Name and Location
Tembang gold/silver project, Sumatra, Indonesia.

Client
Sumatra Copper & Gold.

Project Description
The updated feasibility study on the Tembang project completed in 2014 envisages total production of 2.1-million tonnes of ore at 2.8 g/t gold and 33 g/t silver for 168 795 oz of recovered gold and 1.8-million ounces of recovered silver at a mill process rate of 400 000 t/y.

The development strategy of Tembang is to focus on the underground mining of high-grade veins from Belinau as the core production source of the project.

The Belinau underground, narrow-vein mine is expected to ramp up to a maximum capacity of 200 000t t/y in Year 3.

During the five-year production period, more openpit ore will fill the mill capacity than the ore supplied by Belinau. The mining method applied to this deposit is jumbo ore drive development and bottom-up longhole stoping using unconsolidated wasterock backfill.

About 40% of the ore production will be from development and 60% from longhole stoping. Average yearly production of 33 000 oz of gold and 345 000 oz of silver is expected.

The cash flow from operations will be used to drill potential additional underground targets to replace and supplement the Belinau underground mine.

To achieve this, Sumatra will need to develop additional underground mines. The existing high-grade openpits at Siamang, Bujang and Berenai remain open at the bottom of the existing pits. The company intends to drill these projects out once cash flow is available from the Tembang operation.

Net Present Value/Internal Rate of Return
The project has a pretax net present value, at a 9% discount rate, of $33.8-million at full capital cost.

Value
The project has a total estimated capital cost of $71.3-million, of which $19.5-million has been spent to date, with $33.6-million to be spent until project completion and $18.3-million sustaining capital over the five-year mine life.

Duration
Production is expected in the fourth quarter of 2015.

Latest Developments
Sumatra Copper & Gold has secured a $5-million working capital facility from its major shareholder Provident Minerals to fund operating costs and underground and openpit development at the Tembang mine.

Sumatra will issue five-million convertible notes , with a face value of $1 each, to Provident Minerals to raise the funds. Interest on the convertible notes is 10% a year.

The convertible notes will be issued in two tranches, with the second tranche subject to shareholder approval.

The convertible notes will mature immediately after the maturity date of an existing $45-million senior secured debt facility, which is November 10, 2017.

The noteholder could elect to convert the notes into CHESS depository interests (CDIs) at an exercise price of A$0.057 per CDI, at the Australian/US dollar exchange rate on the day preceding the date of the conversion notice. It is estimated that the conversion will result in the issue of an estimated 161.2-million CID’s equating to a 23% increase in Sumatra’s current CDIs on issue.

Sumatra has also entered into a working capital loan facility with Provident Minerals worth up to $3-million, which will be repaid at the earlier of the issue of the second tranche of the convertible notes or on the maturity date of the convertible notes.

The working capital facility will also have an interest rate of 10% a year.

Sumatra recently started underground production of high-grade ore at the Tembang project, after first gold pour had been achieved in September.

The development of the openpit mines is progressing as planned, with the Berenai and Asmar pits supplying the majority of the ore being processed at the plant.

Key Contracts and Suppliers
Not stated.

On Budget and on Time?
Yes.

Contact Details for Project Information
Sumatra Copper & Gold, tel +61 8 6298 6200.