KGL RESOURCES LIMITED — Interim / Quarterly Report 2012

Apr 26, 2012

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Kentor Gold Ltd ACN 082 658 080

27 April 2012

Kentor Gold (ASX: KGL) is an Australian-based, emerging midtier gold company with advanced projects in Australia and the Kyrgyz Republic.

Formed in 1998 and listed on the ASX in 2005, the Company expects to commence high grade gold production at Burnakura in Western Australia in mid-2012, with potential additional goldcopper production from the neighbouring Gabanintha deposit. At Jervois in the Northern Territory, the Company is studying the feasibility of developing a large, high grade copper-silver resource with potential for the production of gold and other base metals.

In the Kyrgyz Republic, Kentor Gold is ready to proceed with the development of the Company’s 80% owned high grade, very low cost Andash Gold-Copper Project once site access has been obtained. Andash is targeted to produce 70,000 oz gold and 7,400 tonnes copper pa for an initial six years, with high potential for expansion.

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Issued capital:

1,062.1 million ordinary shares 27.4 million unlisted options

Market Capitalisation

26 April 2012: $115 million

Quarterly Activities Report Period Ending 31 March 2012

Australia

• Jervois Copper-Silver-Gold Project scoping study points to strong financial returns

• Up to 26,000 tonnes per year copper production

• Proceeding immediately to feasibility study

• Murchison Gold Project development approved and on course for mid-2012 start-up

• Outstanding high grade gold drilling results even before mining commences

• Potential for early stage increase in production and reduced unit costs

Kyrgyz Republic

• Further steps towards final local approval to develop the very low cost, high grade Andash Gold-Copper Project

Quarterly Overview

During the quarter, Kentor Gold Limited (“Kentor Gold” or “the Company”) advanced to within months of first production at the Murchison Gold Project.

The Company reported outstanding gold drilling results at Murchison and positive findings from a study of the Jervois Copper-Silver-Gold Project - powerful endorsements of the Australian acquisitions made less than a year ago.

The recent outcomes at both projects have continued to justify the aggressive drilling programs and the decisions to move to early production.

The scoping study at Jervois found that it will be a robust project producing strong financial returns, supporting the Company’s confidence in Jervois as a future significant Australian multi-metals mine.

At the Murchison Project, high grade gold was intersected within and adjacent to the planned Lewis pit at the Burnakura site where gold production is on track to commence in mid-2012 and expand in 2013 as part of a four-phase expansion strategy.

Kentor Gold Limited

www.kentorgold.com.au

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In the Kyrgyz Republic, where Kentor Gold has experienced delays in obtaining final local approval for Andash, one of the world’s lowest cost gold-copper projects, progress continued to be made as the Kyrgyz Government sought changes to a 2011 resolution (Parliamentary Decree) opposing the project on environmental grounds.

Australia

Jervois Copper-Silver-Gold Project, NT (Kentor Gold 100%)

The scoping study completed during the quarter found that the Jervois Project would produce strong financial returns based on existing Resources, and that the returns would improve further when based on additional tonnages from the exploration potential that has been identified.

The study examined annual processing rates of 1.5Mtpa, 2Mtpa and 2.5Mtpa.

At the 2.5Mtpa rate, Jervois will produce 181,000 tonnes of copper in concentrate, or approximately 26,000 tonnes a year for seven years, plus significant by-products of gold, silver and magnetite.

The study indicates:

• Free cash flow of $388M* on total revenue of $1.985B at the 2.5Mpta throughput rate

• Life-of-mine cash operating costs ranging down from $1.79/lb of payable copper at a 1.5Mtpa throughput to $1.61/lb at a 2.5Mtpa throughput, after by-product credits

• Open pit mining for the first three years, underground mining years 3 to 7

• Metallurgical recovery of copper 94%

*Assumed US$ = A$

Table 1. Key Parameters for projected throughput

		1.5 Mtpa	2.0 Mtpa*	2.5 Mtpa*
Total Ore processed	Mt	9.8	13.0	16.3
Copper Produced	kt	108.8	145.1	181.4
Capex (pre-production)	$m	234.2	273.5	309.7
Total Revenue	$m	1,191	1,588	1,985
Free Cash Flow	$m	132.4	250.7	388.6
NPV @ 8%	$m	36.5	110.4	198.7
C1 Cash Cost	$/lb	1.79	1.71	1.61
IRR	%	12	19	25

• *Note: The 1.5Mtpa case is based on mine designs for existing resources. The 2.0Mtpa and 2.5Mtpa cases assume additional tonnage from exploration potential identified at Reward and Bellbird adjoining the current resource.

