLoGist GeoRes PO Box 2332 Bowral NSW 2576 T +61 2 4861 3568 M +61 408 724 811 E [email protected]

Tenements Title Report

133

Land Titles Report

142

Investment Risks

147

Summary of Material Contracts

150

Additional Information

152

Glossary of Terms

160

Directors’ Statement and Consent

162

Application Forms and Instructions

important notices this prospectus This is a replacement prospectus dated 8 August 2016 and was lodged with ASIC on 8 August 2016. Neither ASIC nor ASX take any responsibility for the contents of this Prospectus nor the merits of the investment to which this Prospectus relates. No Shares or related Options will be allotted or offered on the basis of this Prospectus later than 13 months after the date of this Prospectus. Persons wishing to subscribe for Shares and related Options offered by this Prospectus should carefully read this Prospectus in its entirety in order to make an informed assessment of the assets and liabilities, financial position, performance, profits and losses, and prospects of the Company and the risks and the rights attaching to the Shares and related Options offered by this Prospectus. Potential investors should carefully consider this Prospectus in light of their own personal circumstances, for example with regard to their personal financial and taxation situation, and seek professional advice from an accountant, lawyer, stockbroker or other financial adviser before making an Application. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe the requirements of those laws. Non-observance by such persons may violate securities law. Any recipient of this Prospectus outside Australia should consult their professional advisers on requisite formalities and laws outside Australia. This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. No action has been taken to register or qualify this Prospectus or to otherwise permit a public offering of Shares or related Options outside Australia. electronic prospectus MGL will place this Prospectus on the Company’s website: www.macquariegold.com.au. Any person accessing the electronic version of this Prospectus for the purposes of becoming a Shareholder must be resident of and must only access the Prospectus from within Australia. The Corporations Act prohibits any person passing on to another person the Application Form unless it is attached to a hard copy of this Prospectus or accompanied by the complete and unaltered version of this Prospectus. Prospective Applicants should read this Prospectus in its entirety before completing the Application Form. Any person may obtain a hard copy of this Prospectus free of charge by contacting MGL. exposure period The original prospectus in respect of the Offer was made generally available during the Exposure Period by being posted on the Company’s website. In addition, copies of that prospectus were made available on request to members of the public by calling the Company on (02) 8298 3633 during the Exposure Period. The purpose of the Exposure Period was to enable the Prospectus to be examined by market participants prior to raising funds. Potential investors should be aware that such examination may result in the identification of deficiencies in the Prospectus; in those circumstances, any application that was received may need to be dealt with in accordance with Section 724 of the Corporations Act. Applications for Shares and related Options during the Exposure Period will not be accepted until the Exposure Period has expired, with no preference given to persons who lodge their Application Forms during the Exposure Period. competent person statement Please refer to the competent person statements on pages 87 and 88 when considering statements of mineral resources set out in this Prospectus. risks Potential investors should carefully consider whether Shares and related Options are an appropriate investment for them. There are significant risks associated with an investment in MGL. The Shares and related Options offered under this Prospectus should be regarded as a speculative investment. The Shares and related Options offered under this Prospectus carry no guarantee whatsoever with respect to return on capital invested, payment of dividends or the future value of the Shares and related Options. Share and related Option prices can fall as well as rise. Refer to the section headed “Investment Risks” for details relating to risks. no Forecast The business of gold exploration, appraisal and development is speculative and there are significant uncertainties associated with forecasting revenues and expenses of such operations by the Company which has no history of development and production for reference for a basis to make reasonable assumptions. Accordingly, the Directors believe that reliable forecasts cannot be prepared and forecasts have not been included in this Prospectus in accordance with ASIC Regulatory Guide 170. Application for Listing The Company has applied to the ASX for admission to the Official List of the ASX and for permission for the Shares and related Options offered by this Prospectus to be officially quoted. Glossary of Terms Certain words and terms used in this Prospectus have defined meanings that are explained in the section headed “Glossary of Terms”. privacy The Application Form accompanying this Prospectus requires you to provide information that may be personal information for the purposes of the Privacy Act 1988 (Commonwealth). The Company (and the Share Registry on its behalf) may collect, hold and use that personal information in order to assess your Application, service your needs as an investor in the Company, provide facilities and services that you request or that are connected with your interest in the Shares and Options and carry out appropriate administration. Under the Privacy Act 1988 (Commonwealth), you may request access to your personal information held by the Company or the Share Registry by contacting the Company Secretary. This document is important and should be read in its entirety and in particular the section headed "Investment Risks". If you do not understand it, you should consult your professional adviser. Replacement Prospectus dated 8 August 2016, Replaces Prospectus dated 25 July 2016

1

Key Dates anD terms

Offer Summary Offer price per Share

$0.30

Number of Shares offered under the Prospectus

12,000,000

Amount to be raised

$3,600,000

One Option will be granted for no additional consideration for every two Shares issued under this Offer. proposed timetable Opening Date for Applications

Tuesday, 9 August 2016

Closing Date for Applications

5:00pm NST Tuesday, 6 September 2016

Expected despatch of Holding Statements

Friday, 9 September 2016

Refund of any surplus Application Monies

Friday, 9 September 2016

Expected date of quotation of Shares on ASX

Monday, 19 September 2016

This timetable is indicative only. The Company reserves the right to vary the dates and times of the Offer without prior notice. How to apply Applications for Shares and related Options must be made on an Application Form attached to this Prospectus. Applicants should read the instructions on the Application Form before applying for Shares and related Options. Completed Application Forms may be lodged at any time after the Opening Date but by no later than the Closing Date. Applications for Shares must be for a minimum of 7,000 Shares and in multiples of 1,000 Shares thereafter. Payment for the Shares must be made in full at the Offer price of $0.30 per Share. Cheques in Australian dollars, must be made payable to “Macquarie Gold Limited - Share Offer” and crossed “Not Negotiable”. Application forms must be mailed or delivered to: Mail: Company Secretary Macquarie Gold Limited C/- Boardroom Pty Limited GPO Box 3993 Sydney NSW 2001 Australia

2

Delivery: Company Secretary Macquarie Gold Limited C/- Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 Australia

Replacement Prospectus dated 8 August 2016, Replaces Prospectus dated 25 July 2016

Letter From tHe cHairman

Dear Investor, On behalf of the Directors, I am pleased to invite you to become a Shareholder of Macquarie Gold Limited. In January 2011, the Company acquired for cash a 100% interest in Challenger Mines Pty Ltd, the company that holds Mining Lease 1435, Exploration Licence 5728 (under renewal application) and 16 Mineral (Claim) Leases covering the majority of the Adelong Gold Field in southern NSW. The Company has since raised additional equity and loan funds and constructed a gold processing plant within the Mining Lease 1435. Once completed, the Plant will have the regulatory approvals necessary to commence processing up to 100,000 tonnes of ore per annum, however, the actual capacity of the Plant will be subject to the Company’s ability to successfully commission the Plant. The Company is targetting to commence feeding ore into the Plant from mid September 2016 to commence commissioning the Plant. Once commissioning of the Plant has completed, then the Company can commence production. The Company recently welcomed International Base Metals Limited (“IBML”) as a major investor in the Company. IBML is an Australian public unlisted company engaged in mineral exploration and development internationally. IBML invested $10 million cash (by way of a convertible note which was converted to Shares) and two of its nominees joined the Board. Consequently the Company is well funded to undertake mining operations for gold production. In the first six months after completion of the Plant, the Company plans to process mullock dumps and underground ore from the Challenger Deposit that can be accessed through the existing adit. Both are in the vicinity of the Plant. Concurrently the Company will be developing the underground Mine to access higher grade ore aiming to increase the gold production rate. The Challenger ore body extends both along strike and at depth and it is likely that the mine will continue to grow as ore is mined. The Company’s management believes that there is significant potential to increase its gold resource estimates by appraisal of known gold deposits within close proximity to the Plant based on exploration data available. Significant additional gold resource potential in the Currajong deposit is located only 500 metres west of the Plant. The 20 plus known gold bearing reefs within the Company’s tenements will be the subject of an exploration program incorporating ground magnetics and evaluation by drilling. The Company has significant cash reserves to meet its funding requirements for the next two years. Accordingly, the Offer is not raising a large amount of capital and is primarily designed to increase the number of the Company’s Shareholders to meet ASX’s requirements for listing. This Prospectus contains detailed information about the Offer, the Adelong Gold Project and the Company generally. I recommend you read it carefully and in full before deciding whether to invest in the Company. I look forward to welcoming you as a Shareholder. Yours faithfully,

Dennis Morton Chairman


3

inVestment HiGHLiGHts anD risKs

Details of the Offer and Use of Funds • The Company is seeking to raise $3,600,000 by issuing 12,000,000 Shares at $0.30 per Share. Applicants will be issued with one Option, at no additional consideration, for every two Shares applied for and issued. •

The Offer has a minimum subscription of $3,600,000. If the Company does not receive Applications to raise the $3,600,000 minimum subscription within three months of the date of this Prospectus, the Company will either repay the Application Monies to the Applicants or issue a supplementary or replacement prospectus and allow Applicants one month to withdraw their Application and be repaid their Application Monies. No interest will be paid on returned Application Monies.

•

The Company’s existing cash on hand, together with the funds raised under this Offer, will be applied to process ore at the Company’s newly constructed Plant to produce gold, mining of the Challenger and Currajong Deposits, exploration programs, repay loans, upgrade the Plant and for working capital in accordance with the plan detailed in the sections headed “Business Overview, Mine Development and Increasing Gold Resources” and “Geologist’s Report”

Refer to sections headed “Purpose of Offer and Use of Funds”, “Business Overview, Mine Development and Increasing Gold Resources”, “Geologist’s Report” and “Additional Information” for details. Gold Mining and Exploration • The Company, through its wholly owned subsidiary, is the sole title holder of the Tenements, which contain the vast majority of the Adelong Gold Field. • •

The Adelong Gold Field contains a gold resource estimate of over 100,000 oz of gold in two deposits, being specifically the Challenger and Currajong Deposits situated in Mining Lease 1435. Those gold resources have been estimated in accordance with the JORC Code as follows:

Challenger Deposit Gold Resource estimates – 1.0 g/t cut-off Proportion by oz

tonnes (t)

Gold (g/t)

Gold (oz)

Measured

51%

459,000

3.07

45,000

Indicated

26%

268,000

2.67

23,000

Inferred

23%

290,000

2.16

20,000

100%

1,017,000

2.71

89,000*

resource class

Total * errors due to rounding

Currajong Deposit Gold Resource estimates – 1.0 g/t cut-off resource class Measured Indicated Inferred Total

4

Proportion by oz

tonnes (t)

Gold (g/t)

Gold (oz)

-

-

-

-

22%

106,000

2.42

8,000

78%

232,000

3.97

30,000

100%

338,000

3.48

38,000

•

The Company has constructed an ore crushing plant and a gold mill. The Company has also refurbished the existing adit which links the surface with the underground main line of gold bearing lode in the Challenger Deposit, facilitating the mining of high grade gold ore at low volumes.

•

The underground operation at the Challenger Deposit has the capacity to mine the high grade gold bearing ore for processing at the Plant. Plant design allows for expansion of the capacity when requisite approvals and consents have been obtained. The Company intends to apply for the modification or otherwise replacement of the current approvals and consents in order to increase the capacity of the Plant to a rate of 200,000 tonnes per annum. The Company has no reason to believe that it will not be able to obtain the approvals and consents for the increased processing rate. The Company does not have reasonable grounds to determine whether or not this rate can be achieved and accordingly, cannot be guaranteed.

•

As soon as possible after the Company’s listing on the ASX, funds raised from the Offer together with the Company’s existing cash balance will be used to commence underground mining of the Challenger Deposit and develop stopes to lower levels to access ore expected to be of higher gold grade than levels currently accessible.


inVestment HiGHLiGHts anD risKs continued

•

The Adelong area has a long history of gold, historically almost 400,000 oz of gold have been produced from hard rock sources within the Adelong Gold Field and there remains considerable potential to increase current gold resource estimates by drilling extensions of known deposits, drilling known targets and exploring untouched areas within the Company’s Tenements. With a priority focus on gold production, the Company has allocated relatively modest amounts from present cash resources to exploration over the next two years by targeting the Challenger, Currajong, Victoria and other known deposits within a short distance from the Plant, but it plans to invest larger amounts if and when surplus funds are generated from operations.

Refer to sections headed “Business Overview, Mine Development and Increasing Gold Resources”, “Geologist’s Report”, “Tenements Title Report” and “Land Titles Report” for details. Experienced Board and management • The Company’s Board and Management possess considerable experience in the mining and resources industry. That experience is spread across a variety of areas including mining, development, exploration and investment. • The Company has utilised the knowledge and expertise of its officers to oversee the construction of the Plant, and develop the Mine Operations Plan, and accordingly considers that the knowledge and experience of its officers and employees supported by its experienced technical advisers will enable it to readily expand its Adelong Gold Project leading it to become a profitable gold producer. Refer to section headed “Directors and Senior Management” for details. shareholder Loans The Company is party to a secured loan agreement with a number of its shareholders, including Dennis Morton and Edward Ambler, (who are also Directors of the Company) and Patrick Sam Yue and Ross Graham (who are former Directors of the Company). As at 30 June 2016, the Company has drawn down $5,026,951 and accrued $507,721 in outstanding interest. $2,500,000 of the loan will be repaid on the Company applying to the ASX for admission to the Official List, with the remaining outstanding principal and interest to be repaid in 8 equal quarterly instalments to 1 July 2018. The loan agreement will become unsecured on payment of the first $2,500,000. The loan agreement is on arm’s length terms. Refer to the section headed “Summary of Material Contracts” for details. International Base Metals Limited On 29 June 2016, the Company and IBML entered into a Subscription and Pre-Listing Agreement under which, amongst other things: •

IBML subscribed for one convertible note with a face value of $10 million; and

•

the Company granted IBML certain rights of ‘top-up’ in future capital raisings, to maintain its percentage shareholding in the Company in limited circumstances. IBML will not be able to exercise its top-up rights in their current form without seeking a waiver from ASX and potentially amending the terms of the top-up rights to a form more readily acceptable by ASX.

IBML converted its convertible note to 40,000,000 Shares on 22 July 2016. Refer to section headed “Summary of Material Contracts” for details.


5

inVestment HiGHLiGHts anD risKs continued

Significant Shareholders The Company has a number of significant Shareholders. The following table sets out the number of Shares held by the Company’s significant Shareholders, as well as the number of their Shares that are likely to be restricted securities (subject to confirmation by the ASX). shareholder IBML

Number of Shares Held (beneficially or non-beneficially)

%1

Number of Shares expected to be restricted securities2

40,000,000

35.7

6,666,667

3

26,098,710

23.3

24,065,807

4

13,499,701

12.1

9,416,467

E P Ambler

D J Morton 1

Calculated as a percentage of the Company’s total Shares on issue after completion of the Offer and rounded to the nearest tenth of a percent. Subject to final determination by ASX. 3 Registered in the name of Ferromin Pty Ltd ATF The Ambler Unit Trust. 4 9,825,000 registered in the name of Budside Pty Ltd . 2

Refer to sections headed “Details of the Offer” and “Additional Information” for details. risks • The reported gold resource estimates are based on estimates and results produced by experts engaged by previous owners and explorers of the Tenements. Any inaccuracies in this information could adversely impact on the Company’s ability to achieve planned levels of production and revenue and within planned production costs. •

The exploration program proposed by the Company carries no guarantee of increasing the gold resource estimates for mining and may result in unforeseen variations in location and grade of the gold resource.

•

The Company is dependent on availability and costs of processing plant, equipment and drilling rigs, workers and contractors to implement the proposed gold production, mine development and exploration program within the planned timeframe and allocated funds. Whilst the Company believes its existing cash and the funds raised under the Offer will be sufficient to cover the costs of the Company’s planned mining, production, development and exploration program, should the actual costs of the mining, production, development and exploration program be significantly greater than the expected levels (whether due to time delays or cost overruns), the Company may need to raise additional capital (whether by way of debt or equity) in order to be able to develop and meet those costs. Where additional funds are raised through equity, it may be dilutive to Shareholders.

•

If the Company is not able to obtain modified or otherwise replacement approvals or consents to increase maximum throughput capacity of the Plant from the current maximum approved amount of 100,000 tonnes per annum to 200,000 tonnes per annum, the Company will be limited to a lower maximum throughput rate of 100,000 tonnes per annum, thereby extending the period of exploitation of the resource. Whilst the Company is aiming to process ore at the Plant’s maximum throughput rate, it does not have reasonable grounds to state that it will be achieved. The Company’s ability to achieve that rate will be affected by a number of factors, including machinery downtime, lack of sufficient manpower, plant operation not being optimised or a depressed gold price making the operation of the Plant uncommercial.

•

The financial performance of the Company is dependent on the price of gold which can be very volatile.

•

If the Company experiences delays in commissioning the Plant, plant malfunctions and/or delays in the mine development, cash flows from the sale of gold will be delayed which may mean that the Company will have to raise funds to bring its Plant to the planned rates of production.

Refer to sections headed “Investment Risks” and “Business Overview, Mine Development and Increasing Gold Resource” for details.

6


pUrpose oF tHe oFFer anD Use oF FUnDs

Purpose of the Offer The purpose of the Offer is to raise $3,600,000 and to increase the number of the Company’s Shareholders to meet ASX’s requirements for admitting the Company to the Official List and thereby listing. The capital raised, after deduction of related capital raising costs, together with Company’s existing cash on hand, will be used to undertake commissioning of the Plant, processing ore at the Company’s Plant once commissioning has completed, mining of the Challenger and Currajong Deposits, exploration programs, repay loans, upgrade the Plant and for working capital. The funds raised by this Offer together with existing cash and loan funds available are planned to be utilised as follows in the two years following the Company’s listing on ASX: $’000 Available funds Cash before this Offer1 Accounts receivable

10,009

2

146

Raised by this Offer

3,600

total

13,755

Application of funds Underground ore extraction and development in Year 1 and 23 Plant operations prior to commercial production in Year 13

1,100 750

3

900

Plant development in Year 2

4

250

Exploration expenditure Year 24

250

Security deposits for mining lease

232

Exploration expenditure Year 1

Accounts payable

5

783

Expenses of the Offer (inclusive of GST)

599

6

4,209

6

1,709

Loans and interest payments in Year 1

Loans and interest payments in Year 2

Payment to vendor on first gold production7

250

sub-total

11,032

Working capital and administration costs

2,723

total

13,755

1

Cash at 30 June 2016 plus $5,000,000 received on issue of Convertible Note before this Offer. See the section headed “Financial Information” and the paragraph titled “Subscription & Pre-Listing Agreement” in the section headed “Summary of Material Contracts”.

2

Accounts receivable at 30 June 2016. See the section headed “Financial Information”.

3

See the section headed “Business Overview, Mine Development and Increasing Gold Resources” paragraphs titled “Mine Development” and “Plant Development”.

4

For details of planned exploration programs refer to the section headed “Business Overview, Mine Development and Increasing Gold Resources” paragraphs titled “Mine Development” and “Increasing Gold Resources” and the section headed “Geologist’s Report”.

5

Accounts payable at 30 June 2016 net of the $447,946 paid with the issue of new Shares and Options before this Offer to specific creditors. See the section headed “Financial Information”.

6

See the section headed “Summary of Material Contracts” paragraph titled “Loan Agreement”.

7

Payable to the vendor of CML on the extraction and production of the first 100 oz of gold from the Adelong Gold Field. See the section headed “Summary of Material Contracts” paragraph titled “Call Option Agreement”.

The Directors consider that the amount sought to be raised by this Offer will provide sufficient working capital to achieve the objectives of the Company in the two years following its listing on the ASX as set out in this Prospectus. It is possible that over the course of the two years following the Company’s listing on ASX, the Company would have commenced generating revenue from its operations. To the extent that such revenue is generated, the Company will put such funds towards appraisal/exploration programs; expansion of the Mine and Plant; working capital and payment of dividends to Shareholders.


7

DetaiLs oF tHe oFFer

The Offer The Company is seeking to raise new capital of $3,600,000 by issuing 12,000,000 Shares at $0.30 per Share to Applicants. One Option will be issued for no additional consideration for every two Shares issued to Applicants. Each Option will be exercisable for one Share at $0.375 per Option on or before 5:00pm NST on 15 July 2019. The rights attaching to the Shares and the terms and conditions of the Options are set out in the section headed “Additional Information”. A Director and the Chief Executive Officer of the Company have indicated that they intend to subscribe for Shares and Options under the Offer. See the section headed “Additional Information” for further details. Pro-forma Capital Structure The capital structure of the Company following completion of the Offer is summarised below: %1 On issue at the date of this Prospectus

89.3

Offered under this Prospectus

10.7

Total Total market capitalisation at Offer price 1

100.0

shares

Options

100,000,000 50,000,000 12,000,000

6,000,000

112,000,000 56,000,000 $33,600,000

All percentages rounded to the nearest tenth of a percent.

Up to $21,000,000 in additional capital may be raised from the exercise of new and Existing Options. The monies raised by such exercise will, depending on the Company’s strategy at the time of the receipt of funds, be applied to working capital and to additional exploration and development projects to be determined at the time of the receipt of funds. Underwriting The Offer is not underwritten. Minimum Subscription The minimum subscription amount to be raised pursuant to this Prospectus is $3,600,000. If the minimum subscription is not achieved within three months after the date of this Prospectus, the Company will either repay the Application Monies to the Applicants or issue a supplementary or replacement prospectus and allow Applicants one month to withdraw their Application and be repaid their Application Monies. No interest will be paid on returned Application Monies. In accordance with the Corporations Act, no Shares or related Options will be allotted by the Company until the minimum subscription has been subscribed.

8

Broker Fees The Company reserves the right to pay fees calculated at a rate of up to 6% of Application Monies received on Applications lodged through stockbrokers and licensed financial advisers. The maximum aggregate fees payable to stockbrokers and financial advisors under this Prospectus is $238,000 including GST. Applications An Application for Shares and related Options under this Prospectus can only be made on the Application Form attached to this Prospectus. No applications will be accepted during the Exposure Period. Applications must be for a minimum of 7,000 Shares and thereafter in multiples of 1,000 Shares. Cheques should be in Australian currency and made payable to “Macquarie Gold Limited - Share Offer” and crossed “Not Negotiable”. Application Monies will be held in a separate bank account in trust for the Applicants until the Shares and related Options are allotted or the Application Monies are otherwise returned to Applicants (in the event that the Minimum Subscription is not met, or Applicants withdraw their Application on the issuance of a Supplementary or Replacement Prospectus). No interest will be paid on any Application Monies held on trust and subsequently returned to Applicants. Completed Application Forms and cheque(s) should be delivered or mailed to the Company in accordance with the instructions on the reverse side of the Application Form. Applications must be received by the Closing Date being 5.00pm NST on 6 September 2016 (subject to the right of the Directors to close the Offer earlier or to extend the date without notice). A completed and lodged Application Form, together with a cheque for the Application Monies constitutes a binding and (subject to the following paragraph) irrevocable Application for the number of Shares and related Options specified in the Application Form. The Application Form does not need to be signed to be a binding application. applicants outside australia Investors outside Australia should consult their professional advisers as to whether governmental or other consents are required, or other formalities need to be observed, before taking up Shares and related Options pursuant to this Prospectus. This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. Where this Prospectus has been despatched to persons domiciled outside of Australia, and where that country’s securities code or legislation requires registration, this Prospectus is provided for information purposes only. No action has been taken to register or qualify this Prospectus or to otherwise permit a public offering of Shares or related Options in any jurisdiction outside Australia.


