MINE2106:

CLASSICAL MINERAL RESOURCE

ESTIMATION ASSIGNMENT

Date of Submission: Friday 7 October, 2011

EXECUTIVE SUMMARY
In response to the promising results of a modern drilling program undertaken by a mining
exploration company in the vicinity of a historical gold prospect, an investigation was
undertaken to determine an approximate resource estimation and to, subsequently, determine
if the prospect has the potential to be economically mined. The prospect was never seriously
mined in the past due to the determined grade of the deposit, averaged at 5 Au g/t, not being
sufficient to support the mining and transport of the ore. The aim of the investigation was to
determine if the deposit has potential to be economically mined in todays market where the
gold price is currently set at approximately $A56 per gram. This report provides a detailed
outline of the data and methodology used in the investigation and provides a summary of the
findings.

The total gold content within the prospect area to date using the provided information was
calculated to be approximately 214696.94 g while the worth of the deposit was calculated to
be approximately $A12 million. The volume weighted gold grade of the deposit was
calculated to be approximately 1.19 Au g/t. These are promising figures but as the analysis
was undertaken using information from only five boreholes, these figures are very broad
estimations and, as such, cannot be used to conclusively determine if the prospect is
economically mineable. It has been recommended that a more intense exploratory drilling
program be undertaken to determine a more accurate resource estimation and to accordingly
determine if the resource can be feasibly mined and to, subsequently, allow the resource to be
upgraded to a reserve.

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CONTENTS
Executive Summary .................................................................................................................... i
1.

Introduction ........................................................................................................................ 1

2.

Provided Data ..................................................................................................................... 1

3.

Ore Body Type, Stratigraphy and Shape ............................................................................ 2

4.

3.1

Ore Body Type ............................................................................................................ 2

3.2

Stratigraphy ................................................................................................................. 2

3.3

Shape of Ore Body ...................................................................................................... 3

Data Analysis and Resource Estimation ............................................................................. 4

4.1

Length Weigthed Gold Grades .................................................................................... 4

4.2

Mineralised Areas ....................................................................................................... 5

4.3

Mineralised Volumes .................................................................................................. 5

4.4

Total ore Tonnage and Volume weighted Gold Grade ............................................... 6

4.5

Total Gold Content and Worth .................................................................................... 6

5.

Conclusions and Recommendations ................................................................................... 7

6.

References .......................................................................................................................... 8

Appendix A: Prospect Plan and Sections.................................................................................... i

Appendix B: Calculations ........................................................................................................ iii
Appendix C: Summary Borehole Logs ....................................................................................vii

1. INTRODUCTION
In response to the results of a drilling program undertaken by a mining exploration company
in the vicinity of a gold prospect, an investigation was undertaken to assess the potential
value of the mineral resource. The prospect is located in North Queensland and was first
worked in the 1890s when several pits and shafts were sunk by prospectors. Serious mining
of the ore body was never undertaken as the average grade of the ore body, approximately 5
Au g/t, was at that time considered too low to be able to support the mining and transport of
the ore. Re-testing of the prospect was commenced in the 1980s by a small syndicate using
modern exploration techniques. The results of the drilling program, in conjunction with the
high price of gold in the present-day market, currently set at $A56 per gram, indicated that
the ore body is potentially minable and, subsequently, an investigation was undertaken to
determine the value of the resource. This report provides a detailed outline of the data and
methodology used in the investigation and provides a summary of the findings.

2. PROVIDED DATA
The data provided by the drilling program and which was used in the investigation was
limited to the following:

a plan view of the prospecting pits and borehole locations (Appendix A);

three east-west cross sections of the area constructed at 50 m intervals (Appendix A);
and

summary borehole logs for five diamond boreholes drilled in the period 1988 to
1989 (Appendix C).

No drilling was undertaken to the north of the exploration area and there was found to be
limited surface outcrop.

3. ORE BODY TYPE, STRATIGRAPHY AND SHAPE

3.1 ORE BODY TYPE
Using the information provided by the summary drill hole logs, it was determined that the ore
body is an epithermal gold deposit, which basically signifies that the gold-bearing veins were
emplaced at relatively shallow depths and have been exposed by erosion. Epithermal gold
deposits are, fundamentally, hydrothermal veins associated with subduction zone volcanoes.
A convective system is instigated by the magmatic heat which causes hot water to rise in the
central part of the system while cool water falls around the edges. Most of the gold either
originates from the magma or is leached from the surrounding country rock. Quartz, sulphide
minerals and gold crystallise in veins as the gold-bearing fluid rises and cools. Gold deposits
are commonly found to be associated with rhyolitic and andesitic volcanoes (UNH, 2001).

