The Company announced in parallel with the Mt Morgans Gold Project (MMGP) Feasibility Study (FS), an expansion pre-feasibility study (PFS) which shows potential future MMGP production increases to 1.7Moz.

Expansion Pre-Feasibility Study Highlights

The key outcomes of the MMGP expansion pre-feasibility study (PFS), as released to the ASX on 21 November 2016, include:

  • PFS shows MMGP production may increase from Ore Reserve of 18.6Mt @ 2.0g/t Au for 1.20 million ounces to 21.4Mt @ 2.4 g/t Au for 1.65 million ounces
  • Corresponding MMGP Ore Reserve AISC improves from A$1,039/oz (US$779/oz) to PFS AISC of A$970-975/oz (US$730-735/oz)
  • PFS focused on potential expanded production of Westralia Mine Area (Beresford and Allanson mines). PFS does not include any changes to the Jupiter Mine Area and Transvaal Ore Reserves
  • PFS shows potential increase of Westralia Mine Area Ore Reserve of 492,000 ounces at an AISC of A$837/oz (US$628/oz) to 938,000 ounces at an AISC of A$795-805/oz (US$595-605/oz)
  • PFS shows potential average gold production of 197,000 ounces per annum for first 7 years.
  • PFS mine life increases from 8 years in Ore Reserve to potentially 9 years.
  • PFS assumes additional increased capital expenditure of approximately $3 million to increase capacity of tailings storage facility. No other infrastructure, permitting or financing requirements are assumed in the PFS.

The first table on the right hand side of this page summarises the key metrics determined from the PFS.

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The expansion PFS outcomes are underpinned by a declared Ore Reserves (73%) and include a minor contribution (27%) of Inferred Mineral Resource.  The Company notes that an Inferred Mineral Resource has a lower level of confidence and that the JORC Code 2012 advises that to be an Inferred Mineral Resource it is reasonable to expect that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration. Based on advice from relevant Competent Persons, the Company is confident that a significant portion of the Inferred Mineral Resources for the Mt Morgans Gold Project (MMGP) can be upgraded to Indicated Mineral Resources with further exploration work.

The MMGP’s geology and mineralisation are well understood. Detailed logging of all drill holes together with excellent mine geological documentation undertaken during the mining at the three prospects in the 1990s provides Dacian with a high level of confidence it understands the lithologies and mineralisation characteristics of the potential mines that comprise the MMGP.

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The expansion PFS was completed to examine the potential additional mine life of the Westralia Mine Area, part of the MMGP.  The Westralia ore body remains continuous at depth below the Ore Reserve, and the interpreted mineralisation controls and extents of mineralisation remains consistent.  The initial Ore Reserves of the Jupiter Mine Area and the Transvaal underground mine were applied in this PFS without any change.

The PFS expands the 1.2 million ounce MMGP Ore Reserve to potentially 1.7 million ounces by applying the same mine design parameters used in estimating the Westralia Mine Area Ore Reserves, to a portion of high grade Inferred Mineral Resource that is continuous with the Westralia Mine Area Ore Reserves.  Apart from the increased tonnages, no other changes to the assumptions which underpin the production scenario defined by Ore Reserves in the Feasibility Study have been necessary for the PFS.

Mining

The individual production sources of the 1.7 million ounce potential profile considered in this expansion PFS are shown on the right side of this page.  The only change from the Ore Reserve production sources described in the feasibility study is from the Beresford and Allanson underground mines.

The detailed mine design work for the Beresford and Allanson underground mines (together the Westralia Mine Area) that was applied to the initial Ore Reserve estimate for both mines is detailed in the 21 November 2016 announcement. The same mine design parameters used in the Feasibility Study for the estimation of the Beresford and Allanson Ore Reserves were applied to the mining of the geologically contiguous Inferred Mineral Resource considered in the expansion PFS.

The figure on the right hand side of this page shows the extent of the possible production of the Beresford and Allanson underground mines, considered in the PFS.

The table on the right hand side of this page provides a breakdown of the Westralia Mine Area PFS potential mining sources.  The total potential future mine production from the Westralia Mine Area increases to 938,000 ounces from an Ore Reserve of 492,000 ounces.    The forecast AISC for the 938,000 ounces is A$795-805/oz (US$595-605/oz) whereas the corresponding AISC for the Ore Reserve is A$837/oz (US$628/oz).

Expansion PFS Mine Production and Gold Production

The PFS considers the potential for 1.7 million ounces to be mined and producing 1.5 million ounces assuming a 91% recovery over a 9 year period.  The potential gold production levels average 197,000 ounces per annum for the first 7 years.

Process Plant

It is anticipated that processing requirements for the PFS potential production schedule will be met by the new 2.5Mtpa CIL treatment facility designed and costed in the MMGP Feasibility Study.

Operating costs for the treatment of the PFS production are assumed to be $18.20/t, slightly higher than that used in the Feasibility Study at $A17.88/t.

The Company notes that in respect of the potential expanded production profile, the subject of the PFS, the potential mining and treatment of the Inferred Mineral Resource does not feature in the early mine and treatment plan.