DetaiLs oF tHe oFFer continued

It is the responsibility of non-Australian resident investors to obtain all necessary approvals for applying for Shares and related Options pursuant to this Prospectus. The return of a completed Application Form will be taken by the Company to constitute a representation and warranty by the Applicant that all approvals necessary in the jurisdiction in which the Applicant resides, have been obtained. allotments Allotment of Shares and related Options will be made as soon as practicable after the Closing Date. The Company is only accepting Applications up to $3,600,000. The Company reserves the right to allot Shares and related Options in full for any Application or to allot any lesser number or to decline any Application received. The Directors urge potential investors to make their Applications as soon as practicable after the Opening Date to avoid potentially having their Applications scaled down or completely rejected. Where the number of Shares and related Options allotted is less than the number applied for, the surplus Application Monies will be returned by cheque within 14 days after the Closing Date. Where no allotment is made, the amount tendered on application with the relevant Application Form will be returned in full by cheque within 14 days after the Closing Date. Interest will not be paid on monies refunded. If the Application Form is not completed correctly, or if the accompanying payment of the Application Monies is for the wrong amount, it may still be treated as a valid Application. The Directors’ decision whether to treat the Application as valid and how to construe, amend or complete the Application Form is final. However, an Applicant will not be treated as having applied for more Shares and related Options than is indicated by the amount of the cheque for Application Monies. ASX Listing The Company will apply for admission to the Official List of ASX and quotation of the Shares and Options on ASX. Certain holders of the Existing Shares and Existing Options will be subject to escrow periods. Refer to the paragraph headed “Restricted Securities” below for further details. The Directors will not issue any Shares or related Options unless and until ASX grants approval on conditions acceptable to the Directors for the Company to be admitted to the Official List. The fact that ASX may admit the Company to the Official List is not to be taken in any way as an indication by ASX of the merits of the Company or the Shares and Options offered by this Prospectus. ASX takes no responsibility for the contents of, including any expert’s reports in, this Prospectus. If permission is not granted for the Company to be admitted to the Official List or the Company’s Shares and Options are not granted official quotation by ASX, within three months after the date of this Prospectus or such longer period as is permitted by the Corporations Act, any allotment or issue of Shares and related Options pursuant to this Prospectus will be void and all Application Monies received pursuant to this Prospectus will be repaid to the relevant Applicants without interest. Restricted Securities As a condition of admitting the Company to the Official List, the ASX will classify certain Existing Shares and Existing Options as restricted securities. Prior to quotation, it will be necessary for certain Existing Shareholders and holders of Existing Options (including Directors and their related entities) to enter into restriction agreements. The effect of the restriction agreements will be that the relevant securities cannot be dealt with for a period as determined by the ASX, usually up to 24 months from the date of official quotation of the Shares and related Options. The Company expects that the following Shareholders will have the corresponding number of Existing Shares and Existing Options escrowed, however, final numbers are subject to ASX’s discretion.


9

DetaiLs oF tHe oFFer continued

shareholder

Estimated number of Shares to be restricted4

%5

Estimated number of Options to be restricted4

D J Morton1

9,416,467

8.41

4,708,234

E P Ambler2

24,065,807

21.49

12,032,903

P W V M Sam Yue3

3,518,166

3.14

1,759,084

R Graham

1,292,586

1.15

646,293

351,981

0.31

175,990

44,635

0.04

22,317

P Wong

112,875

0.10

56,438

W Y M Sam Yue

148,689

0.13

74,345

N Roddy

607,005

0.54

303,502

S Roddy

659,766

0.59

329,883

F Roddy

52,761

0.05

26,381

IBML

6,666,667

5.95

3,333,333

total

46,937,405

41.91

23,468,702

Tectomet Exploration Pty Ltd M K Walcott

1

4,912,500 Shares to be restricted and 3,691,667 Options to be restricted registered in the name of Budside Pty Ltd . 2 Registered in the name of Ferromin Pty Ltd ATF The Ambler Unit Trust. 3 1,728,333 Shares to be restricted and 864,167 Options to be restricted registered in the name Lambian Pty Ltd . 1,789,833 Shares to be restricted and 894,917 Options to be restricted registered in the name of Oni Design Pty Ltd. 4 subject to final determination by ASX. 5 as a percentage of the total number of Shares on issue, after completion of the Offer. Share Register The Company’s register will be maintained by: Boardroom Pty Limited Grosvenor Place Level 12, 225 George Street SYDNEY NSW 2000 cHess system The Company will apply to participate in the ASX’s Clearing House Electronic Sub-register System (“CHESS”). CHESS is an automated transfer and settlement system for securities quoted on ASX under which transfers are effected in an electronic form. When the Shares and related Options become CHESS approved securities, a security holder’s Shares and related Options will be registered in one of two sub-registers, an electronic issuer sponsored sub-register or an electronic CHESS sub-register. The two sub-registers together will make up the Company’s register of Shares or Options (as the case may be). A CHESS participant, or a person sponsored by a CHESS participant, will have their Shares and Options registered on the CHESS sub-register. All other Shares and Options will be registered on the issuer sponsored sub-register. The Company will not offer certificates to security holders. Instead, security holders will receive a holding statement that sets out the number of Shares and/or Options (as the case may be) they hold in the Company. A holding statement will also provide details of a security holder’s shareholder reference number (SRN) in the case of a holding on the issuer sponsored sub-register or holder identification number (HIN) in the case of a holding on the CHESS sub-register. Following distribution of these initial holding statements to all security holders, a holding statement will only routinely be provided to a security holder at the end of any subsequent month during which the balance of the security holder’s holding of securities changes. The Existing Shares or Existing Options designated by agreement or by ASX as restricted securities will be subject to a holding lock under the CHESS System preventing them being dealt with during the period of restriction.

10


BUSINESS OVERVIEW, MINE DEVELOPMENT AND INCREASING GOLD RESOURCES

N

H IG HW AY

Yass

5

0

H

Km

U

M

E

To Sydney

Gundagai To Wagga

ADELONG GOLD PROJECT To Melbourne

CANBERRA

Tumut

151° E

Adelong

NS

NEW SOUTH WALES

ACT

Orange 34° S

West Wyalong Wagga Wagga

ADELONG

W

Sydney Canberra Tumut

N

200 Km

LEGEND MGL Tenemen t Town Main Road River State Bounda ry Prepared by : E. Ambler July 2016

Figure 1: Location of the Adelong Gold Project Key points • 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. • 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 the date of this Prospectus, 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 before the date of this Prospectus). Accordingly, the Company is well funded for its planned operations in the short to medium term. The Company is making this Offer to raise 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.


11

BUSINESS OVERVIEW, MINE DEVELOPMENT AND INCREASING GOLD RESOURCES continued

EL 5728 MCL 282 MCL 283 MCL 284 MCL 285

MCL 288

MCL 287

MCL 289

MCL 291

MCL 279 MCL 290

mcLs Sn

ow y

ML1435

Moun tains

MCL 286

N ay hw

Hig

0

3

ML 1435

aDeLonG

Kilometres

MCL 313 MCL 311 MCL 312

Areas Being Relinquished Area Under Renewal Application

Prepared by: E. Ambler

July 2016

Figure 2: Location of the Adelong Gold Project: EL 5728 (under renewal application) (pink) and Mining Lease Number 1435 (yellow) 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.

MCL 280 MCL 281 N 0

500 Metres

gga

a To W

a De Lon

Prepared by: E. Ambler July 2016

Figure 3: Location of the Adelong Gold Project: Mining Lease Number 1435 (yellow) and Mining (Claim) Leases Numbers 279 to 291 and 311 to 313 (red)

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.

12

G

Figure 4: Minesite looking East



Business overview Strategy 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 the date of this Prospectus. 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 the date of this Prospectus. 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. Background 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) 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 section headed “Geologist’s Report” and as summarised below:

Challenger Deposit Gold Resources – 1.0 g/t cut-off Proportion by oz

tonnes (t)

Gold (g/t)

Gold (oz)

Measured

51%

459,000

3.07

45,000

Indicated

26%

268,000

2.67

23,000

23%

290,000

2.16

20,000

resource class

Inferred Total

100% 1,017,000

2.71 89,000*

* errors due to rounding

Currajong Deposit Gold Resources – 1.0 g/t cut-off Proportion by oz

tonnes (t)

Gold (g/t)

Gold (oz)

-

-

-

-

Indicated

22%

106,000

2.42

8,000

Inferred

78%

232,000

3.97

30,000

100%

338,000

3.48

38,000

resource class Measured

Total

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.


13


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.

Figure 5: Adelong Gold Project Stope Design

14


Prepared by: R.Atayde Date: July 2016

Figure 6: Adelong Gold Project Plant Process Flowsheet



15


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 (

>

>

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.

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;


19

Directors anD senior manaGement

Directors Dennis J morton BA (Hons Geology) Non-Executive Chairman - appointed on 17 December 2010 Dennis Morton was co-founder and until late in 2007 Managing Director of Eastern Star Gas Limited. He is presently the managing director of Gas2Grid Limited, an oil and gas exploration company listed on the Australian Securities Exchange. He has extensive experience in the management of oil and gas exploration entities. He was previously in senior executive positions with a number of Australian and foreign owned companies. He was a director of Orion Petroleum Limited (now Petrel Energy Limited) from July 2007 to June 2011. edward p ambler BSc (Hons), PhD Non-Executive Director – appointed on 17 December 2010 Ted Ambler was the Managing Director of the Company since its formation until his change of responsibilities to Non-Executive Director on 4 July 2016. He co-founded the private company Mining Tenement Management Pty Ltd that discovered mineral deposits and developed four small mining operations in NSW. He is experienced in establishment and management of small to medium sized non-metallic mining operations. He previously held a senior executive position in the mining division of Hooker Corporation. In his role as Assistant General Manager of the Industrial Minerals Division - Hooker Corporation Ltd, Ted Ambler was intimately involved in the design, construction and operation of two mines in NSW until he resigned his position in 1987 to pursue his own career as a mine owner. Since 1987, through a family company, he has found, developed and operated four mines until 2012 when he went into semi-retirement. During his period as mine owner, he has worked closely with engineers and plant operators, and has broad experience in all aspects of permitting, construction and safe operation of surface mines. He is a Member of the Australian Institute of Mining and Metallurgy and a retired Fellow of the Institute of Quarrying Australia. Hugh I Thomas BA, Grad Dip Finance, MAICD Non-Executive Director – appointed on 4 July 2016 Hugh Thomas has significant experience in the resources sector as a company director, senior financial executive and investment banker working thoughout the Asian region including China as well as parts of Africa. He was based in Hong Kong for several years in senior positions with JP Morgan and Morgan Stanley, returning to Australia in 2011 to take up a senior position with South African investment bank, Investec, in Sydney. Since 2014 he has worked as an independent investment banker and company director based in Sydney. He is currently chairman of International Base Metals Limited. Aidong Yang Bsc Non-Executive Director – appointed on 4 July 2016 Born in 1963 and graduated from Chongqing University, China with the degree of BE of Mining in 1982, Aidong has worked in mining industry for 34 years. He was appointed the Department Manager of Mining Planning and Technical Support Division of Jinchuan Nickel Mine – One of the biggest Nickel Mine in China in 1994. He Joined the Sino Gold (Sydney based Australian Company, listed on ASX and Hong Kong stock exchange) in 1996, and held positions of Mining Manager, Deputy General Manager, and General Manager of Jianchaling Gold mine (daily processing capacity 1,000 tonnes/day and production capacity of 2 tonnes gold per year) till he was transferred to Sinogold’s Jinfeng Gold Project as Deputy General Manager in 2007. Between year 2008 to 2010, he was appointed General Manager of White Mount Gold Project (daily processing capacity 2,000 tonnes/day and production capacity of 2 tonnes gold per year) and completed the mine construction and commissioning in one year from feasibility study to first gold pour. He then joined Heilong Mining Group as Deputy General Manager of Heilong Mining Group, General Manager of Baoshan Mining Ltd (where he oversaw the design of a gold processing plant with a capacity of 3,000 tonnes/day), General Manager of Tongshan Mining (where he oversaw the design of a copper ore processing plant with a capacity of 10,000 tonnes/day).

20


Directors anD senior manaGement continued

Senior Management Jordan G Li BA, MBA Chief Executive Officer Jordan G Li is a Member of the Australian Institute of Company Directors and General Manager Commercial at International Base Metals Limited in Sydney. He has over 23 years of commercial and senior executive experience in public and private sectors. His previous positions have included CEO of ASX listed Zamia Metals Limited, Strategy Manager at Fairfax Media, senior management roles at the Department of the Premier and Cabinet in Western Australia and the Chinese Consulate-General in Perth. Jordan holds a BA degree from Shandong University (China) and a Master of Business Administration degree from the University of New South Wales. patrick W V m sam yue CA, FCIS, F Fin, FGIA. Company Secretary and Chief Financial Officer Patrick Sam Yue is a Chartered Accountant who had several years’ experience in international accounting and finance working in the United Kingdom, Africa and the Middle-East before he joined the finance industry in Australia in 1985 prior to moving to the resources industry. He has over 25 years’ experience in financial and corporate management in Australia having held senior executive and company secretary positions with ASX listed entities in the oil and gas and minerals industry. He was a non-executive director of the Company from its formation on 17 December 2010 until 4 July 2016. He is currently a director and company secretary of Gas2Grid Limited and is a former executive director of Ord River Resources Limited. He is also a former non-executive director of Jupiter Mines Limited and Premium Exploration Inc. ramon atayde B Engineering (Mining) Chief Operating Officer Ramon Atayde is a mining engineer with over 26 years’ experience in various senior management and production roles in the mining and extractive industry in Australia and South East Asia. He attended the Colorado School of Mines in 1983 and graduated from the University of New South Wales in 1987. He has been consulting to the Company as Project Manager responsible for the processing plant construction and underground access preparation until his recent appointment as Chief Operating Officer. John r Lean B Engineering (Mining), Aus IMM General Manager - Mine John Lean, a graduate of the University of Ballarat, has over 20 years’ experience in mining from open cut to underground hard rock and coal. In the last 8 years he worked at Newcrest Mining Ltd progressing from Underground Production Foreman to Senior Mine Manager. Prior to that period he had various roles at Mount Isa Mine, Callie for Normandy and coal operation along the Southern Coal fields in NSW.


21

GeoLoGist’s report

Geologist’s Report on

macquarie Gold Limited’s tenements at Adelong, NSW, Australia 3rd August 2016

Report for macquarie Gold Limited By robin rankin MAusIMM CPGeo GeoRes Project GR1615

mail PO Box 2332 Bowral NSW 2576 Australia ph +61(0)2 4861 3568 mob +61(0) 408 724 811 e-mail [email protected] 22


GeoLoGist’s report continued

contents contents TABLES FIGURES ABBREVIATIONS 1 SUMMARY 2 INTRODUCTION 3 BACKGROUND 3.1 Terms of reference 3.2 Purpose 3.3 Sources of information 3.4 Consultant declarations 3.4.1 Independence of MGL 3.4.2 Prior knowledge 3.4.3 Site visits 3.4.4 Qualifications and experience 4 MINING HISTORY 4.1 Underground mining history 4.2 Alluvial mining history 5 EXPLORATION HISTORY 6 MGL’S MINERAL ASSETS & TENURE 7 GEOLOGICAL SETTING 7.1 Regional geology 7.2 Local geology 7.3 Project area geology 8 GOLD MINERALISATION 9 MINERALISED AREAS 9.1 Area names 9.2 Reef details 9.3 Old Hill 9.4 Gibraltar 9.5 Victoria Hill 9.6 Currajong 9.7 Caledonian 9.8 Fletchers 9.9 Donkey Hill 9.10 Blue, Cadzos, The Dyke and Payleys 9.11 Camp Reef 9.12 Sawpit / Lady Mary corridor 10 EXPLORATION 10.1 Exploration area concentration 10.1.1 Concentration justification 10.1.2 Past drilling concentration 10.1.3 Mining concepts 10.2 Topography mapping 10.3 Geological mapping 10.4 Geophysical surveys 10.4.1 Surveys 10.4.2 IP & resistivity 10.4.3 Magnetics & radiometrics 10.4.4 Geophysical data interpretation 10.5 Geochemical soil sampling

22 23 23 23 25 30 30 30 30 30 30 30 30 31 31 31 31 31 32 32 32 32 35 35 35 38 38 38 42 43 44 44 44 44 46 45 45 45 45 45 46 46 46 46 46 47 47 47 50 54 55

10.6 Drilling & sampling 10.6.1 Drilling summary 10.6.2 CEC era drilling (1979 – 1988) 10.6.3 Adelong Consolidated/Capital era drilling (1996 – 2000) 10.6.4 GCR era drilling (2000 – 2007) 10.6.5 Tasman era drilling (2007 – 2009) 10.6.6 MGL era drilling (2011 to present) 10.7 Adits 10.8 Mine waste dump sampling 10.9 Geotechnical studies 10.10 Metallurgy 11 RESOURCE MODELLING & ESTIMATION 11.1 Vein modelling method 11.1.1 Vein deposit type 11.1.2 Vein geological modelling 11.2 Challenger modelling 11.3 Currajong modelling 11.4 Donkey Hill 11.5 Waste dumps 12 MINERAL RESOURCES 12.1 Challenger and Currajong Resources 12.2 Competent Person Statement 13 EXPLORATION POTENTIAL 13.1 Exploration potential concepts 13.1.1 Facts & intuitive suppositions supporting potential 13.1.2 Drilling method concept & dimensions 13.1.3 Proof of drilling method concept 13.1.4 Potential in relation to known reef lines 13.1.5 Geophysical encouragement 13.2 Exploration potential at challenger & currajong 13.2.1 Challenger potential 13.2.2 Currajong potential 13.3 Exploration potential at other areas 13.3.1 Old Hill potential 13.3.2 Victoria potential 13.3.3 Gibraltar potential 13.3.4 Cadzos, Dyke, Blue potential 13.3.5 Donkey Hill potential 13.3.6 Fletchers potential 13.3.7 Caledonian potential 13.4 Exploration potential between areas 13.4.1 Old Hill to Caledonian 13.4.2 Caledonian to Fletchers 13.5 Exploration potential from geophysics 14 PROPOSED EXPLORATION 14.1 Exploration program 14.2 Exploration program budget 15 NEW MINING 16 REFERENCES APPENDIX 1 – CONSULTANT STATEMENTS APPENDIX 2 – JORC 2012 ‘Table 1’

55 55 56 56 56 56 57 59 60 60 60 60 60 60 61 61 65 65 66 66 66 69 69 69 70 70 71 72 73 73 73 74 75 76 76 76 76 77 78 78 79 79 79 80 84 85 85 85 86 87 89


23


taBLes Table 1 Adelong historical gold production by reef Table 2 CEC era exploration drilling (1979 to 1988) Table 3 AC era exploration drilling (1996 to 2000) Table 4 Adelong Challenger JORC 2012 gold Mineral Resources Table 5 Adelong Currajong JORC 2012 gold Mineral Resources Table 6 Adelong total JORC 2012 gold Mineral Resources by class Table 7 Adelong total JORC 2012 gold Mineral Resources by deposit Table 8 Adelong exploration program budget – 2016/7 FiGUres Figure 1 MGL tenements Figure 2 Regional geology Figure 3 Local geology Figure 4 Local geology legend Figure 5 Project area geology Figure 6 Quartz veins underground Figure 7 Challenger adit mapping Figure 8 Challenger adit mapping geology legend Figure 9 Mineralised areas and reefs Figure 10 Project area mineralised reefs & mullock Figure 11 Project area aerial topography Figure 12 Old Hill workings Figure 13 Gibraltar workings Figure 14 Victoria workings Figure 15 Topography surface Figure 16 Gradient array chargeability & resistivity with mapped reefs Figure 17 3D chargeability with projected mapped reefs Figure 18 3D resistivity with projected mapped reefs Figure 19 Total magnetic intensity Figure 20 3D total magnetic intensity with projected mapped reefs Figure 21 3D total magnetic intensity (1VD) Figure 22 MGL ground mag survey area Figure 23 MGL 2016 magnetics Figure 24 Potassium Figure 25 Initial interpretation of high resolution ground magnetometer program Figure 26 Soil geochemistry – gold Figure 27 Soil geochemistry – zinc Figure 28 Exploration drilling Figure 29 MGL 2011 drill cross-sections Figure 30 MGL 2011 drilling – Line 2 Figure 31 MGL 2013 drilling rig Figure 32 MGL 2013 drill cross-sections Figure 33 Donkey Hill cross-section 5,800 N Figure 34 Currajong cross-section 4,480 N Figure 35 Challenger adit bulk sample area Figure 36 Challenger adit portal area Figure 37 Challenger adit portal Figure 38 Boumoya Adit below Currajong Figure 39 Challenger drill holes Figure 40 Challenger vein floor surface Figure 41 Challenger Extended vein roof surface

24

31 56 56 68 68 68 68 85

32 33 34 35 36 37 37 38 39 40 41 42 43 44 47 48 49 50 51 52 52 53 53 53 54 55 55 56 57 57 57 58 58 58 59 59 59 60 61 62 63

Figure 42 Challenger variogram Figure 43 Challenger ranges Figure 44 Section 3,700N blocks Figure 45 Challenge block grades in long section Figure 46 Challenge Extended block grades in long section Figure 47 Challenger / Chall Extended g/m contours in long section Figure 48 Currajong vein surfaces Figure 49 Currajong block grades Figure 50 Donkey Hill E/W cross-section Figure 51 Challenge block classification in long section Figure 52 Challenge Extended block classification in long section Figure 53 Magnetic trends & drill holes Figure 54 Cross-strike E/W fence line drilling Figure 55 Vein interpretations from fence line intercepts Figure 56 Challenger drilling Figure 57 Challenger drilling & vein surfaces Figure 58 Currajong drilling Figure 59 Other areas with potential Figure 60 Old Hill S drilling Figure 61 Victoria drilling Figure 62 Gibraltar drilling Figure 63 Cadzos, Dyke, Blue drilling Figure 64 Donkey Hill drilling Figure 65 Donkey Hill 2013 drilling Figure 66 Fletchers drilling Figure 67 Caledonian drilling Figure 68 Old Hill to Caledonian drilling Figure 69 Caledonian to Fletchers drilling Figure 70 Total magnetic intensity V magnetic first vertical derivative Figure 71 Integrated local and regional ternary radiometics Figure 72 Regional geological interpretation integrating geophysics Figure 73 High resolution ground magnetometer program Figure 74 Targets generated from ground magnetometer survey

63 63 63 64 64 64 64 65 65 67 67 70 71 72 73 74 74 75 76 76 77 77 77 77 78 78 79 79 80 81 82 83 84

aBBreViations AC Adelong Consolidated Gold Mines NL / Adelong Capital CEC Carpentaria Exploration CMPL Challenger Mines Pty Ltd DRE NSW Department of Resources and Energy ECSMC ECS Mining Consultants EL Exploration License EGR Expert Geologist’s Report (this Report) g/t Grams / tonne unit GCR Golden Cross Resources Pty Ltd GR Geologist’s Report (2013) IGR Independent Geologist’s Report (2012) IPO Initial Public Offering (of shares) IGR Independent Geologist’s Report MGL Macquarie Gold Limited ML Mining Lease NSC Near Surface Commodities oz Ounce (Troy) SMGC SMG Consultants



1

•

SUMMARY

This Expert Geologist’s Report (EGR, the Report) of July 2016 is on Macquarie Gold Ltd’s (MGL, the Client) gold prospective tenements located at Adelong (the Property and Project) in southern NSW, Australia. The area is now known as the Adelong Goldfield due to its considerable mining history. This EGR was prepared by Robin Rankin (the Consultant) of geological consultancy GeoRes. It presents an independent Competent Person’s (CP’s) review of the geological and mineral exploration setting of the Project, details the Resources, assesses of the exploration potential, and provides concepts for exploration. It updates a similar report of March 2013 with new JORC 2012 Resources and the results and interpretations from exploration carried out by MGL in the interim. The EGR’s reporting is geological and done according to the JORC 2012 Code (for Exploration Results & Mineral Resources) but is not reported according to VALMIN as it does not express a valuation of the assets. Key points of the Report are: • The historic Adelong Goldfield produced ~24,900 kg (~800,600 oz) of gold between 1857 and the 1940s, roughly half from underground mining of sub-vertical quartz reefs. • The area has at least 20 mineralised reef lines, with past production coming from the 3 with easiest access – the Old Hill line, Victoria Hill line and the Gibraltar. Historical mining grades averaged >1 oz/t (~30 g/t). • MGL owns Exploration Licence (EL) 5728 covering virtually the whole Adelong Goldfield, and Mining Lease (ML) 1435 and a series of small Mineral Claim Leases (MCLs) within the EL. • Modern exploration by successive owners has occurred intermittently since the late 1970s, providing ~36,500 m of drilling, geophysical survey data, geochemical soil survey data, a bulk sample adit, a waste dump evaluation, and JORC Mineral Resources of gold for deposits on two of the reef lines. • Most exploration drilling concentrated on the along-strike Challenger and Challenger Extended deposits on the Old Hill reef line and on the Currajong deposit on a parallel reef line ~300 m to the W. Resources were estimated and publically reported1 for these deposits in 2005 according to JORC 2004. • Resources in the Challenger deposits have been re-estimated in July 2016 (to incorporate new drill holes and updated geological interpretation) and they are reported, with the reviewed Currajong Resources, according to JORC 2012. The deposit ounce proportions stand at 60% Challenger, 10% Challenger Extended and 30% Currajong. • Total JORC 2012 gold Mineral Resources stand at 1.36 Mt @ 2.90 g/t (126,000 oz) using a 1.0 g/t lower gold cut-off, classified by ounce as 36% Measured, 25% Indicated and 39% Inferred. • Resources for the combined Challenger deposits stand at 1.02 Mt @ 2.7 g/t (89,000 oz), classified as 51% Measured, 26% Indicated and 23% Inferred. Resources at Currajong stand at 0.34 Mt @ 3.48 g/t (38,000 oz), classified as 22% Indicated and 78% Inferred.

