KGL RESOURCES LIMITED — Call Transcript 2012

Feb 20, 2012

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Kentor Gold Ltd
Title: “Company Insight – Updates 3 Emerging Near Term Projects”
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Kentor Gold Ltd Date of Lodgement: 20/2/12

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ts”
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Title: “Company Insight – Updates 3 Emerging Near Term Projects”

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Highlights of Interview

• Explains 4 stage expansion at approved Murchison Gold Project.

• dash & Jervois projects to follow. cts to follow.

• Larger Andash & Jervois projects to follow.

• Andash ready for development and waiting final approval – exceptionally low costs.

• Jervois potentially the largest project & with strong exploration upside.  Scoping Study at Jervois nearing completion & expected to enter feasibility stage shortly.

Record of interview:

companyinsight.net.au

Ke n tor Gold L imited (A S X code: KGL; marke t cap of ~ $ 111million) announc e d that it h a d approve d the Mu r chison G o ld Project (KGL 100%) in We s tern Austr a lia compr i sing the B urnakura a nd Gaban i ntha deposits. The initial pro d uction wil l be 24,00 0 ounces at $1,223/oz operating c ost. This is Phase 1 of a pla n ned four s tage expa n sion. Can you expla i n in broa d terms ho w you mig h t increase production and red u ce operati n g costs ov e r the 4 sta g es of expa n sion?

Managing Director, Simon Milroy

Th e key to the Murchiso n Project is not just th a t we can g e t into pro d uction earl y , but that w e can inc r ease pro d uction wit h out com m ensurate in c reases in c apital expenditure an d the workf o rce. In th e first phas e , we are setting up a nd fundin g the core m ining and processin g plant whi c h is actual l y the re-a c tivated pla n t at Bu r nakura sup p lemented b y some of the plant b r ought fro m the closed Indee min e .

But the secon d phase, hea p leaching, oxide ore i s what real l y makes t h e project p e rform as t h is will inc r ease the gold outp u t and red u ce the ope r ating cost s . The hea p leach op e ration wil l have a relatively m o dest cap i tal cost as w e already own most o f the equipment requi r ed.

In t h e third p h ase, we wi l l be doubl i ng the capacity of th e CIP plant to 500,00 0 tonnes a y ear, and i n the fou r th phase, w e envisage processing copper-go l d ore from nearby Ga b anintha.

companyinsight.net.au Ca p ital for Ph a se 1 is $1 4 .8 million with $2 m i llion alrea d y spent. W hen do y o u expect f i rst produc t ion? Wh y have you decided to go ahead w ith the M u rchison G o ld Project at a fairly s mall scale productio n and hig h operating cost?

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Simon Milroy Th e Murchiso n Project should be ke p t in perspe c tive. It is the smalle s t of Kento r Gold’s cu r rent pipeli n e of thr e e projects, but with re a l immedia t e value an d future po t ential for growth and e xtension of its life. I t is a low risk way of getting us into pr o duction v e ry soon – in June t h is year. T he project has very low me t allurgical r i sk as we a r e treating t h e same or e in the sa m e plant wh i ch origina l ly achieve d 94% reco v ery. Th e initial ph a se 1 plans have only included m ining fro m four of t h e 20 open pits at the project an d we expect that we will be a b le to inclu d e further r e sources a n d mine lif e as the re s ults of the current dri l ling bec o me availa b le.

companyinsight.net.au Ho w will you a pproach a d ding to Re s ources of ~ 700,000 o u nces at the Murchiso n Gold Proj e ct?

Simon Milroy

We have a 20,000m expl o ration pro g ram unde r way at the Murchiso n project. T h e progra m me is desi g ned wit h infill dril l ing aroun d the initial mining ar e as to increase confid e nce, and t o extend th e resource. The dril l rig has av e raged ove r 200m per d ay since it commenc e d in early F ebruary. Aft e r completi n g the initi a l work at B urnakura, t he rig will move across to Gaba n intha where it will test the gol d -copper m i neralisatio n targets id e ntified in a recent He l iTEM surv e y.

companyinsight.net.au

Ho w does the Murchiso n Gold Pro j ect compa r e with yo u r two oth e r emergin g projects – Jervois i n the No r thern Terri t ory and A n dash in th e Kyrgyz R e public – in terms of size and imp o rtance to t h e Company?