The 1.5Mtpa case is based on mine designs for existing resources which comprise an initial Inferred Resource of 11.9 million tonnes @ 1.3% copper and 25.2 g/t silver at the Reward, Bellbird, Green Parrot and Bellbird North deposits for a total of 150,500 tonnes copper and 9.66 million oz silver. The Resource includes 1 million tonnes @ 2.6% lead, 2.2% zinc and 73 g/t silver contained within the copper mineralisation at the Green Parrot and Bellbird North deposits.

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Kentor Gold Limited

www.kentorgold.com.au

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The 2.0Mtpa and 2.5Mtpa cases assume additional tonnage from exploration potential, identified at Reward and Bellbird adjoining the current Resource, of 5 – 10Mt @ 0.75 to 1.25% copper and 10 to 25g/t silver at a 0.5% copper cut off (for 50,000 to 100,000 tonnes copper and 3 to 5 Moz silver).

The potential quantity and grade of the Exploration Potential is conceptual in nature and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource.

The four deposits at Jervois are open at depth and there are additional possibilities along strike from the deposits.

Significant gold assays have been recorded in drilling at the Reward deposit. With the additional drilling planned this year, it is anticipated that gold will soon be included in future Resource upgrades.

The feasibility study will consist of the additional drilling – to upgrade confidence in the current resource and extend the resource along strike and down dip – as well as metallurgical test work, plant design, mining, infrastructure, environmental, permitting and marketing studies.

Exploration drilling recommenced at Jervois late in March. Two diamond drilling rigs and one RC drill rig are on site. The exploration programme has three objectives, to source a representative sample of ore for feasibility level metallurgical test work, to infill and upgrade the resource classification of the current resource and to follow up on the high grade area encountered in the previous exploration programme at the northern end of the deposit. A total of 221 metres of diamond core was drilled during the quarter.

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Diamond drilling at the Reward ore body

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27 April 2012

Kentor Gold Limited

www.kentorgold.com.au

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Murchison Gold Project, WA (Kentor Gold 100%)

Newly named during the quarter, the Murchison Project brings together the Burnakura gold and Gabanintha gold-copper sites with initial Inferred Resources totalling 15.1million tonnes @ 1.5g/t gold for a total of 719,000 oz gold at a 0.5g/t gold cutoff.

On 7 February, the Company announced board approval to proceed with the development of Phase 1, and within weeks disclosed outstanding high grade gold intersections with the potential to increase production and reduce unit production costs.

Construction activity at the project’s Burnakura plant is on schedule and on budget with the first gold production targeted for mid-year.

Under the four-phase expansion strategy, initial production is scheduled at the rate of 24,000 oz gold per year from a combination of open pit and underground mining at Burnakura over an initial three and a half years. However, further exploration drilling is expected to increase production and extend mine life. Good metallurgical performance is expected, the previous operation having achieved 94% gold recoveries from the on-site processing of underground ore. Capital cost of the first phase is $14.8M.

The second phase, targeted to commence during 2013, will be the addition of a parallel heap leaching operation which will increase the production with minimal additional capital from already acquired equipment, and lower the operating cost.

The third phase will be an expansion of the CIP plant from 260,000 to 500,000 tonnes a year. The fourth phase will be the flotation of copper-gold ore to produce a copper concentrate.

The cash operating cost in the first phase is forecast to be $1223 per ounce. However, recent drilling results indicate that there is the potential to achieve lower unit costs and higher production in Phase 1. Additionally, the unit cost is expected to reduce significantly in the second phase as a heap leach operation is added.