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The CP considers the exploration potential to increase gold Resources is high, both for the deposits with existing estimates and for many of the other deposits. This high exploration potential is based on a combination of positive factors including that the area has proven gold; the Project area and the known 20+ reefs have only very partially been explored and Resources only evaluated for 2; exploration drilling has found gold mineralisation on virtually all mapped reef lines; drilling has repeatedly focussed on the Old Hill Line, leaving the others only partly explored or completely unexplored; ground conditions prevented historical discovery in many parts of the area; newer exploration drilling data has proved a method of finding new reefs; and new geophysical data strongly suggests the presence of undiscovered reefs and connections between known reefs. MGL is nearing completion of the construction of a modern mill to process ore and extract gold. It is understood that ore will initially be sourced from the old mine dumps and thereafter from underground at the Challenger deposit. This Report does NOT address any mining issues.

Background: The background to this Geologist’s Report is MGL’s intention to lodge a prospectus with the Australian Securities and Investments Commission (ASIC) in 2016 documenting an Initial Public Offering (IPO) of 12M shares at $0.30 each in MGL to raise M$3.6. This Report will be contained in the IPO prospectus. Its terms of reference were negotiated in MGL’s June 2016 engagement of GeoRes. This report updates a similar Geologist’s Report (GR) of 2013. As the Mineral Resources within the Property were originally reported in 2005 by a previous owner to the now out-dated JORC 2004 standard the Consultant was additionally engaged in July 2016 to concurrently consider updating those Resources to the current JORC 2012 standard. That task has been undertaken and the Resources mentioned here are now to JORC 2012 standard with the Consultant being the Competent Person (CP) for them. Specific reporting of the Resource estimates is in a separate document2 to be finalised shortly. Purpose: The purpose of this Report is to provide an independent geologist’s representation of the geology, exploration potential, proposed exploration and exploration budgets of MGL’s mineral assets at Adelong. Mineral Resources of gold have been reported within the tenements at JORC level in the past and thus the focus of this Report is to summarise their current status, the Project’s potential and plans to extend those Resources. Sources of information & JORC: Information was predominantly sourced from geological exploration reports on the Property (and on the Consultant’s personal Property experience) dating back to the late 1990s – essentially the period of modern mineral exploration covered by past JORC reporting. Reports were either by

1

Golden Cross Resources Annual Report 2005 Rankin, R., August 2016. Adelong 2016 Mineral Resources for Challenger & Currajong. GeoRes report to MGL (currently pre-release).

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successive Property owners or were produced for them by various geological and mining consultants. Relevant new exploration information has been incorporated or has updated past understandings. Independence: The Consultant and GeoRes are independent of MGL. GeoRes consulting on this Project is on the basis of payment by MGL, governed by a fee and expenses schedule, and results or conclusions are not contingent on payments. GeoRes is professionally and financially independent and is non-aligned. The Consultant maintains independence of the Adelong Project despite a long association with it through various owners (including MGL) Prior knowledge: The Consultant has prior knowledge of the Property stemming from his periodic geological consulting on the Property for all of the successive owners (including MGL) dating back to the late 1990s. Past work essentially entailed Mineral Resource estimation and associated studies, periodic drilling, and compilation of the 2012 IGR. Site visits: The Consultant visited the Property frequently through consulting for successive owners since the late 1990s. He did not visit the Property specifically for this Report, and his last visit was in 2013. Qualifications & experience: Robin Rankin is a qualified geologist with a BSc degree in Geology from the University of Cape Town, an MSc degree in Mineral Production Management from the University of London (Royal School of Mines), and a DIC from Imperial College, London. Robin is a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM) and is accredited as a Chartered Professional (CP) in the Geology discipline. He has practiced geology professionally virtually continuously since 1981. His background, knowledge and geological modelling and grade estimation capabilities qualified him to estimate and report JORC compliant Mineral Resources on this Property in the past. Mining history: Gold was discovered in the Adelong district in 1852. Significant underground and alluvial gold mining near the town caused the area to become known as the “Adelong Goldfield” and mining continued up until the late 1940s. The Goldfield comprised many individual underground mines tracking for several kilometres north of the town along ridge lines and alluvial mining along the Adelong Creek west of the town. Total recorded production for the Adelong Goldfield between 1857 and 1941 was ~24,900 kg (800,600 oz) – split almost equally between the underground mining of quartz reefs and the alluvial mining. The principal producing reef lines were Old Hill (4,040 kg), Gibraltar (3,890 kg) and Victoria Hill (3,270 kg). Total reef production is recorded as ~11,760 kg (378,100 oz) at a reputed average grade of ~45 g/t. Underground workings varied in depth from 50 m to 200 m, locally reaching ~500 m. Limited mining capabilities at depth constrained mining, not absence of mineralisation. Alluvial mining between 1852 and 1937 produced 13,140 kg (422,500 oz) of gold.

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Exploration history: Significant modern mineral exploration has been carried out intermittently since the late 1970s. The principal periods and explorers were: • 1979 to 1996 – Carpentaria Exploration Corporation Pty Ltd (CEC) and JV partners Mineral Management and Securities Pty Ltd (MM&S), Pan Australian Mining Pty Ltd (Pan Aust), Republic Minerals Corporation (RMC), and Mining Management Services (MMS). • 1996 to 2000 – Adelong Consolidated Gold Mines / Adelong Capital (AC). • 2000 to 2007 – Golden Cross Resources (GCR). • 2007 to 2009 – Tasman Goldfields (Tasman). • 2009 to present – Macquarie Gold Limited (MGL) and antecedent Somerset Mining (Somerset). Exploration to 2009 was predominantly through drill hole sampling programs on the known mineralised reefs, geophysical surveys and geochemical soil sampling. An adit was driven into the major Challenger reef to collect a bulk sample. Old mine dumps were sampled. Exploration culminated in geological modelling and Resource estimation at Challenger and Currajong and in cursory evaluations of several other areas and old mine dumps. The last Resource reporting (2005) was to JORC 2004 standards. MGL’s exploration since 2009 has focussed on geological research, geophysical data re-processing and interpretation, cursory scout drilling along mineralised structures, and new ground magnetics surveys. MGL’s mineral assets: MGL owns (through Challenger Mines Pty Ltd (CMPL)) Exploration Licence (EL) 5728 covering the Adelong Goldfield. It also owns Mining Lease (ML) 1435 within the EL, and a series of small Mineral Claim Leases (MCLs, numbered 279 to 291 and 311 to 313 inclusive) within the EL and surrounding the ML closely. The EL surrounds the town of Adelong and the ML is centred ~1 km north of it. Geological setting - regionally: The Adelong Project is regionally situated at the southern end of the Lachlan Fold Belt (an orogenic zone containing many mineral deposits and mines). Two contrasting geological and tectonic environments dominate the Adelong region – the Wagga-Omeo Belt to the W (with Adelong on its eastern edge) and the Tumut Trough to the east. Adelong is located on the eastern edge of the Wagga-Omeo Belt. The Wagga-Omeo Belt is a metamorphic terrain dominated by metasediments that were deposited in a marginal basin. Siluro-Devonian granitoids are widespread and Late Ordovician-Early Sillurian granitoids occur near Adelong, along with numerous small gabbroic stock like bodies. The Tumut Trough is dominated by rift-related sequences of flysch sediments, mafic-felsic volcanics and related sediments, and minor granites. A major NNW trending, west dipping, zone known as the Gilmore Suture defines the boundary between the two zones, is a major geological and geophysical discontinuity, and now represents a major strike-slip fault boundary. The Gilmore Suture broadly defines a 300 km long belt of gold (+/- copper) mineralisation hosting many mines and prospects.



Geological setting - locally: In the local Adelong area the Gilmore suture bifurcates into the Gilmore Fault Zone passing E of Adelong and a subsidiary structure known as the Wondalga Shear Zone passing W of Adelong. Dominant rock types in the Adelong Project area are the Wondalga Granodiorite and the Avenal Basic Igneous Complex (ABIC) comprising norites, gabbros and diorites. The Wondalga Granodiorite multiphase pluton occurs as a 30 km long elongated body extending from north of Adelong to Batlow in the south. It is predominantly a light to medium grey, medium to coarse grained, biotite granodiorite, occasionally porphyritic. At Adelong the grain size becomes finer with zones of micro-granodiorite occurring. The granodiorite has been moderately to strongly deformed and has a NNW/SSE foliation. The ABIC is a small group of rock units apparently centred on the town of Adelong and comprises five stock like intrusives of noritic to dioritic composition (the most northerly, Donkey Hill, being in the northern part of the Project area). Several other similar bodies are inferred from aeromagnetics data which also suggests these stocks may be connected at depth. None of these stocks exhibit the strong deformation associated with the Wondalga Granodiorite. They have a distinct N/S alignment, sub-parallel to the regional structural grain. Crosscutting the Wondalga granodiorite and the ABIC are at least two sets of basic mafic dykes. The earlier set (probably associated with the intrusion of the granodiorite) has been extensively sheared and altered to schists, is commonly associated with gold mineralisation, and may be associated with the intrusion of the Wondalga Granodiorite. The later set exhibits little deformation except on contacts, has intruded post the ABIC, and possibly reflects the same parent material. Pale coloured dykes of aplite (principally quartz and potassium feldspar) are closely associated with the basic dykes. The dykes and quartz veins are the likely conduits and hosts of the gold mineralisation. Gold mineralisation: Primary gold mineralisation is described as occurring in “reefs”, generally implying narrow sub-vertical high grade veins associated with quartz. These hard rock deposits occur predominantly in N to NW trending structural corridors between the Wondalga Shear Zone and the Gilmore Suture. This area is the focus of strong deformation and late stage intrusive activity, accompanied by significant hydrothermal alteration and gold mineralisation. The source of the ore bearing fluids appears to be unrelated to magmatic fluids associated with the Wondalga Granodiorite or the ABIC and a deep mantle source has been postulated. The Adelong Goldfield reef lines are scattered over an area of ~40 km2, have an aggregate strike length of ~15 km, and have a known vertical extent of at least 500 m in places. Most reefs clearly have a northerly orientation, an exception being the Gibraltar deposit where the structures trend NE. Aeromagnetic images show primarily NNW and NE trends, and most historically exploited deposits appear to occur in close association with the N to NNW trending features. The NW structures represent regional trends observed in the Wondalga Granodiorite. The NE structures possibly represent dilatational zones within the NNW structures. Many of

the historically exploited deposits occur in the NNW structures where they are in close association with the crosscutting NE structures. Most of the high grade gold deposits occur in and adjacent to steeply dipping narrow quartz-pyrite veins or lodes within shear zones in the Wondalga Granodiorite and the ABIC. Reefs may be adjacent to thin irregular sheets of highly altered and sheared mafic dykes and/or highly altered granodiorite (zones of potassic alteration and silicification), and mineralisation may also occur in cross-cutting dykes. Gold mineralisation is often coarse grained and can be observed freely or as fracture fill, generally located within quartz-pyrite veins or veinlets or on the boundaries of sulphide grains. The major sulphide gangue mineral is pyrite, with minor chalcopyrite and sphalerite, or rare pyrrhotite, arsenopyrite and galena. Mineralised zones are made up of single or multiple quartz veins generally less than 2 m wide. Historical vein mining grades averaged more than 1 oz/t (~30 g/t). Wider zones (up to 13 m at 7 g/t) of disseminated-stockwork style mineralisation occur at several prospects. Structurally controlled zones of disseminated gold mineralisation (up to 7 m wide grading 10 g/t on the Challenger deposit) are present in some areas but were apparently not historically exploited. The relatively coarse and erratically distributed nature of gold at Adelong leads to practical sampling problems, and drill assay results may underestimate gold grades. Mineralised areas: There are at least 20 individual gold mineralised reef lines known to occur in the Adelong Goldfield, named from the old underground mines. The principal ones in the Project area are Old Hill, Victoria Hill, Currajong, Caledonian, Fletchers, Donkey Hill and Gibraltar. Historic gold production varied widely between the reef lines. Alluvial mining was concentrated in the Adelong Creek. Exploration: Exploration by a variety of explorers since the 1970’s has been predominantly through drill hole sampling programs. Other important exploration activities included driving an adit underground into the Challenger deposit (which collected a 1,200 t bulk sample grading 5.6 g/t gold) and a program of sampling the old mine dumps. Exploration at Adelong was concentrated in the old underground mining area from just north of Adelong in the south to Donkey Hill in the north and Gibraltar in the NW – an area with approximate extents 4.0 km N/S and 1.5 km E/W – and within that particularly at Challenger, Challenger Extended and Currajong. Exploration culminated in detailed geological modelling and JORC Resource estimation at Challenger and Currajong; cursory evaluation of several other areas and the old mine dumps; and the provision of a framework for defining future exploration potential. Exploration was justified by the mineralisation proved by past production. Detailed geological mapping of the project area is fairly poor, but drill targeting has used the reef outcrop line mapping. Geochemical soil sampling was also relatively sparse. Geophysical surveying was carried in the later 1990s and included induced


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polarisation (IP), resistivity (gradient array, followed up by dipole-dipole), airborne magnetics and radiometrics. That data was initially poorly processed. It has now recently been re-processing by MGL, who have also commenced a new ground based magnetics survey, both of which have enabled much finer delineation of the pervasive nnW trending reefs. Approximately 36,500 m of modern exploration drilling and sampling has cumulatively been done in the Goldfield, and of that approximately 35,500 m has been drilled within the Project area. The drill holes cluster along the reef lode lines. Drill holes were greatly concentrated on the longest line of lode within the ML, the Old Hill line containing the Challenger and Challenger Extended deposits, and (to a much lesser extent) the Currajong reefs. A very small number of holes were drilled from underground in the Boumoya Adit below the Currajong deposit. Primary drilling methods used were reverse circulation (RC), diamond and percussion (RAB). The vast majority of holes were drilled from surface, inclined so as to intercept the sub-vertical reefs obliquely, and oriented ~E/W so as to be sub-normal to the reef strike. Sampling continuity down-hole was variable but mostly continuous, and was often at metre scale. Gold was routinely assayed for and other elements variably A 2011 very minimal shallow cross-strike drilling program by MGL in one area successfully tested a concept that reefs could be detected near surface by weak gold mineralisation – and thus explored easily along strike. This along-strike concept in turn was successfully tested by a minimal 2013 drilling program on several mapped but sparsely drilled reefs. As most old underground workings have waste dumps on surface, which cumulatively represent some tonnage, several non-JORC dump survey and sampling programs were undertaken in the past. Base-line geotechnical and metallurgical studies have also been undertaken to provide mining parameters. Exploration concentration: Initial modern exploration undertook geological reconnaissance over most of the Project area and drilled on various (but not all) reef lines. The bulk of modern exploration has however focussed strongly on the Challenger and Challenger Extended areas on the Old Hill reef line and on the Currajong reef line. These areas became the primary exploration focus due to initial promising results there. Initial interest was also prompted by old records of cross-cuts at Challenger indicating high grades (4 to 23 g/t) over good widths (5 to 14 m). Successive explorers continued with this focus and the potential (from past production) of these reefs and of the intervening Victoria reef were the reasons for the shape of the ML acquired. Most recent exploration has just started to overcome the concentration on the Challenger and Currajong areas by commencing the search for along-strike reef line connections and reef extensions.

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Mining concept: Most explorers’ objectives have been to define sufficient Mineral Resources to support a commercial open pit gold mining and treatment operation based initially on an open pit mine at the Challenger deposit. This option was usually prompted by the simplicity of open pit mining. Production would be augmented by re-treatment of the old waste dumps and then by bringing on-stream other nearby deposits as they were defined by further exploration. Underground mining below the open pit at Challenger has also been seriously considered and is MGL’s current objective. This choice was prompted by immediate access (via the existing adit) to the reef zone. Geological modelling & Resource estimation: Modern detailed computerised geological modelling and Mineral Resource estimation has been undertaken by the Consultant at the Challenger (and Challenger Extended) and Currajong deposits since 1998. The process was iteratively updated by successive explorers and JORC 2004 Mineral Resources were previously reported by Golden Cross Resources Ltd (GCR) in 2005. The deposits were modelled then from drill hole vein intercepts as narrow sub-vertical veins by using DTM surfaces and block grade models. Challenger was modelled as a single almost N/S striking steeply W dipping vein; Currajong was modelled as a four sub-parallel vein system with similar strike and dip to Challenger. Grade estimation parameters were informed by a geostatistical analysis of Challenger data. Longest ranges at Challenger were up to 35 m down a 30° N plunge in the plane of the vein, with shortest at 20 m cross plunge. Challenger Extended ranges were slightly shorter. Grades were estimated using ID2 with 20° N plunging anisotropy in the vein plane and with strong anisotropy cross strike. For this Report the past 2005 Resource estimation and reporting at Challenger and Currajong was concurrently reviewed. Resources at the lesser explored Currajong were taken to be unchanged. The minimal more recent nearby drilling was taken to be on a separate reef line requiring further exploration before re-estimation. However at Challenger a limited amount of subsequent drilling prompted a re-estimate in July 2016. In summary that involved interpreting new and refining old vein intercepts in all drill holes spanning Challenger and its northward continuation Challenger Extended. New holes added very slightly to the northern extent, increasing the tonnage marginally. A notable modelling change was the re-interpretation of the Challenger Extended deposit as a separate distinct sub-parallel vein. The grade block model was created with finer blocks than before (better suited to MGL’s envisaged underground mining) which, along with the tighter intercept interpretation, lead to a slight rise in overall grade. Wire-frames of the known open stope voids and the adit were built into the block model to exclude those blocks from reporting. Modelling and Resource estimation has essentially not been done at the many other mineralised areas due to paucity of drilling data. The Consultant however considers that augmentation of existing drilling with relatively minimal new drilling and updated reef mapping could allow modelling at Victoria, Caledonian, Donkey Hill, and possibly Gibraltar.



Mineral Resources: Total JORC 2012 gold Mineral Resources by deposit, using a default density of 2.7 t/m3 and a lower 1.00 g/t gold cut-off, were reported as: Challenger

850,000 t @ 2.80 g/t (76,000 oz, 60%)

Challenger Extended

168,000 t @ 2.26 g/t (12,000 oz, 10%)

Currajong

338,000 t @ 3.48 g/t (38,000 oz, 30%)

total

1,355,000 t @ 2.90 g/t (126,000 oz)

Blocks were individually JORC classified using a scheme, based on the past geostatistical analysis and visual continuity, combining sample estimation distances and numbers of samples. Classification here divided the total Resources as 36% Measured, 25% Indicated and 39% Inferred. This improved on the 84% Indicated and 16% Inferred of the original 2005 combined Resources of 1,268,000 t @ 2.44 g/t (120,000 oz). The Consultant is the Competent Person (CP) and reports these Resources according to JORC 2012 with an accompanying JORC CP Statement and a JORC Table 1. Exploration potential: The Consultant considers that the exploration potential at Adelong to increase existing gold Resources, and to define new ones, is high. Furthermore he believes that exploration through drilling, using the reef-finding concepts proved in MGL’s 2011 and 2013 drilling programs in concert with the clear reef delineation coming out of new geophysics, could deliver direct results in the near term. Concepts behind the high exploration potential at Adelong combine many positive factors: • the area is a proven gold field which was not worked out when historical mining ceased (it was cut short by economics and physical mining constraints (500 ft depth) no longer applicable); • known reefs were effectively found by their surface outcrops only; • gold was found in nearly all of the quartz reefs but only historically extracted where high grade near surface; • near surface encounters could be chased down plunge to considerable depths in places; • the Project area has only been partially explored; • the known gold bearing quartz reefs themselves have only been partly and mostly minimally explored; • ground conditions suggest the old miners will not have found all reefs (as they effectively concentrated on ridge outcrops and conversely avoided the water-logged outcrop-poor valleys); • recent limited drilling has proved the concept of extensions to several reef lines; • that drilling has proved the concept of tracing near-surface reefs by following very modest gold values; and • recent geophysical data re-interpretation and new magnetometer surveying shows very close correlation of trends with known reefs and the presence of many extensions and new targets to follow.

Furthermore it can be reasonably supposed that reefs buried as little as 5-10 m deep in areas of no outcrop were never found; reef pinch and swell make it highly likely that parts of reefs have no surface expression; and near surface very slight mineralisation may well be an expression of deeper high grade gold bearing reefs. Exploration drilling method concept: The Consultant proposes an exploration drilling method concept on known but poorly defined reefs to i) drill cross-strike fence lines of very short close (~10 m with 20 m holes inclined at 60°) inclined holes looking for vein intercepts (possibly marked by gold values down to 0.05 g/t) and ii) to continue similar drilling at 0.01 g/t should be re-assayed using bottle rolls. “Proof of concept” was demonstrated by MGL’s 2011 drilling in the Caledonian area and by the 2013 drilling. Areas with potential: The Consultant’s opinion is that exploration potential exists at: • Challenger & Currajong: Challenger to a limited extent and Currajong to a large extent have not yet been fully drilled out. • Other old mining areas: Proven mineralisation and significant past mine production applies to numerous areas on reef lines. Most have been minimally drilled. Those with most current potential would be Donkey Hill- Fletchers, Caledonian, Victoria and Gibraltar. • Extensions to reefs: The style of reef line mineralisation and existing outcrop mapping clearly suggests that many known reef lines may be connected. Connecting the Old Hill Line to deposits to the N has potential. • Current barren areas: Much of the ground between reef lines (usually with no outcrop) has not been explored through drilling at all. Therefore the exploration potential is unknown. Geophysical encouragement: Re-processing of 1990’s geophysical data has removed a strong N/S fabric (an artefact of flight line spacing) which hid the pervasive NNW reef trends. Recent new high definition magnetics surveying strongly supports this, should significantly aid exploration, and strongly promotes an update and refinement of the surface outcrop mapping. Proposed exploration & budget: MGL proposes a 2 year green-fields exploration program for 2016/7 including expansion of the ground magnetics survey (commenced in 2014) and integration of its results with past geophysical data; trenching of targets generated; a shallow auger drilling geochemical program; additional geophysical surveying with other methods if believed appropriate; a high resolution drone aerial photography program; and a drilling program of targets generated by the trench and auger sampling and by the geological/geophysical interpretations. MGL also proposes a 2 year program of drilling on the known deposits. MGL’s estimated 2016/7 expenditure budget, for the combined greenfields and deposit drilling programs program is $500,000 over the 2 years.


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2

introDUction

Robin Rankin (the Consultant), Principal Consulting Geologist for independent geological consultancy GeoRes, was engaged by macquarie Gold Limited (MGL, the Client) in June 2016 to update his previous March 2013 Geologist’s Report (GR) on MGL’s gold prospective tenements at Adelong (the Property and MGL’s Project) in SE New South Wales, Australia. The new Expert Geologist’s Report (EGR, the Report) would be included with documentation for an Initial Public Offering (IPO) of shares in MGL. GeoRes assigned this Consulting Project the number GR1615.

