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Tuvatu Gold Project


HIGH GRADE, LOW CAPEX, HIGH IRR, FULLY PERMITTED
ROBUST ECONOMICS HIGHLIGHTED IN 2015


About Tuvatu

Lion One's main asset is the Tuvatu Gold Project, located on the island of Viti Levu in Fiji. The project is accessed by a 15 km drive from Lion One's headquarters adjacent to the Nadi International Airport, 35 km from the port of Lautoka. The project is fully permitted for development, following the approval of the Tuvatu mining lease by Fiji's Minister of Lands and Mineral Resources in 2015.

Tuvatu is a high grade vein-hosted gold deposit related to one of Fiji's major volcanic intrusive complexes, characterized by steeply dipping veins extending 600 meters N-S and 500 meters E-W, 540 meters vertically. A total 39 veins are included in the resource model, including widths up to 9 meters, with average widths of 2.2 meters. Free gold is present in both fine and coarse grains and is potentially amenable to conventional gravity processing. Gold is also contained in quartz and pyrite composite particles, potentially amenable to extraction by flotation and leaching.

The mining lease covers the entire Tuvatu resource area and several high grade exploration prospects in the large underexplored volcanic goldfield of the Navilawa Caldera. Lion One secured a 21 year surface lease agreement in 2014, and previously received Department of Environment approvals for its 2013 Environmental Impact Assessment and 2014 Environmental Management Plans.

The Company has focused, in tandem with the permitting process, on the confirmation, validation, and expansion of an extensive exploration database and resource. Work to date includes check sampling historic drill core, geophysics, geochemical analysis, surface mapping, trenching, sampling, and 14,000 of new drilling to add to 87,000 meters of historic drilling. Previous work includes 1,340 meters of underground development, consisting of a 600 meter decline to a depth of 240 meters, with cross cuts, raises, and drill stations. Engineering work for potential mine design, processing, and waste management commenced in October 2014, concluding with the completed PEA in June 2015.

Tuvatu hosts a National Instrument (NI) 43-101 resource comprising:

1.1 million tonnes indicated grading 8.46 g/t gold for 299,500 oz. gold

1.5 million tonnes inferred grading 9.7 g/t gold for 468,000 oz. gold

Click to download NI 43-101 Technical Report:

Independent Technical Report and Resource Estimate on The Tuvatu Gold Deposit

On May 30, 2015 the Company announced results of the Tuvatu Preliminary Economic Assessment (PEA)with contributions from several independent consultants. All figures are quoted in US dollars utilizing a base case gold price of US $1,200.

2015 PEA Highlights

  • 15 month pre-production schedule
  • Low up-front capital costs of US$48 million
  • 1.5 year payback on capital; 52% after tax IRR
  • Pre-tax Net Present Value (NPV) of $117 million (5% discount rate)
  • Production of 352, 000 oz. at average mined grade of 11.3 g/t gold;
  • Operating costs of $567 per oz.; all-in sustaining costs of $779 per oz.;
  • Payback in year 2 followed by production of 91,229 oz. in year 3 averaging 16.5 g/t Au, and 92,056 oz. averaging 14.40 g/t Au in year 4;

PEA Summary (reported in US$)

Project Life (Years)

7.4

Total Gold Produced (oz. Au)

352,931

Average Annual Production (oz. Au)

57,320

Capital Costs (millions)

$48.6

Average Mining Cost ( per tonne)

$76.50

Processing Costs (per tonne)

$43.80

Mining Dilution

20%

Metallurgical Recovery

86.3%

Inferred resources as percentage of tonnage

55.1%

Inferred resources as percentage of ounces

62.7%

Summary Economics

Summary Economics

$ US ‘000

Total LOM Undiscounted Revenue

$423 M

Total LOM Pre-Tax Cash Flow

$148 M

Average Annual Pre-Tax Cash Flow

$33 M

Total LOM After-Tax Free Cash Flow

$112 M

Average Annual After-Tax Free Cash Flow

$20 M

Discount Rate

5%

Pre-Tax NPV

$117 M

Pre-Tax IRR

67%

Pre-Tax Payback (Years)

1.25 Years

After-Tax NPV

$86 M

After-Tax IRR

52%

After-Tax Payback (Years)

1.50 Years

Cash Costs

$567 per oz.

AISC

$779 per oz.

Mineral Resources

The PEA is based on an Indicated and Inferred mineral resource estimate by Mining Associates Pty Ltd. in the NI 43-101 technical report dated May 6, 2014 entitled “Independent Technical Report and Resource Estimate on the Tuvatu Gold Deposit”, which is filed on SEDAR.

A summary of this resource (reported at a cut-off grade of 3.0 g/t Au - highlighted) is as follows:

Cut off

Indicated Resource

Inferred Resource

g/t Au

tonnes

g/t Au

oz. Au

Tonnes

g/t Au

oz. Au

1.0

1,943,000

5.61

350,300

3,022,000

5.8

561,000

2.0

1,435,000

7.07

326,200

2,156,000

7.5

520,000

3.0

1,101,000

8.46

299,500

1,506,000

9.7

468,000

5.0

683,000

11.25

247,000

872,000

13.9

390,000

Mine Plan

Tuvatu is contemplated as an underground mine. To minimize dilution the envisaged mine plan utilizes shrinkage stoping, and produces a total of 1.13Mt of mill feed over the 6.2 year project production life. The current mine plan focuses on achieving consistent mill feed production rates and mining higher grade material early in the production schedule. The current mine plan utilizes the existing decline enabling significant reductions in pre-production time and reduced capital development costs.