On 27 February, the Company announced the intersection of high grade gold during drilling within the currently designed Lewis pit (initial production will come from the Lewis and Reward pits at Burnakura). Results from two diamond drill holes within the pit design included:

• 5m @ 102.2 g/t gold from 43m (incl. 1m @ 474.5 g/t gold)

• 17m @ 9.6 g/t gold from 43m (incl. 1m @ 103 g/t gold)

On 16 April, the Company announced that further high grade gold had been intersected during RC drilling within and adjacent to the Lewis pit shell including the following results from two holes:

• 1m @ 55.3 g/t gold from 56m and 2m @ 56.4 g/t gold from 75m

• 2m @ 15.2 g/t gold from 69m

A total of 11,235 metres of drilling was completed during the quarter.

Although there is a high density of drilling information available for the Murchison Gold Project, the current resource is classified as an Inferred Resource due to the lack of quality control information from the historical data which is required to classify the resources into the Measured and Indicated categories.

The current drilling programme will be completed in the June quarter and then the resources will be updated which will then allow an ore reserve estimate to take place. This is expected to be completed in the September quarter of 2012.

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Kentor Gold Limited

www.kentorgold.com.au

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Preparations for mining and processing are on schedule. The camp has been renovated and the power station activated. The mining contractor has mobilised to site. Contracts have also been awarded for catering and flights.

Work on the processing plant is well advanced, the crushing circuit having been refurbished, and initial ore already crushed to build a stockpile of fine ore ready for milling mid-year when the plant will be fully commissioned. New leach tanks have been fabricated in Perth and are currently being installed at site.

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Leach tanks arriving at the Murchison Gold Project and being lifted directly into place

At Gabanintha, planning and prioritisation of Gabanintha exploration drilling is being undertaken. It is anticipated that drilling will commence at Gabanintha in May as soon as the follow up holes at Lewis pit have been completed.

Kyrgyz Republic

Andash Gold-Copper Project (Kentor Gold 80%)

During the quarter, further steps were taken towards achieving the formal approval of the local community that is required for the Andash Project to proceed to development.

In March, the Government asked the country’s Parliament to reconsider a resolution (Parliamentary Decree) of last June opposing the development of the project on environmental grounds.

In April, the Government specifically proposed to the Parliamentary Committee on Economic Development that the resolution be amended to remove the requirement to revoke permits and remove land use permits, while requiring that an independent international environmental review of the project be conducted.

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Kentor Gold Limited

www.kentorgold.com.au

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The Government confirmed to the Committee that the project had met environmental requirements. The Government also detailed the benefits that the Andash project and Kentor Gold will bring to the people of the local community and the region.

The Government-proposed amendment provides that activity at the Andash deposit will remain suspended pending completion of the environmental review and resolution of the issue with the local community. The Parliamentary Committee on Economic Development was due to meet again to consider the Government’s response on Andash on the 24[th] April, this meeting has now been postponed until early to mid- May 2012..

The Company regards the Government’s initiatives as steps in the right direction in dealing with the delays in the development of Andash, anticipating that an international environmental review will put aside the issue of environmental risk and resolving any residual anxiety in the local community. The agreed mechanism for final local consideration of the project can then proceed.

The Company is ready to proceed with the development of the very low cost Andash project to produce 70,000 oz gold and 7,400 tonnes copper a year for an initial six years. Upon receiving final local approval and gaining site access, the Company will commence a 3 month geotechnical investigation program and then proceed with a 12 month construction program.

Andash has an estimated JORC Ore Reserve of 539,730 oz gold and 63,486 tonnes copper, and a Resource of 19.2 million tonnes @ 1.1 g/t gold and 0.4% copper for 679,023 oz gold and 77,300 tonnes copper.

Bashkol Exploration Licence (Kentor Gold 80%)

The Company spent the quarter planning a drilling program for the Bekbulaktor Gold Prospect on the Bashkol Exploration Licence and a geological and geophysical program between Bekbulaktor and Sharkmatma.

The drilling program is being planned to establish a gold-copper Resource at Bekbulaktor where, during 2011, channel sampling returned high grade gold and copper results and established the presence of widespread gold and copper mineralisation.

The geological and geophysical program is being planned to explore further the 15km long belt of mineralisation extending from Bekbulaktor to Sharkratma.

Further exploration and construction of an access road is planned to commence in June 2012.

Geothermal Energy – Solomon Islands

During the quarter, Kentor Gold’s 100% owned subsidiary Kentor Energy Pty Ltd (“Kentor Energy”) was granted a 3-year Prospecting Licence for geothermal energy by the Solomon Islands Government.