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BACKGROUND

Background to the Report is given in terms of: • Terms of reference. • Purpose – of this Report. • Sources of information. • Consultant declarations. 3.1 TERMS OF REFERENCE MGL is a privately owned public company formed in December 2010. MGL’s objective is to exploit gold within its mineral asset tenements at Adelong, New South Wales, Australia. GeoRes provides this independent Expert Geologist’s Report (EGR) on MGL’s mineral assets for inclusion in a prospectus to be lodged with the Australian Securities and Investments Commission (ASIC) in July 2016. It updates GeoRes’s similar report of 2013. The EGR’s reporting is geological and done according to the JORC 2012 Code (for Exploration Results & Mineral Resources) but is not reported according to VALMIN as it does not express a valuation of the assets. Terms of reference for this Geologist’s Report were contained within MGL’s engagement terms letter to GeoRes of June 2016. MGL’s intention with the prospectus is to document an offering (the IPO) of 12,000,000 shares at $0.30 each, with attaching options, in MGL to raise $3,600,000. The mineral assets are proven gold within tenements covering the historic mining goldfield at Adelong, New South Wales, Australia. The IPO prospectus will provide many of the specific Project details. This Report does not provide in-depth details of Project location, leases and tenure, or past history of exploration and mining – except where they are necessary to supplement the details provided in prospectus or other reports include in it. Other reports in the 2012 prospectus included a report on the Adelong tenements (by Mining Title Services). The Mineral Resources within the Property were originally reported in 2005 by a previous owner to the now out-dated JORC 2004 standard. Consequently the Consultant was subsequently additionally engaged in July 2016 to concurrently consider updating those Resources to the current JORC 2012 standard. That task has been undertaken, the Resources mentioned here are to JORC 2012 standard, the Consultant is the Competent Person (CP)

for them, and he attaches a CP Statement. Full specific reporting of the Resource estimates is contained in a separate document3 to be finalised shortly. 3.2 PURPOSE The purpose of this Report is to provide an independent expert geologist’s representation of the geology, existing exploration, exploration potential and proposed future exploration of MGL’s mineral assets. JORC Mineral Resources of gold have been reported within the tenements in the past and thus the focus of this Report is to give their current status and the potential and plans to extend those Resources. 3.3 SOURCES OF INFORMATION Information was predominantly sourced from geological exploration reports on the Property (and on personal Property experience) dating back to the late 1990s – essentially the period of modern mineral exploration covered by JORC reporting. Reports were either by the successive Property owners or were produced for them by a variety of geological and mining consultants. 3.4 CONSULTANT DECLARATIONS The Consultant makes particular declarations here on various issues concerning his standing with the Project. They are in addition to, or to emphasise, the general statements made in Appendix 1. Particular declarations made here address: • Independence of MGL. • Prior knowledge. • Site visits. • Qualifications and experience. 3.4.1 INDEPENDENCE OF MGL The Consultant and GeoRes are independent of MGL and are otherwise independent in all senses which might compromise geological consulting work for MGL. GeoRes consulting to MGL is on a paid basis and results or conclusions are not contingent on MGL payments. The Consultant also maintains his independence of the Adelong Project despite a long association with it through various owners. That independence is not influenced by his positive opinions of the Project’s exploration potential. 3.4.2 PRIOR KNOWLEDGE The Consultant has prior knowledge of the Property stemming from his periodic geological consulting on the Property dating back to the late 1990s. That consulting was for all of the successive owners mentioned below (including MGL). Work essentially entailed Mineral Resource estimation and associated studies. Consulting began with ECS Mining Consultants (ECSMC) for AC and consisted of the first modern computerised mineral Resource estimation on the Challenger deposit. Subsequently he consulted with SMG Consultants (SMGC) for GCR and then with his own independent consultancy GeoRes for subsequent Project owners

3

Rankin, R., August 2016. Adelong 2016 Mineral Resources for Challenger & Currajong. GeoRes report to MGL (currently pre-release).

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Tasman, Somerset and MGL. Work included re-estimation of Resources, pit optimisation, open pit mine design, a geostatistical analysis and a due diligence review – all on either the Challenger deposit or the nearby Currajong deposit. GeoRes consulting for MGL immediately prior to the 2012/3 Reports included implementation of an exploration drilling program in 2011, general technical advice, and communication with other parties involved with input to the 2013 IPO attempt. Since then the Consultant designed the exploration drilling program implemented in 2013 and documented the results. 3.4.3 SITE VISITS The Consultant did not visit the Property specifically for this Report. However he has visited and inspected the Property frequently since the late 1990s. During that time he has: • Inspected the surface geology, particularly the mineralised reef outcrops. • Located many drill hole collars. • Viewed old mine shafts and mullock dumps. • Been underground in the CEC adit at Challenger and inspected the gold-bearing veins in the working faces. • Conducted a reconnaissance blast hole drilling program for MGL in 2011. • Pegged holes for the MGL 2013 drilling program and familiarised the contractors to the site. • Attended and geologically assisted with numerous site visits by commercially interested parties. 3.4.4 QUALIFICATIONS AND EXPERIENCE The Consultant, Robin Rankin, holds a BSc degree in Geology from the University of Cape Town (1980), an MSc degree in Mineral Production Management from the University of London (Royal School of Mines,1988), and a DIC from Imperial College London (1988). In specific relation to JORC reporting of Mineral Resources Robin is a Member (#110551) of the Australasian Institute of Mining and Metallurgy (MAusIMM), accredited as a Chartered Professional (CP) in the Geology discipline. The Consultant has practiced geology professionally virtually continuously since 1981. Specific technical background to his involvement in this Project is essentially his extensive experience with gold exploration and with computerised geological modelling and Mineral Resource estimation and JORC reporting.

4

Significant modern mineral exploration has been carried out intermittently since the late 1970s. The mining history of the area is described in terms of: • Historical underground mining. • Historical alluvial mining. As the Project tenements are roughly coincident with and enclose all of the old underground mines the term goldfield is used interchangeably with the Project name. Mineralised deposits mentioned gain their names from the old underground mines (and are shown in Figure 9). 4.1 UNDERGROUND MINING HISTORY Narrow reef underground mining commenced in 1857 on Old Hill reef line (which includes the Challenger Mine) and during the following two years 60,000 oz of gold was extracted from 12,000 t of reef material. By 1860 all of the major known reef lines had been discovered (described in Section 9). Reef gold mining substantially ceased by 1916, although intermittent mining continued until 1947 at the Gibraltar Mine. The principal producing reef lines (>3,000 kg of gold each) were Old Hill, Gibraltar and Victoria. Other reefs with lesser production were Donkey Hill, Currajong and Caledonian. Underground workings typically varied in depth from 50 m to 200 m, locally reaching approximately 500 m. Total reef gold production is recorded as 11,760 kg (378,000 oz) at a reputed average grade of ~45 g/t. Production by reef is given in Table 1. Table 1 Adelong historical gold production by reef Gold production

Area / reef line / mine

(kg)

Old Hill Line (includes Challenger) Caledonian Reef Donkey Hill Reefs + Lady Clare Reef Victoria Reef Currajong Reef Gibraltar Reef

mininG History

Gold was discovered in the Adelong district in 1852. Significant underground and alluvial gold mining near the town caused the area to become known as the “Adelong Goldfield” and mining continued up until the 1940s. The Goldfield comprised many individual underground mines (which essentially tracked northwards from the town along ridge lines for a couple of kilometres) and alluvial mining along the Adelong Creek (from where it runs through the town and to the NW). Total recorded production for the Adelong Goldfield between 1857 and 1941 was 4

24,900 kg (800,600 oz) – split almost equally between the underground mining of quartz reefs and the alluvial mining. Production figures were sourced from a past geological review of Adelong4 with confirmation from multiple historical documents and with reference to NSW DRE reports.

Lady Mary total

(oz)

4,035

130,000

54

2,000

254

8,000

3,270

105,000

190

6,000

3,888

125,000

68

2,000

11,759

378,000

4.2 ALLUVIAL MINING HISTORY Alluvial mining commenced in 1852 working rich deposits along the Adelong Creek. This was followed by underground deep-lead mining and (between 1901 and 1937) high powered hydraulic sluicing and bucket dredging. Total alluvial production is recorded as 13,140 kg (422,500 oz).

ECSI, June 2000. Geological review.


31


5

EXPLORATION HISTORY

Modern era mineral exploration at Adelong has continued intermittently since the late 1970s through a succession of project owners or partnerships. Details of past exploration are given in Section 10. The eras of each explorer were: • 1979 to 1996 (pre-JORC): o Carpentaria Exploration Corporation Pty Ltd (CEC) o Mineral Management and Securities Pty Ltd (MM&S) o Pan Australian Mining Pty Ltd (Pan Aust) o Republic Minerals Corporation (RMC) o Mining Management Services (MMS) • 1996 to 2000 – Adelong Consolidated Gold Mines / Adelong Capital (AC). Adelong Consolidated changed its name to Adelong Capital in 2000. • 2000 to 2007 – Golden Cross Resources (GCR). • 2007 to 2009 – Tasman Goldfields (Tasman). • 2009 to present – Macquarie Gold Limited (MGL) and its intermediate antecedent Somerset Mining (Somerset). Exploration up to 2009 was predominantly through drill hole sampling programs on the known mineralised reefs. It also included geophysical surveys (IP, resistivity, magnetic and radiometrics) and geochemical soil sampling. An adit was driven into the major Challenger reef in the 1980s to inspect it and to collect a bulk sample. Old mine dumps were sampled in several programs. This exploration culminated in geological modelling and JORC Resource estimation at the Challenger and Currajong deposits and in less detailed evaluations of several other areas and the old mine dumps. MGL’s exploration since 2009 has focussed on geological research, improved geophysical data processing and interpretation, and scout drilling along the mineralised structures. Recently it has commenced a high-resolution ground magnetometer survey.

6

mGL’s mineraL assets & tenUre

MGL’s mineral assets are owned by or are in the process of being transferred to Challenger Mines Pty Ltd (CMPL). They are administered by the Department of Primary Industries (DPI) of New South Wales, and are within the following tenements: • Exploration Licence (EL) 5728 – an area of ~68 km2 around the village of Adelong in SE NSW. • Mining Lease (ML) 1435 – existing wholly within the EL. • A series of small Mineral Claim Leases (MCLs), numbered 279 to 291 inclusive and 311 to 313 inclusive – also wholly within the EL and surrounding and close to the ML. Mineral exploitation within the tenements is limited and/or precluded within several small areas adjacent to the ML and within the EL: • Heritage Council Conservation Order 72. • Fossicking Area 32. Aerial photograph Figure 1 illustrates the Project’s EL boundary (red line), the ML boundary (yellow), and the MCL boundaries

(white rectangles). Coordinate marks (white) around the edges are at 1 km spacing, and north is towards the top. The village of Adelong (grey area) is just south of (below) the ML. Figure 1 MGL tenements

7

7.1 REGIONAL GEOLOGY The Adelong Project is regionally situated at the southern end of the Lachlan Fold Belt, a zone in New South Wales containing many mineral deposits and mines. The Lachlan Fold Belt is a composite orogenic belt which was active from the Cambro-Ordovician to the Late Devonian. Two contrasting geological and tectonic environments dominate the Adelong region – the Wagga-Omeo Belt to the west and the Tumut Trough to the east, illustrated in Figure 25. Adelong is located on the eastern edge of the Wagga-Omeo Belt. The Wagga-Omeo Belt (west of Adelong) is a metamorphic terrain dominated by Late to Mid-Ordovician metasediments that were deposited in a marginal basin. Minor slivers of meta-basic rocks, possibly representing Early Ordovician basement or volcanic arc material, are rare but occur near Adelong. Synkinematic, dominantly S- type Siluro-Devonian granitoids are widespread, and I-type Late Ordovician-Early Silurian granitoids occur in the south near Adelong, along with numerous small gabbroic stock like bodies. 5

32

GEOLOGICAL SETTING

The geological setting of the Project is described in terms of: • Regional geology. • Local geology. • Project area geology.

ECSI, June 2000. Independent geological report. Fig 2, pp9.



Figure 2 Regional geology

M GIL E OR

NEW SOUTH WALES

Map Area

WEST WYALONG

ADELONG

0

Canberra

500 Kilometres

Barmedman

Locality Diagram

Reefton

N

SUT URE

TEMORA

Sydney

Springvale

0

50 Kilometres

Sebastopol COOTAMUNDRA Junee Reefs Dobroyd JUNEE

LEGEND GOLD DEPOSITS DISSEMINATED

WAGGA WAGGA

GUNDAGAI

> 10 TONNES PROSPECT > 10 TONNES (AGGREGATES)

Mount Adrah Bangdadang TUMUT

> 10 Kg CAENOZOIC COVER OF ROCKS OF OTHER AGES NOT RELEVANT TO MIDDLE SILURIAN TO EARLY DEVONIAN TECTONICS

ADELONG

GILMORE

EARLY DEVONIAN AND LATE SILURIAN TROUGHS AND BASINS LATE SILURIAN GRANITOIDS MAJOR FAULTS EXTENSION OF GILMORE SUTURE DEPOSITS AND EXISTING MINES


33


The Tumut Trough (east of Adelong) is dominated by rift-related sequences of Silurian flysch sediments, mafic-felsic volcanics and related sediments, and minor I- and S-type granites. In the east slivers of ultramafics and metabasics occur and are thought to represent obducted oceanic crust. A major NNW trending zone known as the Gilmore Suture defines the boundary between these two zones. The Gilmore Suture is thought to represent a west dipping collision contact between the Wagga-Omeo Belt (the then eastern edge of the Australian mainland) and an Ordovician volcanic arc-microcontinent to the east. The Gilmore suture is a major geological and geophysical discontinuity and now represents a major strike-slip fault boundary between the two terrains. The Gilmore Suture broadly defines a 300 km long belt of gold (+/- copper) mineralisation in which several significant mines and numerous prospects are located. Examples of these are Lake Cowal (2 Moz Au Reserve), West Wyalong (produced 0.2 Moz Au), Marsden (significant Au-Cu intercepts), Gidginbung-Temora (produced 0.5 Moz Au and 1.5 Moz Ag), and Mt Adrah (0.5 Moz Resource). Other major deposits such as Canbelago, Mineral Hill and Girilambone-Tritton appear to be related to the Gilmore Suture. 7.2 LOCAL GEOLOGY In the immediate Adelong area the Gilmore suture bifurcates into the Gilmore Fault Zone (passing to the east of Adelong) and a subsidiary western structure known as the Wondalga Shear Zone (passing to the west of Adelong). The shears are illustrated in the following Figure (legend following), shown with the ML (red dashed line) and EL (blue) boundaries for reference, with Adelong just south of the ML. Figure 3 Local geology

34



Figure 4 Local geology legend

and have noritic- gabbroic cores grading out to hornblende diorite-quartz diorite rims. The largest of these stocks is the Adelong Norite, which covers ~13 km2. Several other minor bodies of this type are inferred from aeromagnetics data. Magnetic data also suggest that these stocks may be connected at depth. Interestingly none of these bodies exhibit the strong deformation associated with the Wondalga Granodiorite. The bodies have a distinct N/S alignment, sub-parallel to the regional structural grain.

Dyke Minor Structure Transfer fault Gilmore Fault Major listric fault Listric fault (Stuart-Smith) Accommodating fault

Crosscutting the Wondalga granodiorite and the ABIC are at least two sets of basic mafic dykes. The earlier set has been extensively sheared and altered to schists, and is commonly associated with gold mineralisation. The later set exhibits little deformation except on contacts. Evidence suggests the first dyke set is associated with the intrusion of the Wondalga Granodiorite. The second set has intruded post the ABIC and possibly reflects the same parent material. Pale, creamy coloured dykes of aplite (principally quartz and potassium feldspar) form a close association with the basic dykes in the Adelong Goldfield. These dykes, along with the mafic dykes and quartz veins are regarded as the likely conduits and hosts of the mineralisation.

Fault (other) Dgg granite Si Jacklass Slate Intrusion (small) Sg granoite (undif) Intrusion along transfer fault Ss Snowball metabasic igneous complex Svga volcanics and metasediments (Stuart-Smith) Su Bumbolee Creek Fm San ABIC (possible - mage interp.)

Other rock types occurring are the Early Ordovician Nacka Nacka Metabasic Complex (magenta areas) to the west, and the Jackalass Slate to the east (light grey).

San ABIC (mapped) Sgw Wondalga granodiorite (undif)

7.3 PROJECT AREA GEOLOGY Figure 5 presents MGL’s 2016 detailed geological map of the immediate project area (from the ML in the southern half to the Donkey Hill Norite in the northern half). The mapping was derived from interpretation of their ground- based magnetometer surveys and produced by Near Surface Commodities (NSC) in May 2016.

Os/Sgw Wagga metamorphic belt or Wondalga Sgw Wondalga granodiorite Sheared (DAP) Sgw Wondalga granodiorite sheard (High mag) Sgw Wondalga granodiorite sheard (Low mag) On Nacka Nacka metabsic igneous complex Os Wagga metamorphic belt

8

On/Sgw Nacka Nack + Wondalga Gd On Nacka Nack (high mag)

The dominant rock types in the Adelong Project area are the Late Ordovician Wondalga Granodiorite (white and red areas) and the Silurian Avenal Basic Igneous Complex (ABIC, dark green areas) comprising norites, gabbros and diorites. The Wondalga Granodiorite is a multiphase pluton covering ~180 km2 and occurs as a 30 km long elongated body extending from north of Adelong to Batlow in the south. It is predominantly a light to medium grey, medium to coarse grained, biotite granodiorite, occasionally porphyritic. In the immediate vicinity of Adelong, the grain size becomes finer with zones of micro-granodiorite occurring. The granodiorite has been moderately to strongly deformed with foliation occurring in a NNW / SSE direction. The ABIC is a relatively small group of rock units appearing to be centred on the town of Adelong. It comprises five stock like intrusives of noritic to dioritic composition. From north to south they are the Donkey Hill Diorite, Adelong Norite, Lady Mary Norite, Box Hill and Coomerang bodies. Most of these bodies are zoned

GOLD MINERALISATION

Primary gold mineralisation (as opposed to the secondary alluvial deposits) in the Adelong Goldfield has historically been described as occurring in “reefs”, generally implying narrow sub-vertical high grade veins or shear structures associated with quartz. These hard rock deposits occur predominantly in N to NW trending structural corridors between the Wondalga Shear Zone and the Gilmore Suture. This area has been the focus of strong deformation and late stage intrusive activity, accompanied by significant amounts of hydrothermal alteration and gold mineralisation accompanied by minor base metals occurrences. The aplite dykes, along with the mafic dykes and quartz veins, are regarded as the likely conduits and hosts of the mineralisation. The source of the ore bearing fluids appears to be unrelated to magmatic fluids associated with the Wondalga Granodiorite or the ABIC and a deep mantle source has been postulated. The primary mineralised reef lines in the Adelong Goldfield are scattered over an area of about 40 km2, have an aggregate strike length of ~15 km, and have a known vertical extent of at least 500 m in places. Historically exploited mineralised zones were generally less than 2 m wide and averaged 1 to 7 oz/t. Wider zones (up to


35


Figure 5 Project area geology

Structure Quartz or non-magnetic dyke Structure or foliation in granite Magnetic dyke (possibly mineralised) NNE trending dykes (foliation direction) Magnetic dyke (north trend)

Alteration Zoned alteration (NNE trend) Intense alteration (NE trend)

Wondalga Granodiorite Low magnetic susceptibility Intermediate magnetic susceptibility High magnetic susceptibilty Very high magnetic susceptibilty Altered (Very low magnetic susceptibility)

Magnetic zoning Zoning or intrusion with Wondalga Granodiorite

Relic Formations Formation 1 - possible folding Formation 2 - faulted or folded

Intrusion Possible fragment of ABIC

Donkey Hill Norite Low magnetic susceptibility Moderate magnetic susceptibility Very high magnetic susceptibility

36



13m at 7g/t) of disseminated-stockwork style mineralisation occur at several prospects.

Figure 6 Quartz veins underground

Reefs are more concentrated in specific areas, now named (Section 9.1) for the names of the old underground mines on them. Aeromagnetic images (illustrated in Section 10.4) show primarily NNW and NE trends, and most of the historically exploited deposits appear to occur in close association with the N to NNW trending features. The NNW structures represent regional trends observed in the Wondalga Granodiorite. The NE structures possibly represent dilatational zones within the current NW structural model. Many of the historically exploited deposits occur in the NNW structures where they are in close association with the crosscutting NE structures. The majority of the high grade gold deposits occur in and adjacent to steeply dipping narrow quartz-pyrite veins or lodes within fracture and/or shear zones in the Wondalga Granodiorite and the ABIC. The reefs are adjacent to thin irregular sheets of highly altered and sheared chlorite-biotite-carbonate altered mafic dykes and/or surrounding silica sericite albite carbonate altered granitoids. In other words the reefs commonly occur adjacent to zones of potassic alteration and silicification. Sheared mafic dykes and cross cutting felsic porphyry dykes can also host mineralisation. Gold mineralisation is often coarse grained and can be observed freely or as fracture fill, generally located within well-developed networks of quartz-pyrite veins or veinlets or on the boundaries of sulphide grains. Gold grains up to 3*1 mm6 have been observed in drilling samples. Fine gold also occurs as inclusions within the sulphide minerals. The major sulphide gangue mineral is pyrite, with minor chalcopyrite and sphalerite, or rare pyrrhotite, arsenopyrite and galena also occurring. Scheelite and bismuthinite have also been documented. Mineralised zones are made up of single or multiple quartz veins. Ore chutes generally exhibit strong plunge controls, which may be a result of intersecting structures associated with minor changes in dip along the mineralised structures. An apparent late stage dextral strike-slip shear event may also have some control on mineralisation geometry.

Figure 7 Challenger Adit mapping

Figure 6 (within the modern adit driven into the centre of the Challenger deposit) illustrates a steeply dipping multiphase anastomosing quartz vein reef. The margins of the ~0.3 m wide veins are highlighted by red paint lines. Figure 7 maps the adit (legend in Figure 8) where it encountered the reef (dashed red lines). It illustrates the unusually wide width of the vein there (between 10 and 15m). The adit was driven ~SSE through unaltered granodiorite (grey) whilst the reef (red lines) was flanked by altered granodiorite (light yellow and pink). Grid lines are at 10 m spacing, and N is at the top. Samples for metallurgical analysis were taken from the numbered locations in the Figure. Figure 6 (and later Figure 35) was taken at the southern (bottom) end.

6

AC, March 2000, pp26 Replacement Prospectus dated 8 August 2016, Replaces Prospectus dated 25 July 2016

37


Figure 8 Challenger adit mapping geology legend

Quartz veins Shears and minor faults Fine grained diorite dyke Medium grained quartz feldspar porphyry dyke Fine grained quartz feldspar porphyry dyke Medium to coarse grined quartz feldspar dyke with blue quartz phenocrysts Granodiorite with variable Fe metasomatism Unaltered granodiorite Coarse grained to locally aplitic granodiorite Granodiorite with variable sericite and silica alteration

Structurally controlled zones of disseminated gold mineralisation (up to 7 m wide grading 10 g/t on the Challenger deposit) are also present in some areas but were apparently not historically exploited. The relatively coarse and erratically distributed nature of the gold at Adelong leads to significant practical sampling problems, and drilling assay results may underestimate gold grades. The gold produced from Adelong was reasonably pure for natural metal. Bullion assays from the Gibraltar indicate gold up to 22ct purity was produced from gravity and cyanide treatment. Fairly recent metallurgical test work on Challenger ore indicated it to be generally free milling with overall gold recoveries in excess of 95% for a combined conventional grind, gravity, flotation and intensive leach treatment circuit. The gravity recoverable gold component was up to 70%.

9

MINERALISED AREAS

Mineralised areas in the Adelong Goldfield are described in terms of: • Area names – the names derived from the old mines, now synonymous with reef names. • Reef details – historical notes on individual reefs. 9.1 AREA NAMES At least 20 individual gold mineralised reef lines or mineralised areas are known to occur in the Adelong Goldfield, with most shown in Figure 9. Their names are taken from the old underground gold mines (yellow dots) on each reef or reef system. Reef outcrop lines are shown in red. Some areas have multiple sub-parallel reefs and other have swarms of outcrop lines (such as at the Gibraltar). Alluvial gold occurs in the Adelong Creek to the S and W of the reefs, and historic alluvial

38

mining occurred at various spots along the Adelong Creek (running westwards through Adelong and then NNW parallel to and just to the right of the road marked in white). As the Project tenements are roughly coincident with and enclose all of the old underground mines the term Adelong goldfield is used interchangeably with the Adelong Project name. And the individual mineralised reef areas names are used interchangeably now with individual Project exploration areas. The current general Project area is limited to and corresponds with the area from just north of the town of Adelong up to and including Donkey Hill. This area is illustrated with its mineralised reefs in Figure 10. Reefs mapped by GCR are marked with thick blue lines, and they are shown with contoured topography and the red ML boundary. Most reefs clearly have a northerly orientation, an exception being the Gibraltar deposit where the structures trend NE. Remaining small mullock heaps are marked by the black outlines. 9.2 REEF DETAILS Descriptions and illustrations are given for the most prominent reefs previously mined: • Old Hill. • Gibraltar. • Victoria Hill. • Currajong. • Caledonian. • Fletchers. • Donkey Hill. • Blue, Cadzos, The Dyke and Payleys. • CampReef. • Sawpit / Lady Mary corridor.



Figure 9 Mineralised areas and reefs

kilometres


39


Figure 10 Project area mineralised reefs & mullock

Donkey Hill

Gibraltar

Fletchers

caledonian

Currajong

old Hill (Challenger)

Victoria

40



Figure 11 shows an aerial photograph of the Project area.