The proposed processing rate of 219,000 tpa was used along with underground design and deposit constraints to generate a detailed equipment list and mining fleet suitable for the LOM plan. The capital cost for this list is based on quotations from major suppliers. Mining costs were calculated from first principles using quotes from equipment and consumables suppliers, and Fijian and ex-pat labour rates.

Mine planning, production scheduling, capital and operating cost estimation for the Tuvatu Gold Project were conducted by AMC Consultants Pty Ltd (AMC). A site visit was undertaken by David Lee, AMC Principal Mining Engineer September 9th and 10th, 2014. During the visit Mr. Lee visited the Project site and met with a number of potential suppliers and open pit mining contractors.

The Study considered Indicated and Inferred Mineral Resources. There are no Measured Mineral Resources. Inferred Mineral Resources comprise 55.1% of the mined tonnes and 62.7% of the contained ounces in the mine plan developed in this Study.

There are four main zones contained in the Mineral Resource model. Snake/Murau zone is steeply dipping and strikes east-west. The Tuvatu zone is steeply dipping and strikes north-west by south-east, and is located north of the Coreshed Fault. The SKL zone is shallowly dipping. The Upper Ridge zone is steeply dipping, striking north-south and contains over 80% of the conceptual production ounces.

Mine access will be via two main declines from surface, with a gradient of 1:7 and dimensions of 4.5 meters wide x 4.5 meters high. Access to the ore will be made from the main decline and two internal declines. Two ventilation raises to surface are included.

Level access drives are designed at 4.0 meters wide x 4.0 meters high and draw points at 3.5 meters wide x 4.0 meters high. These dimensions enable use of medium sized loaders for improved productivity and truck loading close to the stoping area. The primary mining method is shrinkage stoping (airleg method) with limited breast stoping (airleg method for shallow dipping lodes).

Processing and Metallurgy

The processing facility flowsheet has been selected based on the criteria defined by the physical characteristics of the mineralized material and metallurgical testwork undertaken. The comminution facility is a conventional two-stage crushing and screening circuit, followed by two-stage grinding. The grinding circuit, which includes gravity recovery, then feeds flotation where a sulphide concentrate is produced and reground prior to entering the Carbon-In-Leach (CIL) circuit. Both the flotation tails and concentrate are leached, followed by detoxification and tails deposition.

A gold recovery of 86.3% has been proposed for the economic evaluation based on the median of the variability testing results.

The process facility has been designed to treat 219,000 tonnes per annum of gold bearing material at the projected plant throughput of 600 tonnes per day. With an estimated combined LOM average feed grade of 11.3 g/t with the overall process recovery of 86.3%, the estimated average gold production is 57,342 ounces per annum.

Operating Costs

Operating Costs

US$ per tonne milled

Mining Costs

$76.50

Processing Costs

$43.83

General & Administrative

$19.49

Exploration

$1.53

Direct Op. Costs before Taxes and Royalties

$141.35

Operating Costs

US$ per ounce Au

Mining Costs

$243.98

Processing Costs

$139.78

General & Administrative

$62.16

Exploration

$4.89

Refining & Transport

$2.40

Royalty

$114.00

Total US$ Cash Costs

$567.21

Cash Costs Including All-in Sustaining Costs

$US per tonne

$US per oz.

Onsite Mining

$76.50

$243.98

Onsite Processing

$43.83

$139.78

G&A

$19.49

$62.16

Exploration

$1.53

$4.89

Refining

$0.75

$2.40

Royalties

$35.76

$114.00

Total Costs

$177.86

$567.21

Capex

$66.28

$211.38

All-in Sustaining Costs

$244.14

$778.59

Capital Costs

All-inclusive pre-production capital is estimated at $48.6 million, including $27.6 million for the processing plant and surface infrastructure, and an added contingency and allowance for taxes and duties of $4.7 million. A further $26 million will be spent after the pre-production period as sustaining capital. LOM capital totals approximately $74.6 million, or $211 per ounce gold. Sustaining capital consists of capitalized waste development after the initial production start-up, major equipment purchases, and tailings facility development.

The capital cost (CAPEX) estimate includes all costs required to develop, sustain, and close the operation for an initial planned 6.2 year life of mine. The construction schedule is based on an approximate 15 month build period. The accuracy of this estimate is +-30%.

Pre-Production Capital

US$

Capitalized Development

$8.9 M

Mining Equipment

$5.9 M

Processing

$13.2 M

Infrastructure

$7.5 M

Indirect Costs

$2.5 M

EPC

$2.06 M

Owner Costs

$2.1 M

Contingency (14.5%)

$6.14 M

Total US$

$48.6 M

The reader is cautioned that the PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized.