Summary
An expansion is planned to double the mill throughput to 5 million tonnes per annum of ore and increase gold production to approximately 300,000 ounces per year and annual silver production to approximately 1.5 million ounces. The current schedule for completion is December 2008, depending on the timing of the grant of the new mining leases at Chatree North, which is the trigger for the approval to commence the expansion.

Processing plant expansion
Ausenco, which designed and constructed the original processing plant, will enter into an EPC contract (Engineering, Procurement, Construction) with the Company, subject to the grant of the Chatree North Mining Leases. The crushing section of the plant is planned to be duplicated, adding grinding mills with a 2.7 million tonnes per annum additional capacity. The grinding mills were pre-ordered in 2006 with a $3.8 million deposit paid in June 2007 to ensure delivery during the September quarter 2008. A gravity concentration circuit will be installed similar to the current plant, to manage higher grade feed.

The flowsheet for the proposed processing plant was recently adjusted and streamlined to be very similar to the current processing plant. A large leach circuit, comprised of four large tanks, will be added to improve silver recoveries from around 45% at present to 65%-70%, without the need for a Merrill Crowe circuit. This has been achieved by blending the future ore feed to keep the silver grades at a more manageable level, below 20 grams/tonne. A new 4 tank leach circuit will be followed by the existing 11 tank cyanide carbon-in-pulp (CIP) circuit operated in parallel with a new 7-tank carbon-in-pulp (CIP) circuit.

A large thickener will be added to aid cyanide recycling, prior to a new cyanide destruction circuit, operated in parallel to the existing one. The existing storage ponds for process water will be replaced by large tanks. A new Tailings Storage Facility will be added. An additional substation will be required to provide for increased power requirements.

The new plant has been designed to ensure the Company maintains a low level of cyanide output to the tailings storage facility. Having a similar flowsheet for both plants will mean that the new plant can be constructed next to the current plant without impacting on its operation, only requiring a brief shutdown to integrate the two plants upon completion.

Expansion finance
To fund the expansion, Kingsgate has worked with TMB Macquarie Securities (Thailand) Ltd to arrange a debt facility with Thai financial institutions for the majority of the cost of the expansion. Akara Mining Limited (Akara) will finalise the debt facility once the final capital costs are provided by Ausenco, including completion of technical due diligence and legal documentation and satisfaction of all Conditions Precedent with major Thai banks. The arrangement of the debt facility is expected to be completed in the December quarter 2007.

TMB Macquarie Securities (Thailand) Ltd is a 51%/49% joint venture between TMB Bank Public Co Ltd and Macquarie Bank Ltd., involved in equity brokerage and investment banking businesses.

Mining contract
Lotus Hall, the Thai mining contractor which has been mining at Chatree since the mine commenced, was awarded a new contract during the September quarter 2007 which will cover the expansion of the mine operations.

A new, larger and more appropriate equipment fleet will be provided including twelve 100-tonne trucks, which are three times as large as the current trucks. The new equipment will become available beginning in January 2008 and the current fleet will be reduced accordingly.

The new equipment will ensure that the longer trucking distance to the processing plant will not be an issue, and that adequate stockpiles of ore will be available once the expanded plant is complete.

Chatree North Mining Lease approvals
The process for granting of the nine new Chatree North Mining Leases is complex but is reaching its conclusion. The Director General of the Department of Primary Industries and Mines (DPIM), Mr Anusorn Nuangpolmak, stated in the Thai press that “Akara Mining Limited’s request for 9 mining leases …will obtain their permission soon” (Thairath news, 1 June 2007). This Thai newspaper has the largest circulation in Thailand.

The key milestone in the process for granting of new leases was the official approval of the Environmental Impact Assessment (“EIA”) on 11 April 2007. This was the first EIA approved by the Office for Environmental Protection and Planning for some time.

Further approvals from the Phitchit and Phetchabun provincial departments of the Forestry Department and the DPIM were obtained in June-July 2007. National approvals, in Bangkok, from Forestry and the DPIM are the last remaining steps prior to the mining leases final review and grant by the Thai Ministry of Industry.

Our new Thai investors, both at the Kingsgate and Akara level, have been working with our team to assist in the processing of new mining leases with the aim of them being granted within the term of the present government.

The grant of the new leases will allow the mine to return to full production, with a significantly increased head grade and cash flow. It will also re-invigorate exploration activity and trigger the expansion of the mine to 5 million tonnes per annum.