41


9.3 OLD HILL The Old Hill line is located almost entirely within current ML1435. The reef structure was worked at various locations along 1,400 m of strike. It has been the principal focus of exploration and development by modern explorers, and contains the Challenger deposit for which modern Resources have been estimated (see following sections). The line strikes ~NS and dips steeply to the W. At several locations, two parallel structures were worked. Total recorded production from 1857 to 1904 is almost 148,000 oz at a recovered grade of ~ 2.8 oz/t7 (87 g/t) although actual production is probably much greater. Principal mines from S to N (right to left in Figure 12) were the Adelong United (140 m deep, and not in Figure), Our Own (120 m), Prowse and Woodward (335 m), Challenger (205 m), North Challenger (140 m) and Challenger Extended (70 m). The latter 4 mines all fall within the recent Challenger geological modelling. It should be noted that the narrow vein “hand-picked” mining methods employed at the time, and the probable supergene enrichment of gold at shallow depths, led to very high grades being extracted, and that these grades give no indication of the grades likely to be achieved with a modern mining operation. Figure 12 is an old long section of the workings (looking E, N to the left). The main Challenger shaft is at the top of the hill (middle), Challenger Extended is on the far left. Figure 12 Old Hill workings

7

42

AC, March 2000, pp24.



9.4 GIBRALTAR The Gibraltar line of reefs consists of several NE/SW trending lodes which can be traced for ~850 m along strike. No modern resources have been estimated here. Lodes dip at 75° towards the SE. Several NS trending structures were also worked. Long sections suggest mineralisation had a steep S plunge. Old records indicate that relatively wide disseminated-stockwork mineralisation, similar to that occurring at Challenger, may be present in proximity to the Perkins and Radcliffes Shafts. However records quality is poor and this potential remains untested. Initial extraction between 1857 and 1891 ceased when faulting overcame old mining methods. However the area saw renewed activity following exploration along the dextral faults, and total recorded production from 1891 to 1943 is 141,350 oz. The average recovered grade from the Gibraltar is in the order of 1.1 oz/t (34g/t). Main shafts worked on the Gibraltar line, from SW to NE, were Perkins (150 m deep), O’Briens (366 m), and Radcliffes (230 m). Numerous other shafts existed, including Shepherds, Henry Parkes, South Gibraltar, Hunter’s and Contessa’s. The Gibraltar Mine was the last to operate on the Adelong field, closing in 1947. Figure 138 is an old long section of the workings (looking NW, NE to the right) and indicates the many unworked areas.

Figure 13 Gibraltar workings

8

ECSI, June 2000. Independent geological report. Fig 6, pp15 (attributed to AC)


43


9.5 VICTORIA HILL The Victoria Hill line is located ~300 m W of the Old Hill line, and the workings extend from just N of Adelong for ~1,400 m. No modern resources have been estimated here. The structure strikes NS and dips steeply to the E. Figure 14 is an old long section of the workings (looking E, N to the left), indicating northerly plunging lodes open at depth. Coordinate grid lines have a 200 m spacing. Historically exploited gold mineralisation generally occurred in several lenticular quartz-sulphide veins commonly enclosed in sheared, variably mineralised mafic dykes in a zone ~25 m wide. Total recorded production from the initial discovery in September 1857 through to 1899 is 105,000 oz at an average grade of about 1.8 oz/t (~56 g/t). The Williams Mine produced over 25,000 oz gold at an average grade in excess of 150 g/t. Main mines, from S to N (right to left), were Little Victoria (100 m deep), Union (170 m), Research (140 m), Great Victoria (315 m), Annetts (275 m), Flagstaff (255 m), Williams (304 m), North Williams (220 m) and Leviathan (180 m). Figure 14 Victoria workings

9.6 CURRAJONG The Currajong corridor may be a northern extension of the Victoria line. Modern Resources have been partly estimated here (see following sections) but the deposit has not been fully explored. Exploitation of the Currajong lodes may be affected by Permanent Conservation Order 72. The Currajong corridor encompasses the historic workings associated with the Main Currajong reef and the East Currajong reef 130 m to the E, an area of ~1 km * 150 m. Mineralisation on the Main Currajong reef strikes N, appears to dip steeply to the W, and indications are it plunges to the N. The East Currajong reef dips 70°E. Incomplete records indicated production gold grades in excess of 50 g/t. Gold was generally derived from irregular quartz-sulphide reefs and stringers up to 0.6 m wide. Records also indicate the presence of lower grade material between the lodes, with a bulk sample of this recording 19 g/t over 7 m. Modern exploration indicates the Main Currajong mineralisation to be up to 17 m wide. The Main Currajong shaft is ~100 m deep; workings on the East Currajong lode (130 m to the E) are less than 20 m deep.

9.7 CALEDONIAN The Caledonian reef lies N of the Old Hill line and may be a northern extension. The structure strikes N/S and dips steeply E. Mineralisation appears to plunge 20° to 30°S. Two main shafts were sunk, North Caledonian (98 m deep) and Main Caledonian (195 m). Historical records indicate a production gold grade of approximately 65 g/t. 9.8 FLETCHERS The Fletchers reef lies N of the Caledonian, and may be a northern extension. It also lies S of the Donkey Hill reefs and sits in a “corridor” with them (see below). The shaft was 91 m deep, and little else is known.

In the 1920s the Boumoya Adit was driven some 335 m in an ESE direction towards the main Currajong shaft, ending 16 m short and 32 m below the base of the shaft. The adit was refurbished and re-sampled in the 1980s, yielding some gold anomalous values (up to 19 g/t).

44



9.9 DONKEY HILL The Donkey Hill line may be incorporated into the Fletchers-Donkey Hill “corridor”, an area encompassing the Fletchers prospect in the S, extending through Donkey Hill to Lady Clare in the N. The zone has a strike length of ~1.0 km, and is possibly the northern extension of the Old Hill structure. It is also E of Gibraltar. Mineralisation is hosted in narrow N striking structures in the Donkey Hill Diorite, and dips steeply (possibly to the W). Ore shoots are recorded as plunging S at Lady Clare and may do the same at Donkey Hill. Unmined high grade material was reported in the lower levels of the Lady Clare workings, the reef reportedly, up to 1 m wide, with grades between 60 and 150 g/t, and located in a 2.5 m wide shear zone. Donkey Hill’s very different geology (lying within and ABIC diorite stock) from the rest of the reefs in the Project area suggests the mineralisation style could be different. Recorded production since 1889 was approximately 10,000 oz at an average grade of 1.3 oz/t (41 g/t), with actual production probably much higher. The main shafts in the Fletchers-Donkey Hill corridor, from S to N, were Fletchers (91 m deep), Whim (60 m), Donkey Hill (181 m), Hodges (90 m) and Lady Clare (155 m). Judging from the size of the dumps there, and the number of mapped reefs, the mine there would have been of significance. 9.10 BLUE, CADZOS, THE DYKE AND PAYLEYS The Blue, Cadzos, The Dyke and Payleys workings are located N of the Gibraltar prospect. The area appears to have been worked by surface sluicing followed up by minor shaft development on narrow NE to N trending quartz veins. Historical production is assumed minimal. The Blue structure is the most W of the group and may extend for over 200 m in a NE direction. The Dyke workings lie between The Blue and the Cadzos structures and trend NW. The Cadzos structure is the most E of the group and can be traced N/S for over 100 m. The Payleys workings occur ~500 m north of The Dyke. Minor shafts and pits exist over a N/S area ~500 m long. Another set of old workings occur 600 m NE of Payleys. 9.11 CAMP REEF Camp Reef is located S of the ML and may be a southern extension of the Old Hill reef. Historical records are scant but indicate average grades in the order of 3 oz/t (90 g/t) and the deepest shaft to be 58 m. A ‘large low grade ‘lode’ at the bottom of this shaft is referred to. 9.12 SAWPIT / LADY MARY CORRIDOR The Sawpit Lady Mary corridor occurs SE of the ML. Minor old workings are scattered along a 4 km NNW trend from Lady Mary in the N to Sawpit in the S. Historical reports indicate that both narrow high-grade quartz veins and lower grade disseminated mineralisation was mined at certain locations along this trend. Specific reports on the Sawpit area record the presence of lodes

from 1 to 6 m wide assaying up to 60 g/t. Those records also indicated that the material yielded poor recoveries through the treatment batteries. Recorded production is less than 3,000 oz at average grades of 0.7 oz/t (22 g/t), mostly from the Lady Mary deposit which was worked down 170 m. Several shafts are present on the Sawpit line, the deepest being approximately 25 m. Other workings include New Chum and Easter Gift.

10

EXPLORATION

Modern exploration at Adelong has been conducted since the 1970s by a variety of explorers (listed in the Section 5). Exploration was predominantly through drill hole sampling programs (based on the known reefs) and geophysical and geochemical surveying. Other important exploration activities included driving underground adits into two major reef lines and a program of sampling the old mine dumps. Past exploration is described in terms of: • Exploration concentration on just two areas (Challenger and Currajong) out of many. • Topography mapping. • Geological mapping. • Geophysical surveys. • Geochemical soil sampling – gold and zinc. • Drilling and sampling. • Adits – at Challenger and Currajong. • Old mine waste dump sampling. • Geotechnical studies – for open pit optimisation and design. • Metallurgy. Modern exploration culminated in detailed geological modelling and JORC Resource estimation in two of the mineralised areas and less detailed non-JORC evaluation of several other areas and the old mine dumps (described in Section 11, with the Resources in Section 12). That exploration also provided the framework for defining the Consultant’s view of the future exploration potential (Section 13). 10.1 EXPLORATION AREA CONCENTRATION Modern exploration at Adelong has concentrated virtually exclusively on the old underground mining areas (listed in Section 9 and illustrated in Figure 9). And in particular it has concentrated on a more limited ‘Project area’ from just north of Adelong in the south to Donkey Hill in the north – an area with approximate extents 4.0 km N/S and 1.5 km E/W (illustrated in Figure 10). Initial modern exploration undertook geological reconnaissance over most of the EL area and drilled limited numbers of holes on various (but not all) reef lines. However the bulk of modern exploration then focussed strongly (for the reasons given below) on the adjacent and along strike Challenger and Challenger extended deposits (on the Old Hill reef line) and on the Currajong deposit (north of the Victoria reef line) within the Project area.


45


This exploration concentration is discussed here not to decry the potential of the Challenger and Currajong areas but to highlight the potential of the other reef lines given their relative lack or absence of modern exploration. It is discussed in terms of: • Justification – a list of reasons. • Past drilling concentration, and recent moves away from it. • Mining concepts – held by explorers which guided their exploration methods. 10.1.1 CONCENTRATION JUSTIFICATION Exploration in the area on or around these two reefs was justified by: • Their past combined production of ~7,300 kg, representing >60% of total reef production (see Table 1). The high production was essentially taken as proof of good mineralisation. • The Currajong deposit being seen as the logical, virtually un-mined, extension of the Victoria Line. • Their relative proximity to each other (a benefit for future mining). • Their existence on elevated ridges (a benefit for open-cut mining). • The probability that past mining had left considerable ground un-mined below them and along strike. • Initial exploration success with more muted results on other reefs. 10.1.2 PAST DRILLING CONCENTRATION The Challenger and Challenger Extended deposits on the Old Hill reef line became an initial primary exploration drilling focus apparently due to promising and consistent results there as opposed to more varied results on other reefs. CEC’s initial interest was apparently prompted by old records of cross-cuts at Challenger indicating high grades (4 to 23 g/t) over good widths (5 to 14 m). Successive explorers more or less continued this approach of concentrating on Challenger with their drilling, while slowly adding holes on other reefs. Although AC drilled numbers of holes on most of the other reefs in the Project area they also continued the trend by drilling Challenger / Challenger Extended in a fairly uniform and concentrated way. GCR added further in-fill holes at Challenger and Challenger Extended but then added a secondary drilling concentration at the Currajong deposit. That was to investigate adding to the existing Challenger Resources, which it did. The focus on the Challenger, Challenger Extended and Currajong areas, and the potential (from past production) of the Victoria reef, were the reasons for the shape of the ML (acquired by AC) to surround only those areas. Most recent exploration by Tasman and MGL has started to overcome the concentration on the Challenger and Currajong areas by commencing the search for along-strike reef line connections (between Challenger, Caledonian and Fletchers) and reef extensions (Currajong).

46

10.1.3 MINING CONCEPTS CEC initially interpreted the high grades and broad widths in old mine cross-cuts at Challenger as a style of mineralisation which could potentially support bulk modern underground mining. Slightly later PanAust’s aim was to explore for shallow open -pittable material. AC’s objective was to define sufficient Mineral Resources to support a commercial open pit gold mining and treatment operation. They would start operation from an open pit mine at the Challenger deposit (identified by AC as the best advanced resource prospect and most likely to be proved a mineable resource) and then use initial cash flow from the open pit and re-treatment of old waste dumps to explore the remainder of the nearby goldfield and define other mineable resources to extend the operational life. GCR continued with this general goldfield development concept but seriously considered and studied also incorporating underground mining below the open pit at Challenger. Pit optimisation and underground studies attempted to determine an optimal depth to the open pit below which underground mining would proceed. Most recently MGL has returned to initial mining being underground and on the Challenger deposit (benefitting from direct access through the existing adit). 10.2 TOPOGRAPHY MAPPING Fine scale topographic data was obtained by AC/GCR when they had the Project area flown by GeoSpectrum in 2002. The topography surface (Figure 15, with the ML boundary in red) modelled from the data was fine enough to discriminate tracks and small existing earthworks and dams. A small quarry dug in to early 2000s immediately adjacent to (and west of) the Challenger deposit was later spliced into the surface 10.3 GEOLOGICAL MAPPING Most if not all of the modern explorers performed surface geological mapping within the Project area. Details of the mapping are sketchy as they appear to have been held in-house. The map provided in the Geology section was produced by MGL and represents a refinement of GCR’s given in the 2012 IGR. One of the most useful pieces of geological mapping was that of the reef surface outcrop lines, and these are displayed in many subsequent Figures. Up until 2012 the outcrops being used were those mapped by GCR. They mapped visible outcrops as well as outcrops inferred from old mine shafts. NB: In some places shafts quite some distance apart were joined as the same outcrop. However the Consultant maintains that in places these joins are incorrect and that the shafts exist on separate reefs. Re-mapping these outcrops, with the benefit of the most recent geophysical data and interpretations (see below), will possibly alter the long shaft joins. This would increase the potential for future exploration success.



Figure 15 Topography surface

10.4 GEOPHYSICAL SURVEYS 10.4.1 SURVEYS Virtually all exploration in the decade to ~2012 used geophysical surveying and interpretation carried out for AC in the later 1990s. Reporting was scanty, however past Annual Reports mention surveys: • Induced Polarisation (IP) and resistivity (gradient array, followed up by dipole-dipole) in 1997. • Airborne (helicopter) magnetics and radiometrics in 1996, by Geo Instruments.

below as updates of, or additions to, the 2012 IGR content. These geophysical interpretations, including new illustrations, were personally communicated to the Consultant by Mr David Pratt (Tectomet Exploration). MGL contracted Near Surface Commodities Pty Ltd (NSC) to perform the re-interpretation.

Explorers AC, GCR and Tasman relied on the 1990’s interpretations of that data. Illustrations of those interpretations were given in the 2012 IGR. The Consultant’s commentary in the 2012 IGR was that the 1990’s interpretations suffered greatly from a N/S fabric, caused by E/W line effects remaining in the data processing, which effectively masked the NNW (slightly off-N/S) reef outcrops. Aspects of MGL’s very preliminary and vastly improved re-interpretations were given in the 2012 IGR.

10.4.2 IP & RESISTIVITY The 1997 ground based gradient array IP survey gave coverage of ~4 km2 in the Project area. It used E/W lines at 100 m spacing and sampling every 25 m, to give 30 line km of surveying. This was followed up by 8 line km of dipole-dipole IP. Figure 169 shows MGL’s recently reprocessed colour contoured chargeability and resistivity data from the gradient array surveys – plotted together to illustrate the similarities and differences. Reef outcrop lines are shown in black and coordinate grid lines are at 500 m spacing. Refer to Figure 10 to reference reefs with area names.

Here the 1990’s interpretations are referred to as the ‘past’ interpretations. MGL’s 2012-2016 interpretations are referred to as the ‘recent’ interpretations, and they are included in the notes

Since 2014 MGL has begun to conduct new geophysical surveys, such as a ground-based magnetometer survey. NSC was contracted to interpret the data. Implications of the newly collected data are given in Section 13.5.

9

MGL, June 2016.


47


Figure 16 Gradient array chargeability & resistivity with mapped reefs

Chargeability: Past explorers believed that ‘high’ chargeability of >8 mV/V (yellow, orange, red areas in the left diagram in Figure 16) was significant at Adelong. Such areas coincide with many old workings, although not particularly well at Challenger (where the high orange area is slightly west the long linear mapped reef). MGL’s more recent analysis shows that the high IP anomalies are offset from the reef trends in many cases. A re-interpretation of the dipole-dipole surveys showed similar offsets for the shallow sections of the chargeability anomalies. It is possible however that deeper anomalies could be present in reef zones that were not previously mined. The general trend of the chargeability anomalies is nnW and aligned with the general foliation of the Wondalga Granodiorite.

Figure 1710 shows the same MGL re-processed chargeability in a 3D perspective view looking NW. The colour contoured chargeability data (slightly different colour ranges to Figure 16) is draped on a surface 150 m below the contoured topography. Pseudo E/W cross-sections show coloured chargeability of dipole-dipole IP lines. The mapped reefs are shown as vertically projected surfaces in khaki. Exploration drill holes are lotted in 3D as thin red traces (with those at Challenger highlighted in the orange oval). The NNW trending structures are clearly visible up through the southern part of the area, shown by the red to yellow ridges (Challenger, Victoria and Currajong).

10

48

MGL, June 2016.



Figure 17 3D chargeability with projected mapped reefs

The scale of these IP surveys is too large to see all of the fine detail needed to easily detect sulphide bearing gold reefs that may be less than a metre in width11. Short dipole spacing IP surveys may still have a role in soil covered areas where the early explorers may have missed high grade reefs and the soil depth is greater than three metres. Resistivity: Interpretations of the resistivity by previous the explorers were fairly vague and cursory (at least in available documentation). It was noted that the low areas (blue) were possibly significant and that the data strongly demonstrated trends oriented NNW and NNE. The strong NNW trends in the re-processed data are aligned with the local foliation direction and often align closely with the reef outcrops. Quartz reefs are expected to have a very high electrical resistivity12, hence the expected alignment (yellow, orange, red areas in the right diagram in Figure 16). This alignment was NOT previously well appreciated as the strong N/S fabric (created by the data processing not removing the line effects sufficiently) masked the NNW alignment. It can also be seen that some mapped reef trends cut across the resistivity trends. The Consultant however maintains (see NB in Section 10.3) that some mapped contacts actually erroneously connect separate reefs, and that the resistivity trends reflect reefs very well. The often mapped single reef from Challenger to Challenger Extended is now believed by the Consultant to be two close but distinct reefs. The low resistivity NNE trend (blue) is probably not relevant as it is believed to be associated with the increased soil thickness in the NNE trending valley immediately north of the Challenger Mine. Figure 18 shows the same MGL re-processed resistivity in a 3D perspective view looking N. The 3D colour shaded contoured resistivity data (close to the colour ranges to Figure 16) is draped on a surface 150 m below the topography aerial photograph (the southern part of the ML boundary is partly shown with the black line). The mapped reefs are again shown as vertically projected surfaces in grey. Exploration drill holes are lotted in 3D as thin red traces. The NNW trending structures are clearly visible up through the whole area (the yellow and red 3D colour shaded ridges). Two more discrete NE trends are marked by vertical red planes, the longer central one coinciding with a resistivity low (blue).

11 12

D. Pratt, June 2016. Near Surface Commodities, personal communication. D. Pratt, June 2016. Near Surface Commodities, personal communication.


49


Figure 18 3D resistivity with projected mapped reefs

10.4.3 MAGNETICS & RADIOMETRICS The 1996 airborne helicopter magnetics and radiometrics survey gave coverage of 11 km2 in the Project area. It comprised 220 km of E/W lines flown at 50 m spacing and at ~50 m sensor height, with readings every 4-5 m. Data was recently re-manipulated in Intrepid software. Ideally, this survey should have been flown at 25 m ground clearance to avoid the significant loss of resolution by flying at 50 m13. Since 2014 MGL has been incrementally conducting a ground based magnetometer survey. Although this is not yet complete preliminary results from it are presented. Magnetics: Figure 1914 plots a 3D colour shaded contour map of the total magnetic intensity data gathered in 1996. The mapped reefs are shown with block lines and the ML boundary is in red.

13 14

50

D. Pratt, June 2016. Near Surface Commodities, personal communication. MGL, June 2016.



Figure 19 Total magnetic intensity

This recent Figure dramatically improves on that presented in the 2012 IGR, revealing the same NNW trends shown by the chargeability and resitivity. Although past interpretations of the magnetics were also vague and cursory the NNW trends were noted along with the cross cutting NNE features. The pronounced circular (red) feature in the north is the Donkey Hill intrusive. Victoria and Currajong wild be marked by linear lows. Figure 20 shows the same magnetics in a 3D perspective view looking N (similar to the Figures above, showing the mapped reefs, drill holes and ML), draped over topography.


51


Figure 20 3D total magnetic intensity with projected mapped reefs

Figure 2115 shows the magnetics in a 3D perspective view looking NE. This is of the first vertical derivative magnetics draped over topography with a 2x vertical exaggeration. Figure 21 3D total magnetic intensity (1VD)

15

52

MGL, June 2016.



The NNW trending structures are clearly visible in the right half of the area, shown by the yellow and orange ridges (particularly at Challenger). The projected mapped reefs are marked by vertical grey planes. Victoria and Currajong wild be marked by a linear low trend.

Figure 22 MGL ground mag survey area

The NNW structures represent the same regional trends observed in the Wondalga Granodiorite. The NE structures visible possibly represent dilatational zones within the current NNW structural model. It is not clear, although possible, if the intersections of the NNW trends with the NE trends are associated with gold deposits. This association does at least occur at the Challenger and Caledonian deposits. MGL has carried out a ground based magnetometer surveys incrementally since 2014. The survey now has 1,814 lines at 5 m spacing for a total of 500.8 km. The average sample spacing is 0,8 m. Figure 22 shows the survey area (shaded in brown) with the black ML boundary in the lower half.

Figure 23 shows a preliminary presentation of the new magnetics data to 2016. The immediate observation is the very fine resolution of the features evident.

Figure 23 MGL 2016 magnetics Figure 24 Potassium


53


radiometrics: The Consultant has very limited information on the radiometric survey. Figure 24 plots a colour shaded contour map of the potassium channel.

On that basis the images potentially indicate many new lodes, many in non-outcrop areas, and for extensive continuations and connections to all of them (whether in outcrop areas or not).

10.4.4 GEOPHYSICAL DATA INTERPRETATION A particularly notable feature in 2016 of all images from MGL’s recent data re-processing is the close association of trends in the data (particularly the NNW trends) with many known and mapped reef lines. This association would probably be even closer given the Consultant’s view that some mapping erroneously joined outcrop dots following the presumed N/S reef orientation (caused by the N/S fabric artefact of old data processing).

The Consultant notes the slight 5-10° anti-clockwise overall rotation of most trends to the nearly N/S reef lines previously mapped, At Challenger there is some possibility that the Challenger Extended lode flexure to the east is possibly a sub-parallel separate reef to the east of the main Challenger reef (more closely matching the geophysical trend there). This slightly anti-clockwise trend rotation better explains the location of some of the scattered exploration mineralisation intercepts and explains why some exploration looking for northern extensions (such as Tasman’s) veered off course quickly.

These NNW trends now indicate along-strike extensions to many reefs. Trends also now exist (with the same characteristics) in unexplored areas.

MGL’s recent surveying appears to be producing very promising results. Implications of the new data are discussed in Section 13.5. Figure 25 shows initial interpretations of recent ground-based magnetometer surveys. Mapped outcrops of known would appear to be very finely defined in the image.