Simon Milroy

An d ash is rea d y to be d e veloped as a signific a ntly larger producer t han Murc h ison and, o f course, a t an inc r edibly low operating c ost of US$ 2 9/oz after copper cre d its and roy a lty payme n ts. We ha v e been making pro g ress towards obtainin g a social l i cence – th e approval o f the local people – a n d once tha t is obtaine d we wil l gain site a ccess to b egin devel o pment wh i ch is scheduled to ta k e 12 mo nt hs. That will have u s in pro d uction at a n initial ra t e of 70,00 0 oz gold a n d 7,400 to n nes coppe r for the fi r st six year s , with excellent ext e nsion and e xpansion p rospects.

If w e meet tho s e target n u mbers we w ill produc e free cash f low each y ear that is e qual to ou r current m a rket cap i talization.

Jer v ois is shap i ng up as a pretty maj o r multi-me t al mine, a n d it could w ell emerg e as the lar g est of the t hree cur r ent project s .

We completed an initial M ineral Res o urce Esti m ate after we acquired t he propert y last year, a nd alread y this has been subst a ntially inc r eased as a r esult of o u r own expl o ration. W e have incr e ased the c o pper and s i lver res o urces in t h e last two m onths by around 30 % to 150,5 0 0 tonnes copper and 9 .66 millio n oz silver, and our consultant s , Hellman & Schofiel d , have ind i cated a su b stantial Ex p loration T a rget beyo n d that. G o ld is pre s ent in assa y s that app e ar to be in c reasing in g rade with d epth, but n o gold fig u re has bee n included i n the res o urce estim a tes yet.

Jer v ois extend s over a 1 2 km strike length, an d all know n mineralis a tion is stil l open at d epth and a long stri k e. we are c urrently e n gaged in a scoping st u dy which w ill be completed nex t month. The scoping study is e xamining t he econo m ics of a 1.5 mtpa fl o tation co n centrator p roducing a copper c o ncentrate with sig n ificant pre c ious metal credits. W e are also i n vestigatin g the production of a m agnetite c o ncentrate f rom the flotation ta i lings.

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companyinsight.net.au Ye s , you repor t ed recentl y that Kent o r Gold has increased t h e copper resource est i mate at th e Jervois Pr o ject in t h e Norther n Territory by 33% a n d the silve r resource e stimate by 27%. Th e total Infer r ed Resour c e is no w 11.9 mill i on tonnes a t 1.3% co p per and 2 5 .2 g/t silv e r containi n g 150,500 tonnes of c opper and 9.66 mil l ion ounces of silver. C an you de s cribe the d imensions o f the total m ineralizat i on?

Simon Milroy

Th e Resource s are locat e d at four d eposits an d there is g reat pote n tial for ex p anding th e resource base thr o ughout the 12km stri k e length. However, t he recent i ncrease in resource e s timates w a s mainly a t the Re w ard and B e llbird dep o sits, giving us a stron g focus for initial mine developme n t there.

As for scale, w hen you take the n e w copper - silver reso u rce estim a te, and y o u conside r the incre a sing pre s ence of q u ite high gr a de gold in the drill a s says that i s not yet i n cluded in th e resourc e estimates, and you add the su b stantial E x ploration T arget that H ellman & Schofield h ave indica t ed, then Je r vois is ent e ring the ranks of one of Australia’s most significant c opper dep o sits.

Th e Explorati o n Target f o r the Rew a rd and Be l lbird depo s its was gi v en as 5 to 10 Mt at 0 .75% to 1. 2 5% cop p er and 10 to 25 g/t s i lver at a 0. 5 % copper cutoff for 5 0,000 to 100,000 ton n es copper and 3 to 5 M oz silver. This is not an u p side limit, this is w h at we expect to define when w e have in f illed the a reas im m ediately a d jacent to t h e existing I nferred Re s ource.

Th e potential quantity a n d grade o f the Expl o ration Tar g et is con c eptual in n ature and there has b een ins u fficient ex p loration t o define a M ineral Res o urce. It is uncertain i f further e x ploration w ill result i n the det e rmination o f a Miner a l Resource.

companyinsight.net.au Given what y o u know a b out the cu r rent resou r ce, what is the likelihood of up g rading the resource a b ove Inf e rred status ? What ab o ut expandi n g the curr e nt resourc e ?

