“Importantly it can be seen that at a cut-off grade of 1.4 grams per tonne there are 998,000 ounces of gold. This is just shy of the one million ounces forecast earlier this year. In addition, this number comprises a high proportion of indicated ounces, which is 29 percent of the total ounces, which should give investors further confidence in the asset and in the ability of management to deliver forecasts. It is also significant that very high grades have been reported. For example, the average grade of 4.2 grams per tonne given for the 1.4 grams per tonne cut-off grade was higher than expected. They are also high for a resource of this size. Consider, for example, NioGold Mining Corp (TSX.V:NOX) which is also a single asset advanced exploration gold company with its asset in Quebec. That company has a total resource of 960,000 ounces of gold with an average grade of 2.2 grams per tonne.

SRK suggested that a cut-off grade of three grams per tonne should be utilised at this stage. We assume this is for the purposes of preliminary modelling for underground production. While this gives a lower number of total ounces, the proportion of indicated ounces is higher at 48 percent, as are the average grades (note particularly the 9.1 grams per tonne average grade of the indicated ounces at this cut-off grade).

It is also interesting to note at this point that by altering the model only slightly, lower cut-off grades become employable in the eyes of SRK, whose members are widely regarded as conservative. For example, by removing the haulage expense from the operating cost, a 2.5 grams per tonne cut-off grade can be used.”

Cheers, Mark