Figure 25 Initial interpretation of high resolution ground magnetometer program

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10.5 GEOCHEMICAL SOIL SAMPLING Geochemical soil and rock chip sampling was carried out predominantly by AC. The following Figures show coloured contours of soil sample geochemistry for gold and zinc. Figure 26 Soil geochemistry – gold

Figure 27 Soil geochemistry – zinc

10.6 DRILLING & SAMPLING 10.6.1 DRILLING SUMMARY Approximately 36,500 m of modern exploration drilling and sampling has cumulatively been done in the full Adelong Goldfield by the various explorers. Of that approximately 35,500m has been drilled within the Project area (illustrated in Figure 28 by drill hole traces marked as white line projections). Similar to the old underground mines the exploration drill holes too can be seen to cluster along the reef lines (blue). And in particular the majority of holes can also be seen to be highly concentrated within the ML (red boundary) and on the longest line of lode in the E, the Old Hill Line (containing the Challenger and Challenger Extended deposits). The coordinate grid has 100m spaced lines. The major drilling methods were reverse circulation (RC), diamond and percussion (RAB). The vast majority of holes were drilled from surface, inclined so as to intercept the sub-vertical reefs obliquely, and oriented ~E/W so as to be sub-normal to the reef strike. A small number of holes were drilled from underground in the adit below the Currajong deposit (NW part of the ML). Sampling was mostly fairly continuous down-hole and at metre scale. Gold was routinely assayed for with the various explorers assaying other suites of elements as they saw fit. Drilling data was collated by AC in the late 1990s, computerised by the Consultant into spreadsheet form, and then updated by subsequent explorers.


55


10.6.2 CEC ERA DRILLING (1979 – 1988) Between 1979 and 1982 Carpentaria Exploration Corporation Pty Ltd (CEC) carried out 7,700 m (116 holes) of RC and diamond drilling – focussed mainly on the Challenger deposit. In 1982 MM&S farmed in, and up to 1985 had completed 2,800 m of diamond tailed drilling. Most work was at Challenger, but some exploration was also undertaken at Caledonian and Currajong. In 1985 Pan Aust farmed in to explore for shallow, open-pittable mineralisation and up to 1988 had also completed 2,800 m of percussion/diamond drilling. Exploration was spread between several lines of reef, Challenger, Our Own, Caledonian, Victoria, Currajong, Gibraltar and Dyke. An undefined amount of drilling was subsequently variably done to 1996. Table 216 summarises the CEC and JV partner era drilling. Figure 28 Exploration drilling

Table 2 CEC era exploration drilling (1979 to 1988) Area / reef line / mine Old Hill (including Challenger)

Holes

Meterage

(#)

(m)

68

8,763

Caledonian

9

1,435

Currajong

11

1,244

Victoria

7

899

Gibraltar

15

712

Dyke

6

256

116

13,309

total

10.6.3 ADELONG CONSOLIDATED/CAPITAL ERA DRILLING (1996 – 2000) Between 1996 and 2000 Adelong Consolidated Gold Mines / Adelong Capital (AC) did 5,850 m (55 holes) of reconnaissance and follow-up RC drilling of coincident gold soil anomalies and IP anomalies at Donkey Hill, Fletchers, Currajong, East Currajong, Gibraltar and Challenger. At Currajong 817 m (6 holes) of drilling (diamond) was from underground in the refurbished Boumoya Adit. They also RC drilled 503 m at Sawpit. Additionally they did 5,602 m (80 holes) of Resource definition RC drilling at Challenger. This Challenger drilling tightened up previous drilling of the shallower portions and extended the deposit northwards into the Extended area. Assaying employed cyanide leach of 1 kg samples of pulverised drill samples in order to minimise sampling / assaying problems often associated with the coarse erratically distributed gold. Table 3 summarises the AC era drilling. Table 3 AC era exploration drilling (1996 to 2000) Holes

Area / reef line / mine

Meterage

(#)

(m)

Challenger

80

5,602

Donkey Hill, Fletchers, Currajong, East Currajong, Gibraltar, Challenger

55

5,850

Currajong (underground)

6

817

Sawpit

503 total

141

12,771

10.6.4 GCR ERA DRILLING (2000 – 2007) Between 2000 and 2007 Golden Cross Resources (GCR) drilled 6,324 m (70 holes) of RC, mostly as in-fill drilling at Challenger. They also drilled reconnaissance holes in scattered locations including some concentration at Currajong. Data from all of the 1979 to ~2005 drilling was used to estimate Mineral Resources (Section 12) at Challenger/Challenger Extended and at Currajong. 16

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2000 IGR, Table 2, pp18.

10.6.5 TASMAN ERA DRILLING (2007 – 2009) Between 2007 and 2009 Tasman Goldfields (Tasman) drilled 907 m (34 holes) of short RC holes in scattered locations to test reefs between Old Hill and Currajong (probably the Victoria Hill line) and near Caledonian.



10.6.6 MGL ERA DRILLING (2011 TO PRESENT) 2011 program: In 201117 Macquarie Gold Limited (MGL) drilled 636 m (34 holes) of very short RAB holes on 4 E/W cross-section lines. The holes utilised a track-mounted blast hole drilling rig, samples were taken continuously every half-rod length (1.8 m), and all samples were analysed for gold by fire assay and for a multi-element suite.

Figure 29 MGL 2011 drill cross-sections

The aim was to test reef connections in areas of little or no outcrop and to see if reefs were continuous and their near-surface expressions would be detectable. Five cross-sections were planned – four on the north end of the Old Hill Line (between Challenger Extended and Caledonian and between Caledonian and Fletchers) and one NW of Currajong. Four or the five cross-sections were drilled, with the northern one near Fletchers abandoned (due to the boggy ground in the valleys which has prevented much past exploration in the low areas at Adelong). Figure 29 shows the 5 planned cross-sections (blue dashed lines), with the 4 drilled ones numbered. Lines 1 to 3 are along the expected lode line (red dashed line) through Caledonian and towards Fletchers. Inclined holes were closely drilled along the section lines to form a fence of holes expected to intersect any surface expressions of a gold mineralised reef. Figure 30 shows the drilling on Line 2 (~E/W cross-section looking N), with 2 holes on the left (west) intersecting the expected vein with gold assays of ~0.1 g/t. The vein, and others, was also encountered in Lines 1 and 3, exhibiting a NNW orientation.

Figure 30 MGL 2011 drilling – Line 2

The program successfully proved that reefs could be detected near surface by weak gold mineralisation. In the Caledonian area it proved the continuity of the reef, extended it N and S, and found indications of other previously un-mapped sub-parallel reefs close by. 2013 program: In 201318 MGL drilled 1,529 m (12 holes) of RC holes. The holes utilised a truck-mounted RC drilling rig, samples were taken continuously every 1.0 m, and all samples were analysed for gold. Figure 31 shows the drilling rig on the ridge at Currajong.

Figure 31 MGL 2013 drilling rig

The program was also to test connections or extensions of mapped reef lines in 5 areas, essentially a degree of in-filling. The reefs lines were essentially an eastern one (through Challenger, Caledonian, Fletchers and Donkey Hill) and a western one (through Victoria North and Currajong). One hole was drilled on each of 10 E/W cross-sections with two on an 11th (4 cross-sections were at Donkey Hill, 1 at Fletchers, 3 at Caledonian, 2 at Currajong and 1 at Victoria North).

17 18

2011 GeoRes drilling report. 2014 GeoRes drilling report.


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Figure 32 MGL 2013 drill cross-sections

Example cross-sections are given below to illustrate the success of the newest drilling and to show that it confirmed results of past drilling by encountering similar mineralisation in predicable locations. Figure 33 illustrates a central E/W cross-section at Donkey Hill drilled in 2013, looking N. The westward (to the left) dipping new hole (MRC12023) intersected the known vein at slightly greater depth (red oval) and also intersected 2 completely new veins up-hole ~30 m and ~50 m to the E (dashed red ovals). These intercepts were confirmed by other new holes in cross-sections drilled 50 m and 75 m to the S. Figure 33 Donkey Hill cross-section 5,800 N

Figure 32 shows the planned cross-sections (red lines). Holes were inclined at between 50° and 60° below horizontal and aimed to intercept the sub-vertical reefs at depths complementing existing holes. Hole depths ultimately ranged between 44 m and 164 m. Holes were either oriented grid due east (090°) or grid due west (270°). Holes encountered 12 “ore grade” intercepts >1.0 g/t and many other “sub-grade” intercepts >0.5 g/t. At least one intercept existed in nearly every hole, and most contained multiple mineralised intervals. The best intercepts were 1 m @ 17.0 g/t at Fletchers and 1 m @ 14.2 g/t at Caledonian. Fire assaying for gold was concluded to be unreliable for higher grade samples >0.2 g/t, for which bottle roll assays were found more accurate (and were subsequently concluded to be more accurate than fire assays at all gold grades at Adelong).

Figure 34 illustrates a central cross-section at Currajong drilled in 2013, looking N. The W and E dipping new holes intersected a known vein (red oval) and a series of new veins (dashed ovals).

Positions and composite widths of the mineralised intercepts encountered were interpreted as successful intersections of the existing vein systems, some of them in blind areas. In virtually every case, and in all exploration areas drilled, the new hole assays confirmed existing veins. In places they also extended those veins in strike and depth, and in other places they discovered new veins. The results validated the ‘vein exploration model’. A lower gold cut-off of 0.2 g/t was interpreted as useful for identifying vein zones, reduced to 0.05 g/t when looking at extensions of veins or at structures that may link them.

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Figure 34 Currajong cross-section 4,480 N


The Consultant’s concluding views were that the intercepts found appeared to correlate linearly with outcrop mapping and NNW structures at Currajong, Donkey Hill and Caledonian. For firm interpretation of vein systems (each having a sufficient number of intercepts) further drilling is required. Should that drilling confirm planar veins in a way that expands their surface areas then computerised geological modelling and Resource estimation should result. 10.7 ADITS In 1988/9 Pan Aust (in JV with CEC), in a joint venture with the Government Insurance Office of New South Wales (GIO), drove a ~400 m long adit eastwards into the approximate centre of the Challenger deposit at the 1,380 m RL level (75 m below surface). The adit descended at a very slight gradient from the portal. The adit purpose was to obtain a bulk sample for grade determination and metallurgical test work and to demonstrate continuity of gold mineralisation. A bulk sample of ~1,200 t @ 5.6 g/t was recovered from an area driven along foot-wall and hanging-wall reefs at the end of the adit (mapped in Figure 7). The average grade was determined from sampling faces and stockpiles from 33 individual cuts. Figure 35 at the southern end of the drives, shows the bulk sampling area and also illustrates the unusually wide width of the vein there (10 to 15 m). The mining has extracted material from a foot-wall zone (drive on the left on the eastern side) and a hanging-wall zone (drive on the right) separated by a narrow pillar of sheared material. Pan Aust observed that bulk mined grades were significantly higher than drill hole grades in the vicinity of the adit, concluding that drill holes may under-sample Adelong gold mineralisation by as much as 50%. Figure 36 illustrates the Challenger adit portal (lower centre of shot, just to the right of the lower white sheds) looking east towards the Challenger outcrop (crest of ridge on skyline). The rock extracted from the adit is dumped across the slope in front of the portal.

Figure 35 Challenger adit bulk sample area

Figure 36 Challenger adit portal area

Figure 37 Challenger adit portal

The Challenger adit was refurbished by AC in the late 1990s and then used by GCR in 2005 to take in-situ samples in the ore zone for metallurgical testing. The adit geological mapping (Figure 7) locates the positions of the metallurgical sampling. The adit descends away from the portal and was generally full of water (which enters via the open old workings as well as via the portal itself) during periods of project inactivity. Figure 37 illustrates the currently dry portal. An ~335 m long adit also exists at Currajong, called the Boumoya Adit, excavated in the 1920s. It was driven ESE from surface towards the old main Currajong shaft, and rises gently from the portal. It was also refurbished and sampled by AC in the late 1980s, and a number of diamond holes were subsequently drilled at various orientations and inclinations. Although the adit ascends and therefore drains freely rubble exists outside the portal and consequently the entrance zone floods.

Figure 38 maps the adit from the portal in the NW (top left) to the near the Currajong mine shaft in the SE (bottom right). Numerous reefs were encountered near the shaft. The scale bar is 100 m long.


59


Figure 38 Boumoya Adit below Currajong

10.10 METALLURGY Although not strictly “exploration” it should be noted that various explorers, particularly the latter ones, undertook various metallurgical studies on gold extraction and recoveries. Figure 7 on the Challenger adit mapping gives the locations of GCR’s in-situ metallurgical sampling.

11

RESOURCE MODELLING & ESTIMATION

Modern computerised geological modelling and Mineral Resource estimation was commenced in ~1998 by AC on the Challenger deposit. The process was iteratively updated by successive explorers and JORC 2004 Mineral Resources were ultimately reported in 2005/6 for both the Challenger and Currajong deposits by the Consultant on behalf of GCR. That modelling and estimation was based on the drilling data (to ~2006) and geological modelling was implemented with a vein modelling method.

10.8 MINE WASTE DUMP SAMPLING Most of the old underground workings have waste dumps on surface immediately adjacent to the shafts. Cumulatively the dumps represent a considerable tonnage. Considering the effective high cut-off grades inherent in the old historical mining it was presumed the waste dumps would contain gold. Consequently several explorers carried out dump evaluation programs to ascertain grade and estimate tonnage. CEC reported initial Resources and AC/GCR undertook a detailed evaluation. AC/GCR work included re-locating some of the material. 10.9 GEOTECHNICAL STUDIES During the GCR exploration era a geotechnical study was undertaken in 2001. The study used rock faces exposed in a small quarry adjacent to the Challenger deposit (visible in Figure 36) and was to determine maximum open pit wall slopes and bench and batter dimensions. The study indicated that overall 60° slopes were valid and that sightly steeper 65° slopes could be applied to western pit walls. Overall 15 m face bench heights were suggested, with 80° face angles and 6 m benches widths. On eastern sides of a pit 75° face angles and 5 m wide benches were proposed, and on western sides 80° face angles and 5 m wide benches were proposed. Up to 30m face heights with 0 m width berms could be used in conjunction with 10 m wide haul roads. Another geotechnical study was undertaken in 2005. That study was to determine if pit design parameters needed changing if an open pit encountered old underground open or loosely filled stopes. The likely pit shape (based on past pit optimisation) was an oval shape, centred on the vein. It was expected that old stopes would outcrop on various levels along the narrow northern and southern spine of the pit. This study supported the 2001 work, and also found that the tight shape of the pits ends where old workings might be encountered would add to stability.

60

Challenger and Currajong were modelled in detail as they were both considered to have a sufficient density of drill hole data and they were the deposits undergoing the most intensive exploration. This was in contrast to the other deposits which were all characterised by far fewer drill holes and drilling less focussed on well-known structures. Pre-JORC Resource estimates were made for some of those deposits by various explorers. The Consultant in not aware of the specific details of those pre-JORC Resources. Modelling and Resource estimation has essentially not been done at the many other mineralised areas due to paucity of drilling data. The Consultant however considers that augmentation of existing drilling with relatively minimal new drilling and updated reef mapping could allow modelling at Victoria, Caledonian, Donkey Hill, and possibly Gibraltar. For this Report the past 2005 Resource estimation and reporting at Challenger and Currajong was concurrently reviewed in July 2016. Resources at the lesser explored Currajong were taken to be unchanged. The minimal more recent nearby drilling was taken to be on a separate reef line requiring further exploration before re-estimation. However at Challenger a limited amount of subsequent drilling prompted a re-estimate in July 2016. Geological modelling and Resource estimation is described in terms of: • Vein modelling method. • Challenger. • Currajong. • Donkey Hill. • Old waste dumps. 11.1 VEIN MODELLING METHOD The computerised geological ‘vein’ modelling method is described to give context to the Mineral Resources reported and for consideration in future exploration. Geological modelling is described in terms of: • Deposit type – its identification and shape characteristics. • Vein modelling – how a vein deposit would be geologically modelled and its Resources estimated.



11.1.1 VEIN DEPOSIT TYPE Structurally the Adelong reef deposits have been mined and interpreted as gold vein systems (Section 8). Essential features of the Adelong veins are that they are generally linear, sub-vertical, sub-parallel, and narrow. Their horizontal width is very small in comparison to the distance between their intercepts in drill holes. And the veins are well defined by sharp hanging-wall and foot-wall contacts. 11.1.2 VEIN GEOLOGICAL MODELLING Being well defined by sharp contacts the veins may be well represented by bounding surfaces. And surfaces are easily created digitally at DTMs (digital terrain models). ‘Vein modelling’ is a method of representing (modelling) geological shapes by bounding DTM surfaces. Appropriate computer modelling would commence with building gridded surface models of individual named vein contact surfaces using surface interpolation from the down-hole vein intercepts. This would be followed by a 3D block modelling method to build fine 3D domained blocks within the bounding vein surfaces. For narrow sub-vertical veins the blocks would be made small enough to allow fine across-strike discrimination (E/W in Adelong’s case). Grade would then be estimated into the blocks from databased drill hole sample assays domained (population segregated) or each vein. Individual block grades would usually be estimated using parameters derived from a geostatistical analysis of the domained vein drill holes samples. An “unfolding” block modelling method could be used to better trend the grade interpolation in the plane of the veins. Initial surface modelling would fit flowing gridded 3D surfaces to the vein contact interfaces – interpolated with a trending algorithm from interpreted down-hole vein intercepts. An advantage of grid surface modelling is the 3D interpolation of new values between vein intercept data points – more accurate than manual sectional interpretation. An advantage of using a trending algorithm is the rolling surface produced which realistically simulates natural surfaces. 11.2 CHALLENGER MODELLING Veins: To ~2005 the Challenger and Challenger Extended (immediately N along strike of Challenger) deposits were modelled together as a single almost vertical very steeply W dipping N/S striking vein. The vein foot-wall (east side) and hanging-wall (west side) gridded 2.5*2.5 m surfaces were interpolated using a trending algorithm from >150 vein intercepts interpreted in the drill holes (which exist on ~20 m spaced E/W cross-sections). The intercepts were interpreted largely from the position of a contiguous or composited section of anomalous mineralised assays cross-checked against the drill hole geological logs. Re-interpretation here in July 2016 involved interpreting new and refining old vein intercepts in all drill holes spanning Challenger and Challenger Extended to the N. New holes (mainly by Tasman) added very slightly to the northern extent, increasing the ultimate Resource tonnage marginally. Drill holes (black traces) are shown approximately in a near horizontal N/S long-section in Figure 39 (looking ~W, N to the right, green surface is topography, grid lines are spaced 100 m apart). The holes are virtually all drilled to the E dipping at ~60°, against the steep W dipping vein. Vein intercepts are marked by the thick sections along the holes. A notable modelling change in 2016 was the re-interpretation of the Challenger Extended deposit as a separate distinct sub-parallel vein. In Figure 39 the black intercepts represent the Challenger vein, the red intercepts the Challenger Extended vein. Figure 39 Challenger drill holes


61


Figure 40 Challenger vein floor surface

Figure 40 shows the sub-vertical ~N/S foot-wall surface (yellow) of the Challenger vein, modelled from the black intercepts. Figure 41 shows the roof (red) surface of the Challenger Extended vein modelled from the red intercepts. The vein surfaces are seen extrapolated slightly above the topography surface (to be trimmed off later). Figure 41 Challenger Extended vein roof surface

Blocks: In 2005 the grade block model was built within the vein surfaces with primary block dimensions in XYZ of 1.5*5.0*5.0 m. With sub-blocking of 3*2*2 to improve accuracy the minimum block dimensions were reduced to 0.5*2.5*2.5 m at boundaries. With re-modelling here in July 2016 the blocks were made finer E/W than before to better suit MGL’s envisaged underground mining and to suit the tighter intercept interpretation (which also ultimately this also lead to a slight rise in overall grade). New primary block dimensions in XYZ were 1.0*5.0*5.0. Existing underground mining voids (stopes and levels (both filled and open) and the adit) were modelled as wire-framed solids (interpreted from available old long section plots and drill hole intercepts) and also built into the block model so they could be excluded or otherwise dealt with. Grades: Gold assays in the drill hole database were geostatistically analysed to determine grade continuity distances and directions. The low grade (0 to 5 g/t) population was studied with a bottom cut of 0.02 g/t. Variography was done in 15° sectors in the plane of the vein – separately for Challenger (strike 358°, dip 80°W) and Challenger Extended (strike 352°, dip 80°W). At Challenger the variograms were generally very good. Figure 41 illustrates a variogram close to the interpreted plunge direction (this one looking north and down 30°) showing a long range at ~35 m (with a nested range at ~17 m). The cross plunge direction showed a ~20 m range.

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Figure 43 illustrates a rose diagram of all of the modelled ranges in the plane of the Challenger vein (effectively looking horizontally W with N to the right). The diagram was interpreted to show gold grade continuity in the plane of the vein dipping down 15° to the N with a maximum range of 35 m and a minimum range of 20 m normal to that. The nested results indicated a shorter range structure with a much steeper plunge of 75° to the M. Combining these directions gave an overall plunge of ~20° down to the N. At Challenger Extended (N of Challenger) the variograms were poorer, and the range diagram was interpreted to indicate longest ranges of 25 m horizontally. This may have been due lack of deep drilling in this part of the deposit.

At Challenger the vein intercept generally represented a composite of several ‘ore zones’ comprising discrete high grade foot-wall and hanging-wall lodes (stoped separately in the past) separated by an intermediate (usually) lower grade zone. In Figure 44 the high grades can be seen favouring one side or the other. Also visible in the Figure are white gaps marking an open stope near surface and the adit half way down. Figure 44 Section 3,700N blocks

Block gold grades were estimated for Challenger and Challenger Extended using the same anisotropy to create continuity within the plane of the vein (and not across it) to mirror the typically high grade hanging and foot wall lodes and a 20° N plunge. Drill hole samples were composited to 1.0 m down-hole, and the effective scan distance was 50 m. Figure 44 illustrates colour-coded block grades (red high, blue low) in a typical E/W cross-section through the middle of Challenger. Figure 42 Challenger variogram

Figure 43 Challenger ranges


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Figure 45 illustrates similar colour coded (red high, blue low) gold block grades in 3D for Challenger, looking horizontally W (N to the right) in long section. The vein hanging wall surface (blue) is behind the blocks with topography (green) above. Figure 46 illustrates the same plot, but for Challenger Extended. Figure 45 Challenge block grades in long section

Figure 46 Challenge Extended block grades in long section

Figure 47 Challenger / Chall Extended g/m contours in long section s

n

Figure 48 Currajong vein surfaces

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Figure 47 indicates GCR’s19 vein gram/metre contouring at Challenger / Challenger Extended in the same long section. This effectively represents the richness of a vein by multiplying the width by the average grade. Also plotted are the existing working outlines (with the thicker lines marking the level accessed by the adit) and results from some of GCR’s drilling.

Figure 49 Currajong block grades

11.3 CURRAJONG MODELLING At Currajong the drill hole vein intercepts were interpreted into a system of 4 sub-parallel semi-vertical veins (named C(urrajong), M(ain), A(ccessory) and F(inal)) with a very similar ~N/S striking orientation to the Challenger vein. There were indications of at least two more veins to the east of these. Each of the 4 veins was modelled with footwall (east side) and hangingwall (west side) gridded 2.5*2.5 m surfaces. Figure 48, looking horizontally N, illustrates the Currajong surface drill holes (white traces, mostly dipping at angles around 60° towards the E, holes drilled from underground in the Boumoya Adit (at various angles), the topography surface (yellow, and clipped to avoid hiding the veins), and the vein foot-wall surfaces. The holes intersect the veins sequentially from the W (left) in the order C vein (grey, 15 intercepts), M (red, 23 intercepts), A (green, 17 intercepts) and F (blue, 8 intercepts). The thick coloured sections of the drill holes in the Figure represent the vein intercepts. Some can be seen to be fairly long (wide). A block model was build within the Currajong vein surfaces with very similar block dimensions to the Challenger block model. No underground workings were modelled or incorporated as old mapping was inadequate and generally unavailable. No geostatistical analysis was performed on the Currajong gold assays and block grade estimation was done using the same parameters as at Challenger. Figure 49 illustrates colour coded (red high, blue low) gold block grades, looking horizontally N (with the C vein hanging wall surface in blue on the left).

Figure 50 Donkey Hill E/W cross-section

The Consultant considers that MGL’s 2013 drilling at Currajong intercepted the mapped reef line E of the existing models (effectively amongst the holes on the very right of Figure 48). That reef appears to have sufficient data for interpretation and, with confirmation from a little recommended additional drilling, could be modelled.