Infrastructure and Capital Costs

No additional infrastructure requirements are anticipated to mine and treat the PFS production scenario from that identified and costed in the MMGP Feasibility Study.

The only material additional capital cost required to mine and treat ore in the expansion PFS production schedule over that estimated in the Feasibility Study, is approximately $3 million to increase the capacity of the tailings storage facility.   This estimate has been provided by G R Engineering Services Ltd; the same engineering company that completed the MMGP Feasibility Study infrastructure designs and costings.

Financing and Permitting

It is anticipated that there is no additional financing or material permitting above that described in the MMGP Feasibility Study required to potentially mine and treat the PFS production.

The Feasibility Study confirms the MMGP is a technically and economically viable project.  Project cash flows generated from the mining and treatment of the Ore Reserves provides sufficient working capital to develop the potential production outlines in the expansion PFS.

 

Cautionary Statement

Some statements on this page regarding estimates or future events are forward-looking statements. They include indications of, and guidance on, future earnings, cash flow, costs and financial performance. Forward-looking statements include, but are not limited to, statements preceded by words such as “planned”, “expected”, “projected”, “estimated”, “may”, “scheduled”, “intends”, “anticipates”, “believes”, “potential”, “could”, “nominal”, “conceptual” and similar expressions. Forward-looking statements, opinions and estimates included in this announcement are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements are provided as a general guide only and should not be relied on as a guarantee of future performance. Forward-looking statements may be affected by a range of variables that could cause actual results to differ from estimated results, and may cause the Company’s actual performance and financial results in future periods to materially differ from any projections of future performance. These risks and uncertainties include but are not limited to estimations inherent in mine development and production; geological, mining and processing technical problems; the inability to obtain mine licenses, permits and other regulatory approvals required in connection with mining and processing operations, competition for among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel, changes in commodity prices and exchange rate, currency and interest rate fluctuations, various events which could disrupt operations and/or the transportation of mineral products, including labour stoppages and severe weather conditions, the demand for and availability of transportation services, the ability to secure adequate financing and management’s ability to anticipate and manage the foregoing factors and risks. There can be no assurance that forward-looking statements will prove to be correct.

The information on the page has been prepared in compliance with the current JORC Code 2012 Edition and the ASX Listing Rules. All material assumptions on which the forecast financial information is based are included in the 21 November 2016 announcement.

The Company notes that an Inferred Mineral Resource has a lower level of confidence than an Indicated Mineral Resource and that the JORC Code 2012 advises that to be an Inferred Mineral Resource it is reasonable to expect that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration. Based on advice from relevant Competent Persons, the Company is confident that a significant portion of the Inferred Mineral Resources for the MMGP will be upgraded to Indicated Mineral Resources with further exploration work.

In relation to the application of Inferred Mineral Resource in production target, the Company notes that there is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realized.

The MMGP’s geology and mineralisation are well understood. Detailed logging of all drill holes together with excellent mine geological documentation undertaken during the mining at the three prospects in the 1990s provides Dacian with a high level of confidence it understands the lithologies and mineralisation characteristics of the potential mines that comprise the MMGP.

The Company believes it has a reasonable basis for making the forward-looking statements on this page, including with respect to any Production Targets and economic evaluation based on information contained in this page and in the 21 November 2016 announcement.

In relation to Mineral Resources, the Company confirms that all material assumptions and technical parameters that underpin the relevant market announcement continue to apply and have not materially changed.

Dacian has a highly experienced management team with a proven track record in discovering, developing and mining Western Australian gold mines. In particular Mr Rohan Williams, Executive Chairman of Dacian Gold, was previously the founding CEO and Managing Director of Avoca Resources Limited, where he oversaw its growth from a $7M IPO to a $1B ASX200 gold mining company, at which time it merged with Anatolia Minerals to form, between them, the +$2B Alacer GoldCorp. Mr James Howard, Dacian Gold’s Project Manager was formerly Avoca’s Mining Manager at its 170,000 ounce per annum Higginsville Gold Operation, and Mr Dan Baldwin, Dacian Gold’s Exploration Manager was formerly Avoca’s and subsequently Alacer’s Australian Exploration Manager.

Dacian’s Board members also include Mr Barry Patterson as a Non-executive Director, Mr Ian Cochrane as a Non-executive Director and Mr Rob Reynolds, also a Non-executive Director. Messrs Patterson, Cochrane and Reynolds have decades of experience in corporate governance, financing, building and operating mines both throughout Australia and overseas.

Mr Matthew Keenan is an independent mining engineering consultant and a full-time employee of Entech Pty Ltd, and has sufficient relevant experience to advise Dacian Gold on matters relating to mine design, mine scheduling, mining methodology and mining costs pursuant to the PFS (see ASX announcement 21 November 2016). Mr Keenan is satisfied that the information provided in this page has been determined to a PFS level of accuracy and, based on the data provided by Dacian Gold, considers that there is a reasonable likelihood that, subject to infill drilling confirming grade and continuity of the Westralia mineralisation similar to the observed in the Inferred Mineral Resource, progress to an Ore Reserve can be justified.