Kentor Energy will investigate the potential for supplying geothermal power to Honiara, capital city of the Solomons, from the island of Savo, a dormant volcano with vigorous geothermal activity, 35km away.

Previous geoscience results indicate that a substantial geothermal reservoir at a temperature of 260 – 3000C may exist at Savo, probably at conventional geothermal depths of less than 2,000m. Currently consumers in Honiara must pay one of the world’s highest prices for electricity produced entirely by diesel generators. The situation creates a compelling business opportunity to supply Honiara with power at much reduced cost.

The Solomon Islands initiative arose when Kentor Gold discontinued investigations into geothermal power in central Asia due to low power costs there, and reviewed South Pacific opportunities for conventional, volcanic related projects in locations with high cost, diesel power generation.

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Kentor Gold Limited

www.kentorgold.com.au

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Corporate

The Company maintains a strong financial position. The development of the Murchison Project has been funded from cash reserves which stood at US$28.4m on 31 March 2012.

Outlook

The Company will continue on the path of bringing the Murchison Gold Project into production in mid2012. Additional drilling is continuing in order to increase and add confidence to resources.

The feasibility study at Jervois will be progressed vigorously, including drilling to upgrade resources, source samples for metallurgical test work and extend resources particularly around the high grade area at Reward and north of Bellbird.

The Company will seek to expedite the proposed international environmental audit of Andash to move the project closer to gaining local approval leading to site access and development.

For further information contact:

Mr Simon Milroy Managing Director Phone: (07) 3071 9003 Email: info@kentorgold.com.au

Mr. David Waterhouse Investor Relations Phone (03) 9670 5008 Email: dwaterhouse@waterhouseir.com.au

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Kentor Gold Limited

www.kentorgold.com.au

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Appendix 1 KGL Group Resources

	Tonnes (mt)	Grade Au g/t	Grade Cu%	Grade Ag g/t	Gold (oz)	Copper (t)	Silver (Oz)
Andash Sulphide Jervois Burnakura Gabanintha	0.38 11.9 10.6 4.5	0.93 1.5 1.4	0.25 1.3	25.2	11,350 516,000 203,000	950 150,500	9,660,000
Total Inferred Resources	27.38				730,350	151,450	9,660,000
Andash Oxide Andash Sulphide	0.81 14.31	0.85 1.11	0.43 0.38		22,136 510,507	3,510 54,260
Total Indicated Resources	15.12				532,643	57,770
Andash Oxide Andash Sulphide	0.923 3.16	0.88 1.21	0.5 0.47		26,114 122,932	4,638 14,900
Total Measured Resources	4.08				149,046	19,538
Total Resources	46.58				1,412,039	228,758	9,660,000

Gabanintha and Burnakurra Resources as quoted at a cut-off grade of 0.5g/t Au. Jervois Resource is based on cut-off grades 0.2% to 0.5% Cu Kentor Gold own 80% of the Andash project

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Kentor Gold Limited

www.kentorgold.com.au

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Competent Persons Statements

The information in this report that relates to mineral resource estimation for Gabanintha and Burnakura is based on work completed by Mr Jonathon Abbott who is a full-time employee of Hellman & Schofield Pty Ltd and a member of the Australasian Institute of Mining and Metallurgy. Mr Abbott has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Abbott consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The data in this report that relates to Mineral Resource Estimates and Exploration Potential for Jervois is based on information evaluated by Mr Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”). Mr Tear is a full-time employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear.

The Resource estimates for Andash in this report are based on information compiled by Dr. Phil Newall, who is a Chartered Engineer and Fellow of the Institute of Materials Minerals and Mining and a full time employee of Wardell Armstrong International. Dr. Newall has sufficient experience which is relevant to the style of the mineralisation and the type of deposit under consideration and to the activity to which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr. Newall has consented to the inclusion of this information in the form and context in which it appears in this report.

The information in this report that relates to exploration results for Burnakura is based on work completed by Mr Keith Mayes who is a full-time employee of Kentor Gold Limited and a Fellow of the Geological Society of London. Mr Mayes has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Mayes has consented to the inclusion of this information in the form and context in which it appears in this report.

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