Table of Contents

TABLE OF CONTENTS 1

LIST OF FIGURES 2

LIST OF TABLES 2

LIST OF ATTACHMENTS 2

EXECUTIVE SUMMARY 3

1. INTRODUCTION 6
1.1 Introduction 6

1.2 Objectives 6

1.3 Work Program 6

2. METHODOLOGY 7
2.1 Definition of Exploration Stages 7

3. RESULTS OF THE KIDSTON EXPLORATION REVIEW 8

3.1 Data Summary Sheets 8

3.2 Discussion of Exploration Stages 9

3.3 Kidston Exploration Probabilities and Costs 10

4. RESOURCES DEFINED AND PROJECT EXPENDITURES 14

5. CAMPEX VS FGR EXPLORATION AT KIDSTON 21

6. TEMPLATE FOR RANKING EXPLORATION PROJECTS 23

7. CONCLUSIONS AND RECOMMENDATIONS 27

8. REFERENCES 29

1
List of Figures

FIGURE 1. CHART OF HISTORICAL EXPLORATION EXPENDITURE AT KIDSTON,

INCLUDING PROJECT, ANNUAL AND CUMMULATIVE. 19

List of Tables

TABLE 1. DEFINITION OF EXPLORATION STAGES (FROM LAVERTON REVIEW) 7

TABLE 2. SUMMARY OF EXPLORATION PROJECTS REVIEWED AT KIDSTON 8

TABLE 3. SUMMARY TABLE OF KIDSTON PROJECTS SHOWING NUMBER OF EXPLORATION

PROSPECTS, COST OF EXPLORATION, AND AVERAGE COST PER PROSPECTS FOR EACH OF
THE EXPLORATION STAGES. NOTE THAT STAGE E IS NOT REPRESENTED IN THIS DATA
SET (SEE DISCUSSION BELOW). 12

TABLE 4. SYNTHESIS OF HISTORICAL EXPLORATION ACTIVITY BY EXPLORATION STAGE 13

TABLE 5. SUMMARY OF EXPLORATION EXPENDITURE PER PROJECT VERSUS CURRENT

RESOURCE OR OUNCES PRODUCED AND PROFIT. 14

TABLE 6. TABLE OF RESOURCES AND ESTIMATED NET PRESENT VALUE (NPV) OR PROFIT AT
DECISION TO MINE (DTM) FOR THE DEPOSITS DEFINED AT KIDSTON. 16

TABLE 7. EXPLORATION EXPENDITURE BY YEAR ON KIDSTON EXPLORATION PROJECTS 18

TABLE 8. SUMMARY OF CAMPEX AND FOCUSED GRASS ROOTS EXPLORATION PROJECTS AT

KIDSTON 21

TABLE 9. SYNTHESIS OF HISTORICAL EXPLORATION ACTIVITY BY EXPLORATION STAGE FOR

CAMPEX AND FOCUSED GRASS ROOTS EXPLORATION PROJECTS AT KIDSTON 21

TABLE 10. EXAMPLE OF PROSPECT RANKING TABLE 26

List of Attachments

APPENDIX I: PROJECT SUMMARY SHEETS AND EXPLORATION COSTS FOR EXPLORATION

PROJECTS AT KIDSTON (DIGITAL FORMAT)

2
Executive Summary

 In 2000 Placer (Granny Smith) and Placer Dome Inc., in conjunction with SRK
Consulting investigated alternate approaches and methodologies for assessing exploration
value and progress to discovery on early phase exploration properties. This was based on
a review of historical gold exploration in the Laverton District over the past decade. As a
result of the success of this approach, Greg Hall requested that a similar review be
conducted on the exploration at Kidston. The principal objectives were to:
 Review annual technical reports and expenditure for exploration projects at Kidston
 Synthesize this data to determine exploration costs and probabilities of advancing
exploration prospects through the exploration ‘pipeline’
 If possible, review resource sizes and Net Present Value (NPV) data at decision to mine
and currently, to allow assessment of the success of the exploration expenditure
 Construct a template methodology for ranking and prioritising exploration targets for
intrusive related deposits in North Queensland.
Data was compiled by KGM for fourteen exploration project areas between 1985 and 2000.
Based on Annual Technical Reports and expenditure recorded by KGM, these constituted
some $24 million in exploration expenditure. Two delineation/feasibility stage resources were
identified with both of these becoming mines or mine expansions.