3.2 STRATIGRAPHY
Mapping in the prospecting pits and along the access track indicates that the host stratigraphy
is dominated by rhyolite and andesite striking at about 170 and dipping to the east at 60-70.
The information provided by the summary borehole logs (Appendix C) shows that the
stratigraphy, in order of increasing depth, is comprised of:

weathered rhyolite;

rhyolite;

andesite;

altered andesite;

quartz vein;

altered andesite;

andesite; and

rhyolite.

The borehole log summary information shows that the rhyolite intrusion is volumetrically
dominant with a subordinate andesitic intrusion intersecting the rhyolite intrusion towards its
deeper end. The rhyolite intrusion has been pushed to the surface and has been weathered to
depths of approximately 30-40 m. The quartz vein system is directly hosted by the andesite
intrusion which, on the quartz vein-andesite boundary, has been hydrothermally altered. The

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summary borehole log information also shows that the gold bearing minerals are primarily
contained within the quartz vein system with lesser grades being located within the altered
andesite.

3.3 SHAPE OF ORE BODY

The three provided cross sections of the area were used, in conjunction with the plan view
and summary log information, to determine an approximate ore body shape. The ore body
predicted outlines can be seen on the relevant cross sections along with the stratigraphy in
Figures 1 and 2. It should be noted that only the sections with a grade equal to or greater than
the cut-off grade (COG) of 1.0 g/t were included in the analysis. Cross-section 50 N
containing borehole 5 (borehole location marked on Figure 3) was, subsequently, not
included in the analysis as all individual grades within the section were less than the COG.

Figure 1. Section 150 N Ore Body Shape with Stratigraphic Legend

Figure 2. Section 100 N Ore Body Shape with Stratigraphic Legend

4. DATA ANALYSIS AND RESOURCE ESTIMATION

In order to provide an estimate of the resource and to, subsequently, provide an approximate
worth of the prospect to date, a number of processes were undertaken including:

calculation of the length weighted gold grades;

calculation of the mineralised areas;

calculation of the mineralised volumes;

calculation of the total ore tonnage;

calculation of the total volume weighted gold grade;

calculation of the total gold content; and

calculation of the total worth of the deposit investigated to date.

4.1 LENGTH WEIGTHED GOLD GRADES

In order to determine the length weighted gold grade of each of the mineralised sections
contained within each of the cross sections, the length weighted grade of each individual

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borehole was first calculated. The calculated weighted grade values for the individual
boreholes located on the same cross section could then be used to determine an overall
weighted grade for that section. The calculated weighted grades for the mineralised zones in
each section can be seen in Table 1 while full calculations can be seen in Appendix B.

Table 1. Length Weighted Gold Grades

Section
Weighted Grade (g/t)

150 N

100 N

3.13

3.18

4.2 MINERALISED AREAS

In order to calculate the mineralised area of each section, Simpsons rule was used.
Simpsons rule is a relatively accurate method for approximating the integral of a function by
using quadratic polynomials (Abramowitz and Stegun, 1972). In the area calculations, each
cross section was broken down into two categories; uncertain and certain. The uncertain areas
encompass the areas outside (above) the region between the two boreholes while the certain
areas encompass the areas within this region. The calculated mineralised areas for each
section can be seen in Table 2 while Simpsons formula along with all relevant calculations
can be seen in Appendix B. The breakdown of the cross-section mineralised areas for use in
Simpsons rule can also be seen in Appendix A.

Table 2. Calculated Mineralised Areas

150 N

Section
Certainty
Calculated Area

100 N

Uncertain

Certain

Uncertain

Certain

588.50

358.42

427.58

443.33

(m2)

4.3 MINERALISED VOLUMES

By assuming the influence of each cross section extends halfway to the next section (Figure
3), the volume of each mineralised block was able to be calculated and, subsequently, the
volume of the total ore body. The calculated volumes for each section, using a half-distance
between sections of 25.25 m, along with the total ore body volume can be seen in Table 3
while the complete set of calculations can be seen in Appendix B.

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Table 3. Calculated Mineralised Volumes

150 N

Section

100 N

Certainty

Uncertain

Certain

Uncertain

Certain

Calculated Volume (m3)

14859.63

9050.11

10796.40

11194.08

Total Volume (m3)

67890.70

4.4 TOTAL ORE TONNAGE AND VOLUME WEIGHTED GOLD

GRADE
In order to determine the total tonnage of ore, the total volume was multiplied by a tonnage
factor of 2.65. This gave a total of 179910.36 tonnes. To determine the actual amount of pure
gold within this tonnage value, the volume weighted mean grade of the mineralised rock was
calculated. It was found that for the total volume values calculated, the approximate grade is
1.19 Au g/t. The result values can be seen in Table 4 while full calculations can be seen in
Appendix B.