Simon Milroy

We expect tha t this year’s current d r illing pro g ram will m ove a portion of the I nferred R e source int o the Me a sured and I ndicated c a tegories. T he planne d drilling al s o includes some exte n sional wor k and also s ome me t allurgical d rilling to generate t h e samples required f or further metallurgi c al test wo r k as part of a fea s ibility stud y . We are p articularly interested i n the high g rade areas at depth a n d along st r ike to the n orth of B ellbird an d the high g r ade area t o the north o f Reward.

companyinsight.net.au

Do you have a n y idea of p ossible production rat e s from Jer v ois?

Simon Milroy

Ou r current c o ncept is o f Jervois commenci n g produc t ion in 20 1 4 as a m i d-size co p per mine with considerable s i lver and g o ld credits. We need t o complete t he present scoping st u dy and progress to th e full fea s ibility stu d y to give u s a firm pl a n, howeve r given the scale of th e plant we a re conside r ing, the pr o ject has the potenti a l to produ c e around 2 0 ,000 tonn e s of contai n ed copper per year in concentrat e .

companyinsight.net.au His t orically, n o t many d r ill holes w ere assaye d for gold at Jervois. It is Ke n tor’s inten t ion to re- a ssay historical, and a ssay futur e drill hole s for gold. H ow much value coul d gold add t o revenues ?

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Simon Milroy

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We intend to i n clude gol d in the Re s ource Esti m ate for Je r vois later this year. T he presen c e of gold a t the Re w ard depos i t has been k nown for y ears, but u nfortunately only 20 % of the his t orical drill i ng was ass a yed for gold. It is not possible to re-ass a y the old core becaus e most of it no longer exists, ho w ever we s h ould have sufficient information after the p lanned dri l ling to co m e up with a reliable e s timate on t he gold co n tent of t h e resource.

Th e gold will add signifi c antly to t h e revenue b ecause of the grade a nd the rel a tionship to the high g rade cop p er, althou g h it’s pre m ature to e s timate a f i gure. As a n indicato r , the hole u sed for m etallurgica l test wo r k late last year assay e d 72m at 3 .27% cop p er, 0.25% lead, 0.11 % zinc, 51. 3 3 g/t silv e r, 1.16 g/t gold fro m 414 met r es. I shou l d mention that the te s t work ac h ieved exc e ptional res u lts - a be s t response of a concentrate wi t h a grade o f 26% cop p er for a 94 % recovery.

companyinsight.net.au Ca n you sum m arise ke y milestones across e a ch projec t for 2012 / 13 - drilli n g progra m s (at site and reg i onally), sc o ping studi e s, feasibili t y studies, f irst produc t ion and an y other imp o rtant anticipated eve n ts?

Simon Milroy

In W estern A u stralia, Ke n tor Gold is on track t o be in pr o duction at the Murc hi son Gold P roject in J une, wit h gold prod u ction to i n crease and cash costs t o decline f rom next y e ar when t h e second p h ase heap-l e ach sta g e comes o n line.

Th e Andash G old-Coppe r Project in the Kyrgy z Republic is ready to go to the d evelopme n t stage, an d we are looking forward to ac h ieving loc a l approval t hat will se e us in production ther e next year.

In t h e Norther n Territory, the Jervois Copper-Si l ver-Gold P roject’s sc o ping stud y is nearing completio n and sho u ld progress to full fe a sibility.

Du r ing 2012, we are co m mitted to drilling p r ograms at Murchison and Jervo i s to upgr a de and ex p and Resources.

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companyinsight.net.au Th a nk you Si m on.

To read past Company Insights please visit www.companyinsight.net.au

DISCL A IMER: Gryphon Management Au s tralia Pty Ltd tra d ing as Company Insight has take n reasonable car e in publishing th e information co n tained in this C o mpany Insight. It is informatio n given in a sum m ary form and do e s not purport to be complete. This is not advice. T h e information c o ntained herein s h ould not be used as the basis f or making any in v estment decisio n . You are solely r e sponsible for an y use you choose t o make of the inf o rmation. You sh o uld seek independent professional advice befor e making any inv e stment decisions . To the fullest ex t ent permitted b y applicable law, C ompany Insight i s not responsible or liable for any c onsequences (in c luding, without limitation, con s equences caused by negligence) of any use whatsoe v er you make of t h e information, in c luding without li m itation any loss o r damage (including any loss o f profits or conse q uential loss) suff e red by you or a t h ird party as a res u lt of the use.

