FROM 14 MONTHS RESERVE LIFE TO 7 YEARS PRODUCTION AND STILL DIGGING – SOME GOOD NEWS AND LESSONS FROM MINERAL HILL, NSW.

Angus Collins

Triako Resources Limited,

Level 2, 80 Mount Street

North Sydney NSW 2060

Key Words: Mineral Hill, gold, copper, exploration strategy, success factors

EXTENDED ABSTRACT

Production history

Triako’s Mineral Hill underground gold copper mine is located 65 kilometres north of Condobolin in the centre of NSW. After two short periods of production (1989 – 1990 and 1993 – 1994), the mine resumed production in 1995.

On resumption of production in March 1995 the ore reserves contained 10,000 ozs of gold and were sufficient for 14 months production at the rated treatment plant capacity (i.e. to June 1996). The reality has been 7½ years (90 months) of production yielding 214,000 ounces of gold (figure 1) and a cumulative operating cash surplus of $41.7 million (before capital and exploration costs). Of this surplus 56% was generated in the last two years. Moreover there are another 199,000 ozs of gold in resources including 108,000 ozs of gold in reserves.

Success factors

This successful exploration, production history and outlook results from a combination of factors. Some are serendipitous, some relate to events in the Silurian and others are the usual success factors for exploration – good strategy, geology, people, persistence and cash. To these should be added some local factors; a relatively unfashionable area, existing open pits for decline portals, and a flexible processing plant with an insatiable appetite for ore.

Triako’s exploration strategy has evolved over time from the imperative of finding millfeed as fast as possible to the current growth driven strategy:

· discover ore close to existing and planned underground development

· discover satellite ore deposits that will be trucked to the mill

· explore for stand-alone deposits in the region.

Implementation has resulted in a large tenement package in the region (figure 2) all in the extended “Shadow of the Headframe”.

The geology of Mineral Hill and the region is permissive for high grade to exceptionally high-grade gold and copper mineralisation. The mineralising systems have created gold and/or copper lodes plus or minus zinc, lead and silver in a range of styles, orientations, mineralogies, widths and grades within in an area of 600x800 metres (figures 3 and 4). Recently, exploration has discovered an iron-rich skarn type of mineralisation with exceptional gold grades in the lower levels below the current mine workings (figure 5). This discovery has further opened our eyes to the potential of the Mineral Hill system. As well as the immediate and near term economic significance, the host of the skarn mineralisation underlies a large part of our mine area tenements.

The quality of geology and data management has been fundamental to success at Mineral Hill. Modern exploration commenced in the 1960’s with drilling by the New South Wales Mines Department. A succession of companies followed, all generating and documenting information, samples and drill core. Early in 1996 we realised the extent and value of this resource. By skilful data management, persistence, provision of funds when we could barely afford it and a determination to understand the “Mineral Hill System” as we call it, we now have a functioning data management system that is used continuously in our search for ore.

People are the linking factor in the success of Triako’s exploration and production since 1995. This started with the recognition by the Board of Directors that funds must be found to sustain the company’s only source of cash flow, namely the mine. From the start, exploration was driven by applying the best possible geological skills and by drilling as much as the available funds would allow. The “System” was not neglected and a detailed airborne magnetic and radiometric survey was flown over the company’s then only EL and its mining leases. From that time we have tried to apply the best geological science to our exploration and to recruit talented geologists to build, retain and apply what we know. Use of contractors and consultants regularly adds to our exploration effort. Above all, passion for discovery of ore is the driving objective of Triako’s exploration people.

The lessons

-recruit, support and adequately fund the exploration team

-passion for discovery of ore is imperative in all exploration personnel

-drill

-complete the exploration by mining, i.e. don’t overdrill

-focus exploration on the parameters that impact on profitability; this is high-grade gold grade at Mineral Hill

-use and manage the old and new data

-use the best hands on geology, mapping and logging to form the basis of understanding the mineralising system

-use the local strengths: flexible mill, open pits, satellite mine opportunities

-get control of the ground

-understand the economic parameters to aim high and low

-obtain and retain the support of the Board

The outcome

For Triako, exploration in the immediate and extended shadow of the headframe has:

-extended the current mine life from 14 months to over seven years

-discovered as much gold in resources as has been produced to date (figure 6)

-created shareholder wealth from dividends, cash resources of $16 million, continuing strong cash generation, no

debt, low-cost gold production, extended mine life, and strong underground mining and exploration skills.