Legend Donkey Hill Micro-gabbro/Diorite Donkey Hill Main Lode Stoped Donkey Hill Main Lode Donkey Hill Footwall Lode Donkey Hill Hangingwall Halo

11.4 DONKEY HILL AC drilled a number of high grade intervals on E/W cross section 6,095,780 m N during their limited exploration at Donkey Hill. The intervals constituted a “discovery” as they represented a previously unknown foot wall lode 3 to 7 m to the E of the main mined reef. Hole drilled 40 m and 80 m off section to the N and S failed to yield similar results. The section is illustrated in Figure 50 (looking N, E on right), with the intercepts annotated in red. Horizontal coordinate grid lines are at 100 m spacing. 19

RC Drillhole Trace Historic Drive

~2006 GCR diagram


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This cross-section is effectively the same as that recently drilled by MGL in 2013 (Figure 33) where MGL confirmed the lode below AC’s hole ARC039. The Consultant’s view is that AC’s holes ARC047/8 missed the lode narrowly by not drilling quite deep enough. The Consultant considers that MGL’s 2013 drilling at Donkey Hill appeared to correlate linearly with outcrop mapping and to indicate a new vein to the E of the single lode previously investigated. Further drilling is required to confirm presumption of a vein system interpretation. In concert with the Currajong opinion, should drilling confirm planar veins with reasonable surface area (the current system appears very short strike) then computerised geological modelling and Resource estimation should result. 11.5 WASTE DUMPS Significant volumes of surface mine dumps surround many of the old underground mine shafts and several explorers evaluated their in-situ Resources. CEC made and reported estimates and, although it is not known which specific dumps these applied to, it is certain they only reported on a small sub-set. AC and GCR later worked on a large bulk sample from 29 old mine dumps. The dump tonnages were estimated by using several methods to determine their volumes and then by the application of a fixed loose density of 1.8 t/m3 to the volumes. They also physically shifted a portion of the dump material to a plant site at Challenger and screened it to evaluate processing. Various manipulations were done with screen and gold recoveries to estimate and report recoverable gold.

12

MINERAL RESOURCES

Gold quantity in-house estimates were variously made by all of the modern Adelong explorers to various standards. To what extent they were publically reported is not clear and so all older estimates, effectively pre-JORC or early JORC, are not presented here. Resources presented here are for the Challenger (which includes Challenger Extended) and Currajong deposits – and both are reported according to JORC 2012. . 12.1 CHALLENGER AND CURRAJONG RESOURCES JORC 2012: Mineral Resources for the Challenger and Currajong deposits were estimated by the Consultant for successive explorers on several occasions in the past to JORC standards pertaining at the time (2004 and prior). Those Resources were previously last reported by GCR in 2005 to JORC 2004 standard. The Challenger deposit Resources were fully re-estimated by the Consultant in July 2016 and are reported here according to JORC 2012. They incorporate a minimal number of extra drill hole (essentially in the very N); refinement of geological understanding of the deposit; and the results of a geostatistical re-analysis of existing Challenger data in 2010 which provided the confidence for a portion of the Indicated Resources to be re-classified as measured.

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Resources at the lesser explored Currajong deposit are reported here according to JORC 2012. Their 2005 estimation by the Consultant was fully reviewed in July 2016 and its reporting here updated and extended to JORC 2012 standard. The minimal nearby MGL 2013 drilling was taken to be on a separate reef line to the E requiring further exploration before its inclusion might be possible. The Challenger and Currajong JORC 2012 Resources reported here are accompanied by a JORC ‘Table 1’ (of estimation details, in Appendix 2) and a JORC CP Statement (in Section 12.2). Mining prospects: Although not explicitly required by the 2004 and prior JORC Codes, and probably not reported as thus in the past reporting, the Consultant nevertheless states clearly here that the Resources reported would have had ‘reasonable prospects for economic extraction’ (JORC 2012 clause 20). He bases that opinion on a series of factors including that the gold mineralisation was proven by past underground mining in the area and on the specific reefs being evaluated; that the modelling and Resource estimation was oriented towards and assumed very similar future mining; that the modelled reefs were close to past workings and represented along strike and down dip extensions; that the extensions were for very moderate (conservative) distances in the same order of magnitude as past mining (no unreasonable extrapolation); that the volumes of past mining openings (as far as they could using all available historical data) were removed from the models; that the modelled veins were of the same approximate dimensions as past mining, on the assumption that future underground mining would be using very similar methods and hand-scale mining; that the Consultant had physically inspected the modelled veins in-situ in the underground adit at Challenger; and that all modelling was based on close spaced drilling and the models were not extended outside their influence; that the assay results from multiple eras of drilling did not disagree; that sample gold assay values were typically considerably above current underground gold mining cut-off grades (thus economic) and assessed to understate actual grades; and that the drill sample assays had stood up to repeated geostatistical analysis (used to generate grade estimation parameters). mineral resources: AC reported the initial JORC Resources of gold for Challenger in February 1999. The total was 796,000 t @ 3.1 g/t (for 79,100 oz) with a 1.0 g/t lower cut-off. The Resources were classified as 37% Indicated (328,000 t @ 2.8 g/t for 29,500 oz) and 63% Inferred (468,000 @ 3.3 g/t for 49,600 oz). Tonnages were calculated using a constant density of 2.7 t/m3. JORC classification was based on long-sectional polygon boundaries. Indicated material was inside a polygon enclosing the tightest spaced drilling and was base limited to the 1,370 m RL. Resources included 14,000 t @ 4.0 g/t (1,800 oz) from old waste-filled hanging-wall stopes and 7,000 t @ 2.7 g/t (600 oz) from old waste- filled foot-wall stopes, both assuming a constant density of 1.5 t/m3. The Resources excluded the volumes in the block model representing open stopes (voids).



In 2005 GCR reported updated JORC 2004 Resources21. For Challenger they incorporated additional drilling data which increased the total Resource to 930,000 t @ 2.74 g/t (for 82,000 oz). The category proportions changed with 84% Indicated (765,000t @ 2.81 g/t for 69,100 oz) and 16% Inferred (165,000t @ 2.43 g/t for 12,900 oz). GCR also reported the first JORC Resources (repeated in the Table below) for Currajong using a new geological interpretation. Tonnages for both deposits were calculated using the same densities as before. GCR also reported this data within optimum pit shells computed from the block model grades. JORC classification was based on the average sample distances and numbers of samples used to estimate each block. Classification rules at the time for Challenger and Currajong were: • Measured: Sample distance ≤ 10 m and ≥ 6 samples and geological considerations. • Indicated: Sample distance ≤ 20 m and ≥ 2 samples. • Inferred: Sample distance ≤ 50 m and ≥ 1 sample. In December 2010 Somerset Mining (for MGL) updated the JORC 2004 classification of the Challenger Resource, classifying the bulk of the deposit called Challenger Main separately from the smaller northern part called Challenger Extended. This was based on a geostatistical study (described above) which tightened up and tailored the rules and provided the confidence to categorise 34% of the Resources as Measured. The classification rules for Challenger Main were: • •

Measured: Indicated:

•

Inferred:

With the July 2016 re-estimation the JORC classification rules were adjusted slightly to accommodate the separation of the Challenger and Challenger Extended veins. No Measured class was to be reported at Challenger Extended. The new rules were: Challenger: • Measured: • Indicated: •

Inferred:

Sample distance ≤ 20 m and ≥ 6 samples. Sample distance > 20 m and ≤ 30m and ≥ 3 samples. Sample distance > 30 m and ≤ 50 m and ≥ 1 sample.

Challenger Extended: • Measured: None • Indicated: Sample distance > 10 m and ≤ 20m and ≥ 3 samples. • Inferred: Sample distance > 20 m and ≤ 50 m and ≥ 1 sample. Figure 51 illustrates colour coded Resource classification blocks in 3D for Challenger, looking horizontally W (N to the right) in long section. Measured blocks are red, Indicated yellow and Inferred cyan. The Measured area is in the centre of the highest density drilling. The vein hanging wall surface (blue) is behind the blocks. Figure 51 Challenge block classification in long section

Sample distance ≤ 20 m and ≥ 6 samples. Sample distance > 20 m and ≤ 25m and ≥ 2 samples. Sample distance > 25 m and ≤ 40 m and ≥ 1 sample.

The classification rules for Challenger Extended were: • Measured: Sample distance ≤ 10 m and ≥ 6 samples. • Indicated: Sample distance > 10 m and ≤ 15m and ≥ 2 samples. • Inferred: Sample distance > 15 m and ≤ 40 m and ≥ 1 sample. Figure 52 illustrates the same plot, but for Challenger Extended. 21

GCR Annual Report 2015 Figure 52 Challenge Extended block classification in long section


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The 2016 re-estimated Challenger Resource figures are given in Table 4 and the Currajong figures are given in Table 5. Tonnages were calculated using the same 2.7 t/m3 densities as before. Both Resources are reported with a 1.00 g/t lower gold cut-off. Rounding may cause some addition errors. Table 4 Adelong Challenger JORC 2012 gold Mineral Resources Adelong Challenger Resources - by deposit. 7/2016 Deposit

Dom

resource

Cut-off

class

class %

tonnes

au

au

sG

(mt)

(g/t)

(oz)

(t/m3)

Challenger

1

Measured

59%

1.0

459,000

3.07

45,000

2.70

Challenger

1

Indicated

21%

1.0

188,000

2.70

16,000

2.70

Challenger

1

Inferred

19%

Challenger

1

all

Challenger Ext

2

Measured

0%

1.0

Challenger Ext

2

Indicated

56%

Challenger Ext

2

Inferred

44%

Challenger Ext

2

all

Challenger total

All

Measured

Challenger total

All

Challenger total

All totaL

all

1.0

203,000

2.26

15,000

2.70

1.0

850,000

2.80

76,000

2.70

1.0

81,000

2.62

7,000

2.70

1.0

87,000

1.92

5,000

2.70

1.0

168,000

2.26

12,000

2.70

51%

1.0

459,000

3.07

45,000

2.70

Indicated

26%

1.0

268,000

2.67

23,000

2.70

Inferred

23%

1.0

290,000

2.16

20,000

2.70

1.0

1,017,000

2.71

89,000

2.70

Table 5 Adelong Currajong JORC 2012 gold Mineral Resources Adelong Currajong Resources. 2005 Currajong

All

Measured

0%

1.0

Currajong

All

Indicated

22%

1.0

106,000

2.42

8,000

2.70

Currajong

All

Inferred

78%

1.0

232,000

3.97

30,000

2.70

Currajong

all

all

1.0

338,000

3.48

38,000

2.70

Table 6 Adelong total JORC 2012 gold Mineral Resources by class Adelong Challenger Resources - by Resource class. 7/2016 Challenger

1

Measured

100%

1.0

Challenger Ext

2

Measured

0%

1.0

Currajong

All

Measured

0%

1.0

all

3.07

45,000

2.70

measured

36%

1.0

459,000

3.07

45,000

2.70

Challenger

1

Indicated

52%

1.0

188,000

2.70

16,000

2.70

Challenger Ext

2

Indicated

22%

1.0

81,000

2.62

7,000

2.70

Currajong

All

Indicated

26%

1.0

106,000

2.42

8,000

2.70

indicated

25%

1.0

374,000

2.60

31,000

2.70

203,000

2.26

15,000

2.70

all Challenger

1

Inferred

30%

1.0

Challenger Ext

2

Inferred

11%

1.0

87,000

1.92

5,000

2.70

Currajong

All

Inferred

60%

1.0

232,000

3.97

30,000

2.70

Inferred

39%

1.0

522,000

2.96

50,000

2.70

all Challenger

1

All

60%

1.0

850,000

2.79

76,000

2.70

Challenger Ext

2

All

10%

1.0

168,000

2.26

12,000

2.70

Currajong

All

All

30%

1.0

338,000

3.48

38,000

2.70

1.0

1,355,000

2.90

126,000

2.70

all

68

459,000

all classes



Table 7 summarises the deposit total Resources. Table 7 Adelong total JORC 2012 gold Mineral Resources by deposit Adelong Challenger Resources - by deposit. 7/2016 Deposit

Dom

resource class

Cut-off

class %

tonnes

au

au

sG

(mt)

(g/t)

(oz)

(t/m3)

Challenger

60%

All classes

1.0

850,000

2.79

76,000

2.70

Challenger Ext

10%

All classes

1.0

168,000

2.26

12,000

2.70

Currajong

30%

All classes

1.0

338,000

3.48

38,000

2.70

all classes

1.0

1,355,000

2.90

126,000

2.70

all

12.2 COMPETENT PERSON STATEMENT The following is a Competent Person (CP) Statement, relating to the information in this Report, in the JORC 2012 Code format. The information in this report that relates to Adelong gold Exploration Results or Mineral Resources is based on information compiled by Robin Rankin, a Competent Person who is a Member (#110551) of the Australasian Institute of Mining and Metallurgy (MAusIMM) and accredited since 2000 as a Chartered Professional (CP) by the AusIMM in the Geology discipline. Robin Rankin provided this information to his Macquarie Gold Limited Client as paid consulting work in his capacity as Principal Consulting Geologist and operator of independent geological consultancy GeoRes. He and GeoRes are professionally and financially independent in the general sense and specifically of their Client and of the Client’s project. This consulting was provided on a paid basis, governed by a scope of work and a fee and expenses schedule, and the results or conclusions reported were not contingent on payments. Robin Rankin has sufficient experience that is relevant to the gold vein style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code) and a “qualified person” as defined in Canadian Instrument 43-101. Robin Rankin consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

13

EXPLORATION POTENTIAL

The Consultant considers the exploration potential at Adelong to find new deposits and increase existing Resources of gold to be high. Furthermore he believes that exploration through drilling, using the reef-finding concepts proved in MGL’s 2011 and 2013 drilling programs in concert with the clear reef delineation coming out of new geophysics, could deliver direct results in the near term.

Explaining and justifying this high potential and the means for achieving it is described in terms of: • • • • •

Concepts – why there is exploration potential at Adelong. Potential at Challenger and Currajong – currently well explored. Potential at other mineralised areas – currently poorly explored. Potential to connect areas and find new areas. Geophysics.

13.1 EXPLORATION POTENTIAL CONCEPTS The basic concept behind high exploration potential at Adelong rests on the combination of multiple individual positive factors: • the area is a proven gold field where historical mining was cut short by economic and physical mining constraints no longer applicable (such as underground depth limitations); • the Project area has only been partially explored; • the known gold bearing quartz reefs themselves have only been partly explored; • ground conditions suggest the old miners will not have found all reefs (as they effectively concentrated on ridge outcrops and conversely avoided the water-logged outcrop-poor valleys); • recent limited drilling has proved up extensions to several reef lines; • recent drilling has proved the concept of tracing reefs close to surface by following very modest gold values; • recent geophysical data re-interpretation and new magnetometer surveying shows very close correlation of trends with known reefs and the presence of many extensions and new targets to follow; • and modern data interpretation and exploration capabilities will lead to the discovery of new reefs and extensions to reefs.

Perhaps the clearest example of recent geophysics helping to point out reef targets is in Figure 50 where the existing reefs (blue lines) and the existing drill holes (white lines) are clearly seen to correlate with the NNW trends in the magnetics AND only exist on a small sub-set of the trends or parts of them.


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Figure 53 Magnetic trends & drill holes

These concepts happily rest not on a single factor but on a combination of multiple positive factors, which are explained here with their details given in following sections: • Facts about the goldfield which intuitively indicate more gold to be found. • Drilling method concept – shallow drilling and pattern drilling as the means of quickly delivering results. Actual dimensions are also suggested. • Proof of drilling method concept – provided during the 2011 and 2013 drilling programs. • Potential at and between all of the known reef lines. • Strong encouragement given by geophysical data reinterpretation. .

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13.1.1 FACTS & INTUITIVE SUPPOSITIONS SUPPORTING POTENTIAL Indications there is more gold to be found in the Adelong Project area rest on various historical facts and the reasonable suppositions which may intuitively be drawn from them: • The Adelong Goldfield produced substantial quantities of gold in the past. • The Goldfield was not worked out when it ceased production due to rising costs in a period of flat gold prices. • The Adelong Project contains most, if not all, of the Adelong Goldfield. • Gold was found in nearly all of the quartz reefs, but only extracted where high grade near surface. The near surface encounters could be chased down plunge to reasonable depths in places. • Known reefs were effectively found by their prominent surface outcrops only. It is probable that reefs buried as little as 5-10 m deep in areas of no outcrop were not found. • As reefs pinch and swell in width both along strike and down dip it is highly likely that not all reefs were found as some had no surface expression. • Expressions of currently unknown reefs may be very close to surface as the early miners did not have the means to effectively probe for them at the depth or spacing necessary to find them. • Near surface expressions of deeper gold bearing reefs may be indicated by very minimal mineralisation. • Modern exploration has demonstrated substantial Resources from two areas. • Modern exploration has also confirmed mineralisation in several other areas which has not yet been followed up with modelling and Resource estimation. 13.1.2 DRILLING METHOD CONCEPT & DIMENSIONS A concept for exploration drilling at Adelong is explained in terms of: • Drilling concept. • Dimensions – suggesting actual dimensions of a drilling program, hole depths and spacings, etc. Drilling concept: The Consultant proposes an exploration drilling method concept on known but poorly defined reefs to i) drill cross-strike ‘fence lines’ of very short close inclined holes looking for vein intercepts (possibly marked by gold values down to 0.05 g/t) and ii) to continue similar drilling at 0.01 g/t should be re-assayed using bottle rolls.



Figure 54 Cross-strike E/W fence line drilling

This concept is proposed as a means of quickly (through shallowness allowing rigs to move quickly and thus also cover area quickly), practically (through actual reef finding effectiveness), and cost effectively (through minimising drilling meterage per unit of area covered) extending known mineralised reefs and finding new ones. Proof of the concept is given in the following Section. The points made above about the limited capacity of the old miners to find blind reefs at shallow depths (particularly in bad ground conditions in the valleys), coupled with modern assay detection limits capable of finding slight vein mineralisation indicative of nearby higher vein mineralisation, all support the probable success of modern drilling and sample assaying being able to find actual or near surface expressions of new gold bearing reefs.

•

Drilling ‘fence lines’ could be used firstly to find reefs lines by drilling lines of very short inclined holes across expected reef strike directions. Holes could be shallow (and therefore the programs quick and cost effective) as even low mineralisation would indicate reefs. Holes would be spaced and inclined so as to ensure intercepting reefs at the typical sub-vertical dips, as in Figure 54 from the 2011 drilling at Caledonian, where the postulated reef (red dashes) was intercepted at the bottom and near the top of two holes. Reef intersections could then be followed up along strike by short (because the reef is already located) closer spaced fence lines of similar short inclined holes. And then conventional deeper drilling would be the logical tool to follow up promising reefs at greater depths. The ‘pattern’ drilling of fence lines put in regularly across the whole Project area would give thoroughness to future exploration. Past exploration has largely focussed on known reefs without testing surrounding areas. Drilling concept dimensions: The exploration aim on vein deposits is to intersect the vein in drill holes in enough places in the plane of the vein to sufficiently characterise the vein extent and grade distribution and by drilling completely through it to characterise the vein thickness. This simply means the aim is to encounter the vein in a semi-regular patter along strike and down dip and at each encounter to drill completely through the vein to tag both the hanging and foot walls and thus measure the thickness adequately. Comments following on actually dimensioning exploration drill hole spacing assume (in the first place) the intention to find deposits accessible by the cheapest mining methods – and therefore assume mining from surface in open pits. These dimensions would be applied to the drilling concepts described above.

• •

•

•

•

Maximum line spacing along strike: Horizontal drill hole line spacing may initially be very wide to find the strike extents – in the order of 100 m or more. To define a reef it envisaged the maximum line spacing would be ~20 m. Line length across strike: Horizontal line length would be whatever required to find reefs. Minimum line spacing: Subsequent in-fill drilling will be required to reduce the spacing of the pattern in the plane of the vein to properly characterise the vein. This spacing may be determined from geostatistical variography analysis of vein data. The spacing of this data would necessarily be required to be small enough in places for the variography to “work”. Variography will require spacings of 10-20 m in places. Maximum hole spacing down dip in step-down drilling: Hole depth and angle may initially be long enough and steep enough to find or at least test the down dip extents by encountering the vein several times at different depths below shallow intercepts. Some hole depths will be in the order of several hundred metres. Subsequent in-fill drilling spacing down dip would be similar to the minimum line spacing given above, and controlled by the same geostatistical analysis. Down-hole sampling: Holes would be logged and sampled continuously and finely enough down-hole to fairly accurately allow definition of distinct vein intercepts. Sampling would be in the order of 1-2 m intervals, and broken in sequence to match closely breaks in geology. Assaying: All initial XRD (cheapest method) hits >0.01 g/t should be re-assayed using bottle rolls.

13.1.3 PROOF OF DRILLING METHOD CONCEPT Proof of the potential of the “fence line” drilling concept (described above) to find reefs was demonstrated by the results of a small exploration drilling program undertaken in 2011 at Adelong. The objective22 of the program was “... along strong and clear ~N/S trending sub-vertical gold bearing quartz vein lode structures ... to find extensions to, or connections between, the known linear gold lodes within EL 5728”.

22

Rankin, R., May 2011. Adelong EL 5728 – April 2011 exploration drilling report. Internal report for Macquarie Gold Ltd. Pp5


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The 636 m program drilled at total of 34 shallow blast holes along 4 “fence lines” in 3 days. The first three lines were essentially to find connections along the Old Hill reef line (between Challenger Extended and Caledonian, and between Caledonian and Fletchers) and the fourth was to find a northern extension of a Currajong reef. Drill holes were spaced 10 m apart on E/W lines, were inclined at 60° to the E, and were ~18 m deep. Samples were collected over the full hole depths in 1.8 m intervals, and were assayed for gold. The blast holes were 102 mm in diameter and the high air capacity blast hole drilling method worked well to achieve good recovery and keep holes open even where deep or wet surface soil conditions would normally present problems.

Figure 55 Vein interpretations from fence line intercepts

Assay results showed good discrimination between mineralised and non-mineralised intervals, indicating that sample contamination was not readily apparent and indirectly proving the blast hole drilling method. Overall tenor of the gold assays was low, with 60% in the range 0.002-0.010 g/t. Approximately 10% were >0.020 g/t and these were taken to represent mineralised zones. Clustering of gold assay values in holes was very encouraging – with the higher results (>0.010ppm) generally grouped narrowly together (sequentially), separated by groupings of very low values. The clustering was taken to indicate that the higher sample clusters represented vein intervals. In the 3 fence lines drilled along the Old Hill line the interpreted vein intercepts could be correlated in several ways, either closely matching the ~N trending existing reef line mapping at Caledonian or possibly lined up along a NNW trend (interpreted trends as dashed red lines in Figure 55 (showing lines 1 and 2 either side of Caledonian). Either way the interpreted trends either extended the existing N trending reef, indicated new sub-parallel reefs, or provided a new NNW interpretation. Geophysics was used in the fence line positioning, and in the interpretations. The new NNW interpretation would have been further reinforced with the help of the more recent geophysical data modelling (see section below). The conclusion was made that “The concept of using shallow vertical fences of overlapping blast holes, matched with careful sampling and choice of sample interval, appears valid for rapid cost-effective search for quartz vein lodes at Adelong. GeoRes concluded that each drill line successfully intersected discrete zones of gold mineralisation representing vein intersections. 13.1.4 POTENTIAL IN RELATION TO KNOWN REEF LINES Areas with exploration potential at Adelong are defined largely by the location of existing exploration. Modern in-situ gold Resources have only been well defined and estimated at Challenger (Old Hill reef line) and to a lesser extent at Currajong (with reasons given above in the Exploration Concentration section) – essentially due to modern exploration focus on them and sufficient exploration drilling having been carried out there. In contrast the known deposits on other reef lines are

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characterised by few and generally insufficient numbers of exploration drill holes and consequently modern Resources have not been estimated for them. And areas between reefs, either along strike or simply in between, have either been very poorly and sporadically explored or not at all. The Consultant’s opinion on exploration potential is given here, grouped by location: •

•

Challenger & Currajong: Challenger to a limited extent and Currajong to a large extent (see details in the following section on Potential there) have not yet been fully drilled out – and therefore hold good potential for exploration to further increase Resources there. The “gaps” in current drilling at these deposits clearly indicate zones of potential. Other old mining areas: Given the existence of good mineralisation in some of the limited numbers of exploration holes on the other known reefs, and significant past mine production on these reefs proving their status as deposits, all of the known mineralised areas on reef lines hold good exploration potential. This includes extensions to the Old Hill line hosting Challenger.



•

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Extensions to reefs: The style of reef line mineralisation, and the existing outcrop mapping, clearly suggests that known reef lines may be connected or could extend beneath the surface. Therefore all areas along strike from known reefs hold good exploration potential. Mineralised intercepts exist in existing holes in some of these areas, remain to be interpreted, and do in places already indicate new areas of mineralisation. Current barren areas: Much of the ground between reef lines, where there has not been an association with reefs, has not been explored through drilling at all. Therefore the exploration potential is unknown. However prudence would indicate that these areas should be tested somewhat, clearly with an open mind.