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	App endix 1 KG L Group Resources	App endix 1 KG L Group Resources						Silver( 9,660 9,660 9,660 Oz) ,000 ,000 ,000
		Tonnes(mt)	Grad Aug/ e t	Grade Cu%	Grade Ag g/t	Gold(oz)	Copper(t )	Silver( Oz)
	And Jerv Burn Gab ash Sulphide ois akura anintha	0.38 11.9 10.6 4.5	0.93 1.5 1.4	0.2 1. 5 3	25.2	11,350 516,000 203,000	150, 950 500	9,660 ,000
	Tota l Inferred Reso urces	27.38				730,350	151, 450	9,660 ,000
	And And ash Oxide ash Sulphide	0.81 14.31	0.85 1.11	0.4 0.3 3 8		22,136 510,507	3, 54, 510 260
	Tota l Indicated Res ources	15.12				532,643	57, 770
	And And ash Oxide ash Sulphide	0.923 3.16	0.88 1.21	0. 0.4 5 7		26,114 122,932	4, 14, 638 900
	Tota l Measured Re sources	4.08				149,046	19, 538
	Tota l Resources	46.58				1,412,039	228, 758	9,660 ,000
	Gaba Jervo Kento nintha and Bur is Resource is r Gold own 80% nakurra Resour based on cut-of of the Andas ces as quoted f grades 0.2%t h project at a cut-off grad o 0.5% Cu e of 0.5g/t Au.

Competent Persons Statements

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The information in t h is report that r e lates to miner a l resource esti m ation for Gab a nintha and Bur n akura is base d on work com p leted by Mr Jo n athon Abb o tt who is a full- t ime employee of Hellman & Schofield Pty Lt d and a member of the Austral a sian Institute o f Mining and Metallurgy. Mr A bbott has s ufficient exper i ence which is relevant to the style of miner a lisation and t y pe of deposit u nder consider a tion and to th e activity which he is undertaking to quali f y as a Compet e nt Person as d efined in the 2 0 04 Edition of t h e ‘Australasia n Code for Rep o rting of Explor a tion Results, M ineral Res o urces and Ore Reserves’. Mr A bbott consents to the inclusi o n in the report of the matters based on his i n formation in th e form and con t ext in whic h it appears.

The d ata in this report that relates to Mineral Re s ource Estimat e s and Explora t ion Potential f o r Jervois is b as ed on inform a tion evaluated by Mr Sim o n Tear who is a Member of T h e Australasian Institute of Mi n ing and Metall u rgy (MAusIM M ) and who has sufficient experience relevant to the style of mineralisati o n and type of deposit under consideration a nd to the acti v ity which he is undertaking t o qualify as a C ompetent Per s on as defin e d in the 2004 E dition of the A u stralasian Co d e for Reporting of Exploration Results, Miner a l Resources a n d Ore Reserves (the “JORC C ode”). Mr T e ar is a full-tim e employee of Hellman & Sch o field Pty Ltd a nd he consent s to the inclusi o n in the report of the Mineral Resource in th e form and c ontext in whic h they appear.

The R esource estimates for Andas h in this report a re based on in f ormation com p iled by Dr. Phil Newall, who is a Chartered E n gineer and Fellow of the I n stitute of Mat e rials Minerals a nd Mining an d a full time e m ployee of Wardell Armstrong International. D r. Newall has sufficient experience whic h is relevant to the style of th e mineralisatio n and the type of deposit und e r consideratio n and to the a c tivity to which he is undertaking, to quali f y as a Compet e nt Person as d efined in the 2 0 04 Edition of t h e Australasian Code for Reporting of Explor at ion Results, Mineral Resourc e s and Ore R eserves. Dr. N ewall has consented to the in c lusion of this in f ormation in th e form and cont e xt in which it a p pears in this r e port.

The J ervois assay data in this report is based on i n formation compiled by Rudy L ennartz, who i s a member of t he Australian I n stitute of Mini n g and Metallurgy and a ful l time employe e of Jinka Minerals Ltd. Mr. Lennartz has suff i cient experien c e which is rele v ant to the styl e of the mineralisation and the type of dep o sit under cons i deration and t o the activity to w hich he is un d ertaking, to qu a lify as a Com p etent Person as defined in th e 2004 Editi o n of the Austr a lasian Code f o r Reporting of Exploration R e sults, Mineral Resources and Ore Reserve s . Mr.Lennartz h as consented to the inclu s ion of this info r mation in the f o rm and contex t in which it ap p ears in this rep o rt.

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