Table 4. Total Ore Tonnage and Volume Weighted Gold Grade

Total Tonnage of Ore Body (t)

179910.36

Volume Weighted Gold Grade (g/t)

1.19

4.5 TOTAL GOLD CONTENT AND WORTH

Using the mineralised volumes and weighted grades calculated, the total contained gold
content was determined to be 214696.94 g. Using the current market price of $A56 per gram
of gold, this gives the total worth of the prospect outlined to date as approximately $A12
million.

5. CONCLUSIONS AND RECOMMENDATIONS

By determining the length weighted gold grades, mineralised areas, mineralised volumes,
total tonnage and volume weighted total gold grade, the total gold content and worth was
found to be, respectively, approximately 214696.94 g and $A12 million. As the analysis was
undertaken using information from only five boreholes however, these figures are very broad
estimations and, as such, cannot be used to conclusively determine if the prospect is
economically mineable.

Based on the estimated worth of the analysed areas and the estimated total grade of the
deposit, however, it is recommended that a more intense exploratory drilling program be
undertaken to determine a more accurate resource estimation and to accordingly determine if
the resource can be feasibly mined and to, subsequently, upgrade from a resource estimation
to a reserve estimation.

Based on the shape and orientation of the deposit, it is recommended that additional
boreholes be drilled in a number of locations. Additional boreholes should first be drilled to
the west of the current boreholes to determine the vertical extent of the deposit, while
additional boreholes should also be drilled to the north and south of the current boreholes to
determine the lateral extent of the deposit. It is recommended that additional boreholes be
drilled to the south despite borehole 5 having a low grade. This is because the quartz vein in
the section of borehole 5 was broken and this occurrence may only be applicable to a small
section. Also, there may be a high nugget effect in the region and thus grade values may not
be consistent across the whole deposit. As such, it is also suggested that additional and more
closely spaced boreholes may be warranted between the prospecting pits and existing
boreholes despite the approximate shape and continuity of the deposit being known in this
area. This is recommended in order to avoid any incorrect estimations being made as a result
of a high nugget effect and to upgrade the estimation status from uncertain to certain.

6. REFERENCES
Abramowitz, M and Stegun, I, 1972. Handbook of Mathematical Functions with Formulas,
Graphs, and Mathematical Tables, 9th printing. New York: Dover, 886 p, 1972.

University of New Hampshire (UNH), 2001. Class 40: ore deposits, geology of gold [online].
University of New Hampshire. Available from: <http://earth.unh.edu/esci401/docs/class_40
.pdf> [Accessed: 23 September, 2011].

APPENDIX A: PROSPECT PLAN AND SECTIONS

Figure 3. Prospect Plan

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Figure 4. Cross Sections with Simpson's Rule Sections

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APPENDIX B: CALCULATIONS
Length weighting method of grade calculation;

SECTION 100N E-W

For DDP1;

For DDP4;

Section

Section

Grade (g/t)

2.9

5.9

3.4

Grade (g/t)

2.7

2.5

Length (m)

7.2

2.1

6.1

Length (m)

6.8

0.9

3.8

Section

Grade (g/t)

3.51

2.74

Length (m)

15.4

11.5

Grade of section;

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SECTION 150N E-W
For DDP2;

For DDP3;

Section

Section

Grade (g/t)

2.6

5.8

Grade (g/t)

3.1

4.6

2.8

Length (m)

10.5

1.5

6.2

Length (m)

5.6

2.2

2.4

Section

Grade (g/t)

3.35

Length (m)

18.2

10.2

Grade of section;

Cross-sectional area of ore body calculation, by Simpson's Rule;

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SECTION 150N E-W (CERTAINTY)
Perpendicular No.
1
2
3
4
5
6
7
d = 5.5m

Length (m)
8
13.5
12.5
11.5
10.5
9
5.5

SECTION 100N E-W (CERTAINTY)

Perpendicular No.
1
2
3
4
5
6
7
d = 7m

Length (m)
6
11.75
11.5
11.25
11
10.5
5

Volume of ore body;

SECTION 150N E-W (UNCERTAINTY)

Perpendicular No.
1
2
3
4
5
6
7
8
9
10
11
12
13
d = 5m

Length (m)
7.5
8
8.5
9
9.5
10
10.3
10.75
11
11.25
11.5
10.5
6

SECTION 100N E-W (UNCERTAINTY)

Perpendicular No.
1
2
3
4
5
6
7
8
9
d = 7m

Length (m)
4.5
5.5
6.25
7.25
8
8.75
9
10
6.25

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SECTION 150N E-W (CERTAINTY)

SECTION 150N E-W (UNCERTAINTY)

SECTION 100N E-W (CERTAINTY)

SECTION 100N E-W (UNCERTAINTY)

TOTAL VOLUME

TOTAL TONNAGE

TOTAL GOLD

.18

VOLUME WEIGHTED GOLD GRADE

TOTAL WORTH

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APPENDIX C: SUMMARY BOREHOLE LOGS