Figure 56 Challenger drilling

13.1.5 GEOPHYSICAL ENCOURAGEMENT Processing of past geophysical data, particularly from the aerial surveys, showed a fairly strong N/S fabric to contouring of all data – which hid the predominant strong NNW reef trends. That now appears to represent a feature of the poor processing and not of the data or geology (and represented the removal of the line noise from the E/W flight lines). Re-processing of this data clearly removes much of this line noise and produces vastly clearer maps (illustrated in detail in Section 13.5) where the NNW trends are obvious. Interpretation of the new geophysical maps is expected to aid exploration planning, increasing the potential in some areas whilst explaining why other areas may have reduced potential. 13.2 EXPLORATION POTENTIAL AT CHALLENGER & CURRAJONG The Challenger and (to a much lesser extent) Currajong areas are currently the best explored through drilling in the Adelong Project. This section addresses remaining exploration potential there. It should be noted that the Old Hill line containing Challenger had the highest historical production in the goldfield. 13.2.1 CHALLENGER POTENTIAL Further exploration potential at Challenger is limited by current mining objectives. Challenger is not closed off by drilling at depth at sufficiently close spacing to disprove the existence of small high grade shoots below the currently found mineralised zones. However the Consultant would consider that Challenger has almost been drilled out for the objective of exploration for open pit mining. This is given that current gold prices and mining costs which indicate optimum pit shells stopping slightly short of maximum drill depths. Several spots should be closed out by drilling to avoid finding the final pit limits should have been bigger if high grades were to be found there. Figure 56 shows the plan extent of existing drilling at Challenger (lower half of picture) and Challenger Extended to the north (upper half).

However if Challenger became an underground mining proposition (as is now the case) then a deeper exploration drilling program would certainly be necessary. Exploration at depth has potential as currently little drilling exists there to negate it. Old mines on the Old Hill line are presumed to have been depth limited by mining capabilities, not by the cessation of gold mineralisation.

The reef is modelled is illustrated by the grey mesh in the Figure. It can be seen that both the southern and northern ends of the model could be better supported by drilling, and this is also illustrated in the isometric Figure 57. Additionally the connection between the Challenger and Challenger Extended could be investigated to determine if they are actually separate reefs and could extend past each other. Replacement Prospectus dated 8 August 2016, Replaces Prospectus dated 25 July 2016

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Figure 57 Challenger drilling & vein surfaces

13.2.2 CURRAJONG POTENTIAL Exploration potential at Currajong would be high at the deposit remains to be adequately drilled. It has certainly not been drilled out as all veins are open at depth and most likely along strike (although some closing off structure to the north is presumed from past discussions with David Hobby). Furthermore the past drilling was not clearly targeted at the four veins subsequently interpreted, and certainly did not explore the indications of further veins to the east. Figure 58 illustrates the drilling and the vein models (grey mesh), and the drilling can be seen not testing 50% of the strike length of the mapped reef (blue line) on the left. The long eastern veins were investigated briefly by MGL’s 2013 drilling, with encouraging results leading to the Consultant recommending the veins there now be further drilled and if a vein system can be interpreted then it should be modelled and Resources estimated. Further exploration success here would require the ML embayment (seen in the Figure above) containing the Conservation Order 72 area to be addressed.

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Figure 58 Currajong drilling


13.3 EXPLORATION POTENTIAL AT OTHER AREAS Mineralised areas other than Challenger and Currajong areas are currently poorly explored through drilling. However, good mineralisation was encountered in some holes in all or most of these areas. This, together with the evidence from significant past mine production on these reefs, indicates good theoretical exploration potential at all of the other known mineralised areas. This includes extensions to the Old Hill line hosting Challenger. MGL’s limited 2013 drilling served to improve potential at Donkey Hill and Caledonian particularly. The ‘other’ areas are shown in Figure 59 (with Challenger and Currajong marked by the grey modelled surfaces). Grid line spacing is 100 m. Data in the limited existing holes in these areas has not been computer modelled in the JORC era, and therefore their individual otential has not been evaluated. Preliminary modelling should be undertaken, in conjunction with the re-processed geophysical data, before commencing exploration drilling to more scientifically (than in the past) rank these deposits for attention and then guide the necessary exploratory drilling. This section addresses remaining exploration potential at each area through Figures illustrating the reefs (blue lines) and the sparse drill holes (white). All Figures are at approximately the same scale, with N at the top and grid line spacing 100 m. Figure 59 Other areas with potential

Donkey Hil Gibraltar

Fletcher

Caledonian

Victoria

Old Hill


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13.3.1 OLD HILL POTENTIAL The Old Hill line extends a long way south of Challenger (see Figure 60 where the Challenger model exists at the very top). This part of the line has limited drilling, probably due to the visibility from and proximity to the Adelong village to its S. 13.3.2 VICTORIA POTENTIAL The Victoria reef line (in the centre of Figure 61) is a long N/S reef line W of the Old Hill line and produced substantial gold (it has the third largest historical production) from beneath the ridge running across it (in the lower third). Approximately 75% of the holes drilled in the Victoria reef area (on the actual reef and the others just to the E) contain mineralised intercepts. Many holes also have multiple intercepts, implying the presence of several reefs. Its northern end has almost no drilling (and the southern end was probably not explored due to the Adelong village to the S). The Consultant’s impression is that the area was not seriously followed up in the past due to slightly (trivial) inhibiting issues which reduced its priority with respect to the other areas – its low position topographically; proximity to Adelong; drilling access; and

old workings. These issues should not inhibit future more intensive exploration of an area with high potential (particularly to the N). 13.3.3 GIBRALTAR POTENTIAL The Gibraltar is a complex of reefs with a distinct NE trend (in the centre of Figure 62) contrasting strongly with the N trend of most of the rest of the goldfield. It also produced substantial gold (it has the second largest historical production). It can be seen to have had very little drilling exploration. Old mine plans exist and digitisation of that data should aid geological interpretation and future exploration. Because of the unusual reef orientation here the area’s potential may have been difficult to evaluate in the past. However its high production implies high potential. 13.3.4 CADZOS, DYKE, BLUE POTENTIAL This area (Figure 63) is to the N of the Gibraltar, appears to contain a mixture of NNW and NE trending reefs and has had very little drilling exploration.

Figure 60 Old Hill S drilling

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Figure 61 Victoria drilling


Figure 62 Gibraltar drilling

AC made a cursory but promising in-house manual estimate of mineralised material immediately adjacent to their central E/W drill cross-section (50% residual) lengths. • Sample composites: Currajong: Drill hole sample intervals composited on-the-fly down-hole to 2.0 m (plus >50% residual) lengths. • Estimation algorithm: • Inverse Distance (ID2) • Scan distance: 50 m • Distance weighting power (ID2): 2 • Anisotropy: Challenger: o Anisotropy factors were derived from the comprehensive geostatistical study in 2010. That study built on a brief earlier 2001 study. o Anisotropy - distance weighting factor: o X: 3 (to reduce cross-vein continuity) o Y: 1 o Z: 1 o Anisotropy- rotation: o X: -20° (to align Y axis 20° plunge down to N) o Y: 10° (to align Z axis 80° dip to west) o Z: 0° (although strike was assumed at 35° no rotation was applied to force it) • Anisotropy: Currajong: o Same factors used in original 2005 estimations of both Challenger and Currajong. Those parameters relied on the brief 2001 geostatistical study results. o Anisotropy - distance weighting factor: o X: 3 (to reduce cross-vein continuity) o Y: 1 o Z: 1.5 (toreduce vertical continuity slightly) o Anisotropy- rotation: o X: -20° (to align Y axis 20° plunge down to N) o Y: 10° (to align Z axis 80° dip to west) o Z: 0° (although strike was assumed at 35° no rotation was applied to force it) •

•

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Sample points/sectors: Challenger: • Maximum samples/sector: 3 • Minimum sectors: 1 • Minimum points: 1 • Effectively minimum samples 3, maximum samples 18. Sample points/sectors: Currajong: • Maximum samples/sector: 2 • Minimum sectors: 1 • Minimum points: 1 • Effectively minimum samples 2, maximum samples 12.



criteria

JORC Code explanation

commentary

Estimation and modelling techniques (Continued)

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Limits: Challenger: Input data maximum limited to 50 g/t gold (1 value of ~150 g/t in Challenger Extended. • Limits: Currajong: Input data maximum limited to 200 g/t gold. Simply a safety limit as the highest assay at Currajong was only 116 g/t. • Grades estimated: • Gold (AU) • Sample distance (AU_D) • Sample points (AU_P) • Density: None estimated. Reporting used default of 2.7 o JORC classification: • Variable AU_CAT. Computed in each block by SQL. Based on variables generated during block estimation for average distance (AU_D) and number of sample points (AU_P). Specific D and P criteria for each vein. Set to: • 3 – Measured • 2 – Indicated • 1 – Inferred • See criteria in ‘JORC classification section below. Other estimates to check against: o 1998 to 2005 JORC Resource estimates by Consultant. o The current Resource is compared with past estimates within the Report. o Challenger Resource here were of the same order of magnitude, and slightly greater for the reasons given (greater strike length, exclusion of edge low grades). o Challenger adit: See below. o No other Resources for Currajong were available to check against. By-products and other elements: o None were considered. o Past mining did not apparently encounter problems. o The presence of some sulphides (principally pyrite) within the veins has apparently been taken into account by MGL’s metallurgy and plant design. o It is presumed that the AMD issue has similarly been taken into account by MGL. Deleterious elements: o None were studied as an issue, and Consultant was not aware of any existing issues. See immediately above. o It is assumed that any deleterious elements contained within the ore has been researched by MGL during its metallurgical studies. o Arsenic assays were only very minimally available and have not been studied. Block size relationship to samples and search distances: o Block sizes were considered well-proportioned to drill hole spacing and down-hole sampling. o Long section (YZ) block sizes (5*5 m) were ~25% of typical average drill hole section spacing (~20 m). o

o

Challenger: Horizontal cross-vein (X) block sizes (1 m, and 0.5 m on edges) were ~ equal to or 50% less than down-hole sampling intervals (1-2 m). This was also equal to the down-hole sample composite length (1 m). Currajong: Horizontal cross-vein (X) block sizes (2 m, and 1 m on edges) were ~ equal to or 50% less than down-hole sampling intervals (1-2 m). This was also equal to the down-hole sample composite length (2 m).


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criteria Estimation and modelling techniques (Continued)


commentary

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o Sub-blocking was not an issue as it only occurred along the vein edges. Sub-blocks wire very thin and so provided volumetric accuracy. Selective mining units: o The primary Challenger 1*5*5 m or Currajong 2*5*5 m tall thin block sizes in the model were specifically built not only to reflect the vein shape but to take into account the probability of hand-held underground mining. o Therefore the block shape and size reflected a practical under ground mining unit. Correlation between variables: o No analysis on variable correlation was done as only gold was assayed for in any quantity. Geological interpretation controls of the estimates: o The geological ‘vein’ interpretation was the primary geological control: ▪ Defining individual deposits. ▪ Well representing their thin sub-vertical long strike shape. ▪ Their shape was represented by the block shapes (described above). o Vein segregation was implemented through the domain control (detailed above). o Grade continuity geologically interpreted sub-parallel to the veins was implemented through the strong horizontal sample distance weighting. Grade cutting/capping use: o Maximum sample grades: ▪ Challenger: A particular feature of all of the gold assays was their relatively small range (high to low) without many high grade samples. Only 8 individual samples in total existed above 30 g/t. Cutting to 30 g/t reduced the range. ▪ Currajong: Here anomalously high grades were fairly common. No serious attempt was made to cut or cap high grades as they were not taken to be ‘anomalous’. ▪ Vein composite maximums: Challenger: Au • Challenger C1: 6.6g/t • Challenger Extended CHX2: 10.9 g/t ▪ Vein composite maximums: Currajong: Au • All veins: 16.4 g/t • Currajong (CU_C): 8.1g/t • Currajong Main (CU_M): 5.7 g/t • Currajong Accessory (CU_A): 7.9 g/t • Currajong Final (CU_F): 16.4 g/t ▪ Individual sample maximums: Challenger: Au • Challenger C1: 155 g/t (out of 1,490 samples (only 8 samples >30 g/t)) • Challenger Extended CHX2: 41.5 g/t (out of 468 samples (only 2 samples >30 g/t)) ▪

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Individual sample maximums: Currajong: Au • All veins: 116.0 g/t (out of 2,653 samples, average 0.4 g/t, variance 10.2) • Currajong (CU_C): 10.1g/t (51 samples, average 1.7 g/t, variance 5.9) • Currajong Main (CU_M): 49.3 g/t (218 samples, average 1.3 g/t, variance 16.8) • Currajong Accessory (CU_A): 87.7 g/t (120 samples, average 1.6 g/t, variance 68.8) • Currajong Final (CU_F): 116.0 g/t (51 samples, average 3.2 g/t, variance 259.2)



criteria Estimation and modelling techniques (Continued)


commentary o Minimum sample grades: ▪ Overall the assay data contained a great number of very low grade samples. ▪ However virtually all of these were excluded as being outside the vein intercepts. ▪ The effective vein intercept interpretation lower cut-off was ~0.2g/t. ▪ And low values within the intercepts were used as-is. ▪ An indeterminate number (but estimated to be relatively small) of un-sampled intervals were assigned values of zero – thereby causing an overly conservative result. o Top clipping: Challenger: A top clip of 30 g/t was applied to all estimation. o Top clipping: Currajong: A top clip of 200 g/t was applied to all estimation. • Estimate validation process: o Block geology validation: ▪ Volume report: Initial check to compare volumes reported within geological vein surfaces with volumes reported from the blocks built from them. As expected these almost exactly matched. ▪ Plots: Visual cross-sectional plot comparison of block boundaries with geological model surface intersections. Particular focus on validity of the blocks in each lode (possibly corrupt if the raw surfaces overlapped). Also check of block domain assignments. Comparisons were considered very good. o Block grade estimate validation: ▪ Estimate stats: Initial basic check to compare overall (on a lode/domain basis) stats given during the block estimation – input drill sample stats with estimated grade stats. Expect reasonable but not exact match. Particular focus on closeness of the maximums and the raw averages. ▪ Plots: Methodical visual cross-sectional plot comparison of colour-coded block grades with annotated drill hole sample values. Comparisons were considered excellent. • Estimate reconciliation: Challenger: ▪ The estimate was checked against the Consultant’s previous JORC estimates in 1998 and 2005. ▪ Estimates were in the same order of magnitude, but were slightly greater for the reasons given in the Report (greater strike length, exclusion of edge low grades). ▪ Challenger adit: • A partial reconciliation was made against the bulk sample taken from the Challenger adit by CEC. • That material was reported as 1,200 t @ 5.6 g/t. • Here the tonnage could not be computed, but the grade within the vein zone was 5.4 g/t – which at 100 g/t). Encountering these by drilling is very difficult and unlikely, and only actual mining will prove the point.

Moisture

• Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.

• Moisture: Reporting has assumed a dry basis. • The Project effectively has no drill hole density measurements that the Consultant is aware of. • The default density of 2.7 t/m3 was determined by AC/GCR from their study of old dump material. • This value was also partly informed by the geotechnical studies undertaken for GCR.

Cut-off parameters

• The basis of the adopted cut-off grade(s) or quality parameters applied.

• Cut-off grades: o A lower gold cut-off value of 1.0g/t was used in the Resource reporting. o This value was historical and was typically used as the base-line value in all past reporting. o This value was used in the past as a practical open-cut mining value. Past explorers contemplated open-cut mining as the most probable mining method. o A range of cut-offs (from a low of 0.5 g/t up to ~5.0 g/t) were used by GCR to determine the tonnage grade profile for mining and economic studies.

• Assumptions made regarding possible mining • Mining factors & assumptions: Mining o Operators prior to MGL contemplated open-cut mining as the methods, minimum mining dimensions and factors or most probable initial mining method. internal (or, if applicable, external) mining assumptions o On that basis considerable time was spent (by GCR in particular) dilution. It is always necessary as part of the on pit optimisation and mine design – all of which proved the process of determining reasonable prospects practicality and profitability of an operation at going costs and for eventual economic extraction to consider gold values. potential mining methods, but the assumptions o At Challenger the optimum pits generally created a large deep pit made regarding mining methods and parameters over Challenger and a shallower pit over Challenger Extended. when estimating Mineral Resources may not These pits merged with higher gold values or lower mining costs. always be rigorous. Where this is the case, this o At Currajong the optimum pits were typically singular and oval in should be reported with an explanation of the shape. The shape was not seriously considered as it was clear the basis of the mining assumptions made. deposit had not been ‘drilled out’ along strike and hence the pit was obviously sub-optimal. o GCR also investigated the possibility of continuing underground mining below the Challenger open-cuts. o MGL is currently considering underground mining as the initial mining method at Challenger. o This is apparently on the basis of lower start-up costs (no waste to move) and immediate access to high grade ore through the adit at Challenger. o Currajong has not been considered sufficiently drilled for in-depth consideration of mining method. Its location on a sharp rise would certainly facilitate open-cut mining.

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commentary

Metallurgical factors or assumptions

• The basis for assumptions or predictions • Metallurgical factors & assumptions: o No metallurgical (or mineralogical) data has been studied by the regarding metallurgical amenability. It is Consultant and hence he is not aware of specifics. always necessary as part of the process of o However he is aware that a considerable portion of the contained determining reasonable prospects for eventual gold can be liberated freely and separated by simple gravity. economic extraction to consider potential o Metallurgical studies have been undertaken by GCR and MGL. metallurgical methods, but the assumptions o Those done by MGL are informing the design of the plant regarding metallurgical treatment processes currently being constructed. and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.

Environmental factors or assumptions

• Assumptions made regarding possible waste • Environmental factors & assumptions: o The Consultant is not aware of environmental studies on the and process residue disposal options. It Project, and has not considered any environmental issues. is always necessary as part of the process of o However the Consultant presumes this area would not present determining reasonable prospects for eventual negative impacts as the site was subject to mining in the past and economic extraction to consider the potential MGL’s planning for mining is well advanced. environmental impacts of the mining and o Past work for GCR by the Consultant included design of a tailings processing operation. While at this stage the dam in the valley below Challenger and the design of waste determination of potential environmental dumps. impacts, particularly for a greenfields project, o The tailings dam design was in cooperation geotechnical experts may not always be well advanced, the status Coffey. of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

Bulk density

• Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples. • The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vughs, porosity, etc.), moisture and differences between rock and alteration zones within the deposit. • Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.

• Bulk density determination: o Density has been assumed at 2.7 t/m3. o The Consultant is not aware of drill hole density determinations, and is under the impression they have not been taken (particularly not recently) or not in sufficient numbers. o The assumed density was derived from the AC/GCR dump studies (and possibly by the CEC bulk sample from the Challenger adit) • Density accounting for rock variability: o The vein rock could be considered as a rock type whose density may vary considerably over short distances (considering the variable mineralogy). o This represents an inhomogeneous rock mass on a small drill hole diameter scale. o Therefore bulk sampling should be the most reliable source of determinations. o The historic CEC bulk sample is the only one to date, and data is sketchy (but possibly informed AC/GCR use of 2.7). • Assumptions behind density estimates: o The Consultant has taken the default 2.7 t/m3 density default as reasonable for a considerable period. o During that time the density has also been assumed by a variety of mining engineers and other experts.


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criteria


JORC • The basis for the classification of the Mineral classification Resources into varying confidence categories. • Whether appropriate account has been taken of all relevant factors (i.e. relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data). • Whether the result appropriately reflects the Competent Person’s view of the deposit.

commentary • JORC classification basis: o Criteria for classification: ▪ The principal criterion used in primary classification was the average distance and number of samples used to estimate each block grade. ▪ Sample distance could be related to the average geostatistical maximum range determined from the variogram analysis of the principal lodes. Samples distances less than the range would have higher confidence (as they would be statistically linked) with increasing confidence with reducing distance. ▪ Numbers of samples could be related to the uniformity of drilling around a block. Greater numbers of samples would imply better data distribution around a block. Blocks at the edges of veins, where holes were only present on one side, would have the lowest confidence. ▪ Classifications were decided on combinations of the distances (_D) and point (_P) numbers – independently for each vein – based on the geostatistical analyses. Results of the geostats are given in the Report. o Classification values: ▪ Values were set by sql in variable AU_CAT to specify the JORC class with a number: • Measured: 3 • Indicated: 2 • Inferred: 1 ▪ Criteria: Challenger Main (C1): (and see 2016 EGR report): • Measured: D ≤ 20 m and P ≥ 6 samples • Indicated: D ≤ 30 m and P ≥ 3 samples • Inferred: D ≤ 50 m and P ≥ 1 sample ▪ Criteria: Challenger Extended (CHX2): (and see 2016 EGR report): • Measured: none (nothing classified as Measured) • Indicated: D ≤ 20 m and P ≥ 3 samples • Inferred: D ≤ 50 m and P ≥ 1 sample ▪ Criteria: Currajong (all): • Measured: D ≤ 10 m and P ≥ 6 samples • Indicated: D ≤ 20 m and P ≥ 2 samples • Inferred: D ≤ 50 m and P ≥ 1 sample o A secondary visual criteria were applied by observing the calculated distance, points and calculated classes. This smoothed the areas in each class and took into account un-supported edge areas. See plots in the Report. • Classification accounting for all relevant factors: o Classification details were developed : ▪ As project knowledge was gained. ▪ During the geological interpretation. ▪ With regard to the previous mining and history and data spacing deemed necessary for that. o Confidence in the classification was particularly supported by the good variography results. • CP’s view of Challenger classification result: o The classification scheme developed by the Consultant (the CP) produced results which accurately reflect his expectations of the class proportions and their relative locations and distributions. o He considers the classification to be conservative in that the veins have either actually been partially mined or are very close to past mining.

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commentary

JORC classification (Continued)

o That observation is partly personally informed by the Consultant’s inspection of the ‘middle’ of the Challenger deposit in the adit, where the base of old stopes could also be observed. • CP’s view of Currajong classification result: o The classification scheme, although developed in 2005 before subsequent Challenger focus, experience of the area, and Challenger re-estimation, reflects the CP’s expectations of the class proportions and locations. o No Measured class was reported, and at this point (prior to further drilling exploration and observation in the adit (which he has not see)) the CP would not consider classification of any Measured Resources there.

Audits or reviews

• The results of any audits or reviews of Mineral Resource estimates.

• Audits: o The Consultant is unaware of specific third-party audits of this Resource, and they are unlikely given the newness of them. o However during early MGL (and its precursor Somerset Mining) ownership (and also very recently) the 2005 Resources were reviewed by a series of potential purchasers or mining consultants acting for them. o One of these consultants, Mining One from Melbourne, conducted (in ~2010) a detailed study and review of the geology, Resources and pit optimisation. o In 2016 an independent geological Resource consultant very briefly reviewed the Resources, apparently concluding their validity but noting the risk of not having excluded all past mining. The Consultant here concurs with that risk, but considers it minimal (see also ‘Risk’ below).

Discussion of relative accuracy/ confidence

• Where appropriate a statement of the relative • Accuracy & confidence in the estimate: o Statement: The Consultant is confident in the accuracy of the accuracy and confidence level in the Mineral estimate. Reasons follow. Resource estimate using an approach or o This recent Challenger re-estimation work should be considered procedure deemed appropriate by the to be a second or third generation process built on earlier Competent Person. For example, the application knowledge and work. This work only increased the Consultant’s of statistical or geostatistical procedures to confidence. quantify the relative accuracy of the resource o The careful geological interpretation and vein modelling are within stated confidence limits, or, if such an considered the most appropriate to the style of mineralisation. approach is not deemed appropriate, a o The Challenger geostatistical analysis in 2010 gave good results qualitative discussion of the factors that could to build confidence and range results (maximum ranges of~200% affect the relative accuracy and confidence of the typical drill hole spacing) which cover the typical drilling pattern. the estimate. o Assays from each of the many drilling programs backed each • The statement should specify whether it other up. • Risks: relates to global or local estimates, and, if o The Consultant considers the greatest risk to the reported local, state the relevant tonnages, which Resources is the proportion of materially already mined that may should be relevant to technical and economic not have been fully accounted for. evaluation. Documentation should include o He notes that the volume of all known old stopes at Challenger assumptions made and the procedures used. (both filled and open), which were modelled and extracted from • These statements of relative accuracy and the grade block model, represents a small volume in relation confidence of the estimate should be to the Resource (far