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KGL Resources' Jervois Is A Viable Mid-Sized, Multi-Metal Mine

KGL Resources (ASX:KGL) has delivered a Pre-Feasibility Study (NYSE:PFS) update for the wholly-owned Jervois copper project in the Northern Territory.

The studies show Jervois as a technically and commercially feasible project with strong upside from additional planned drilling and metallurgical work.

Simon Milroy, managing director, commented: "Jervois has been confirmed as a viable mid-sized, multi-metal mine.

"However, the opportunities to add value to the project before proceeding to development are too substantial to ignore.

"The opportunities at Jervois are demonstrated not only by the PFS to date, but also the continuing flow of exploration results that point to the potential for a larger and more valuable asset."

Only exploration results received prior to July 2014 were included in the resource update used as the basis of the PFS.

The additional works program is targeting an extra $100 million to $200 million of free cash flow over the life of the project in an optimised pre-feasibility study.

The cost of the additional work program is estimated at $2.7 million and will be funded from existing cash reserves, which were $12.7 million at the end of September 2014.

Summary of Pre-Feasibility Study work to date:

- Based on Resources of 25.3 million tonnes containing 280,000 tonnes of copper, 18 million ounces of silver, 120,000 tonnes lead/zinc and 113,000 ounces of gold;

- Throughput estimated at 2 million tonnes per annum over an initial 7 year mine life (4.5 years open cut);

- Production of approximately 21,000tpa copper and 1 million oz/pa silver in concentrate plus gold, lead and zinc;

- Capex estimated at A$189 million including $22 million in contingency;

- Estimated C1 cash costs of US$1.51 per pound *
* (After by-product credits and using an exchange rate of A$/USD 0.845 and silver price of US$20/oz).

Milroy added, "Our declared strategy for Jervois includes attracting an equity partner into the project.

"It is important therefore that the project be presented in the best possible way to attract such a partner to contribute to the project's development.

"We are confident the work program announced today will be important in maximising the value of Jervois to shareholders."

Planned Work

The PFS work to date has shown that the development of a copper mine and concentrator is technically and commercially feasible.

Only exploration results received prior to July 2014 were included in the resource update used as the basis of the PFS.

Since then, further high grade drill results have been received, including the highest silver grade recorded at Jervois (1 metre at 2,350 grams per tonne silver from 19m Hole JOC266 at Reward) and more gold intersections (including 28 metres at 2.49g/t gold from 2 metres Hole JOC268 at Reward) within the proposed open pit at Reward.

Studies highlight that the project's value can be increased greatly by further drilling and metallurgical studies.

Therefore, KGL's board approved a further work program following which the PFS will be updated to include all of the additional improvements identified.

The program can be subdivided into:

- Drilling to increase the resources and reserves in both open pit and underground areas; and

- Metallurgical improvements to potentially increase the recoveries and reduce capital and operating costs.

Additional Resource Drilling

The planned drilling program will incorporate the following:

- Optimising the Marshall - Reward, Bellbird and Green Parrot open pits. The ore bodies remain open along strike and down dip in numerous areas in these pits.

Further shallow drilling is likely to increase the size of the open pits which will increase the number of years that the Jervois project is an open pit only operation.

Increasing the open pit mine life also has the secondary benefit of delaying the expenditure of the capital required to develop the underground mines.

- Additional shallow drilling around Rockface, Rock Hole and Cox's Find to delineate additional ore and include these resources in the mining schedule.

- Drilling in the gap between the southern end of the Marshall deposit and the Northern end of the Green Parrot deposit.

- Additional drilling around the Morley deposit.

- In-filling the gap in the resource at the southern end of the Marshall resource. Currently high grade stopes are planned both above and below this area, hence it is likely that additional drilling will add high grade resources in this area.

- Bellbird central underground - Further drilling in this area is likely to add high grade stopes.

- Further drilling at Bellbird north is likely to increase the lead-zinc resources in this area and possibly define some ore that could be mined by open pit.

- At Marshall, further drilling around the margins of the high grade stopes is likely to extend these stoping areas which would require no additional development to access them.

- The recent DHEM survey suggests that the two areas of high grade silver, lead and zinc ore at Marshall are likely to link up. Additional drilling between these areas is likely to increase the silver-lead- zinc resources.

Metallurgy

The flow sheet was assembled from unit processes used throughout the minerals processing industry in general and commonly used in copper flotation.

The process plant will utilise a conventional comminution processing line comprised of a primary crusher followed by a SAG mill operating in closed circuit with a classifying cyclone cluster (with provisions for pebble crushers being installed in the future).

The flotation circuit design, consisting of rougher flotation and cleaning flotation is based on reasonable flotation test work.

The remaining unit processes in the flow sheet such as concentrate thickening, concentrate filtration, tailings thickening, tailings disposal and air and water services were typically based on design data from similar plants and are considered by AMEC to be reasonable at the current study's level of accuracy.

Analysis

Today's Pre-Feasibility Study update for Jervois shows a technically and commercially feasible project with strong upside from additional planned drilling and metallurgical work.

Jervois has been confirmed as a viable mid-sized, multi-metal mine.

Significant upside has identified with value to be added to the project from a fully-funded $2.7 million additional works program included drilling and metallurgical work, which is focussed on:

- Increasing resources/reserves and mine life;
- Increasing recoveries;
- Reducing operating costs; and
- Reducing capital costs.

The additional works program is targeting an additional $100 million to $200 million of free cash flow over the life of the project in an optimised pre-feasibility study.

Only exploration results received prior to July 2014 were included in the resource update used as the basis of the PFS.

Given this, the continuing flow of exploration results point to the potential for a larger and more valuable asset.

Jervois also has an existing mining lease due to historical mining activities on site, which has the potential to provide a faster-track to production.

The company remains well funded with $12.7 million in cash at the end of September 2014, and no debt.

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