A summary of the historical exploration costs per Exploration Stage and probabilities of
advancing from the previous Exploration Stage is as follows:

Exploration Stage Expenditure Number of Cost / Probability of advancing

(1985-2000) prospects Prospect from previous Stage
Generative $3.9M 169 $23K
Reconnaissance $4.6M 83 $56K 0.49: 1 in 2
Systematic Drill $3.8M 46 $268K 0.49: 1 in 2
Testing
Resource Delineation $11.6M 2 $5802K 0.05: 1 in 20
Feasibility 2 1.00: 2 of 2
Mine 2 100: 2 of 12

The success of exploration in terms of the resources discovered per project and expected NPV
/ Profit at decision to mine were also summarised:

3
 Project Total expenditure Resources defined or Estimated Profit
1985-2000 ounces produced
Kidston Lease $14,731,867 2,210,000 $189M*
Kidston Environs $4,818,521 None $0
Georgetown West $949,783 None $0
Mt Turner $871,016 None $0
Forsayth West $776,264 None $0
Bald Mountain $502,819 None $0
Wandoo $320,746 None $0
*Approximate due to the delay in processing of low grade waste dumps
Key outcomes of this analysis include:

 The high generative component reflected the large area explored by KGM, and the heavy
reliance on large scale regional stream geochemistry, reconnaissance traversing and
regional mapping, and regional I.P. programs to identify a “Kidston signature”, as well as
large aeromagnetic surveys, photogeologic surveys and other studies.

 The relatively low cost/prospect for the Reconnaissance reflects the early identification of
drill targets.

 The relatively low Systematic Drill Testing component reflects the early recognition of
targets that will not meet KGM’s investment criteria.

 All of the resources defined at Kidston were located in the Kidston Mine Lease, and
correspond with the highest funded exploration project by far.

 The Kidston Environs Project has a very high total expenditure commitment due to the
extremely large area encompassed by the project. Numerous small mineralised systems
were identified, but with potential for <20 Koz and hence were quickly evaluated and
disposed.
 Major intrusion related deposits are restricted to the primary structural anomaly, i.e.
breccia pipe, on the major transfer structure in the area.
 Once the major deposit has been found, the main structural anomaly and its immediate
vicinity should be intensely explored. Once this is completed, exploration should move on
to finding the next major deposit on the another transfer structure.
 The Georgetown West, Forsayth West, Mt Turner, Bald Mountain, and Wandoo Projects
tested targets on other transfer structures in Far North Queensland. These targeted stand
alone deposits of >1 Moz.
 The Reconnaissance cost per prospect for Campex and FGR at Kidston is remarkably
similar due to using a consistent exploration approach based on the Kidston model.

 The probability of advancing from Generative to Reconnaissance, and from

Reconnaissance to Drill Testing is significantly higher for Campex prospects than for
FGR prospects, largely due to the area surrounding a major deposit being more highly
endowed than other areas, but also due to the smaller target size for Campex than for FGR

Findings from the Laverton review, which are applicable in all areas, include:

4
 Exploration success should also consider financial outcomes e.g. NPV data as this may
show quite different trends.
 Linking the resource size and NPV of the exploration target to where exploration dollars
are expended is critical to optimising exploration value.

Significant lost opportunities at:

 Kidston Lease project. The late recognition of the Eldridge orebody resulted in the large
stripping program being conducted with production largely from low-grade dumps, and
production of Eldridge ore at historic low gold prices. The later resource write-downs
may not have had such dire consequences for Kidston’s bottom line had there not been
such a long period of high cost mining with low production. This had a flow on effect to
other projects.
 Project Generation project. The Agate Creek target was identified in 1997. An
opportunity to acquire the project in 1998 was refused due to lack of funds caused by the
high stripping ratio at Eldridge. When the next opportunity arose in 2000, it was too late
in the mine life to conduct delineation drilling, and have a Mining Lease granted. This
project would have added ~100 K high-grade ounces to the resource at a time when they
were needed.
 Critical exploration effectiveness factors include;

 Prompt recognition and early drill testing of key targets is critical in optimising and
realising exploration value.
 Exploration should aim to systematically test the best exploration targets, rather than
systematically exploring the project areas.

5
1 Introduction

1.1 Introduction

In 2000 Placer (Granny Smith) and Placer Dome Inc., in conjunction with SRK Consulting
investigated alternate approaches and methodologies for assessing exploration value and
progress to discovery on early phase exploration. This was based on a review of historical
gold exploration in the Laverton District over the past decade. As a result of the success of
this approach, Greg Hall (PDI) requested that a similar review be conducted on the
exploration at Kidston. The review involved the creation of an exploration database for the
Kidston district, for a period of sixteen years, summarising the exploration programs and
budgets. The review involved the creation of an exploration database for Kidston that
summarised the exploration programs and budgets from start of mining in 1985 to 2000. The
data was compiled and analysed to determine the exploration costs and probabilities of early
stage exploration projects advancing through the “exploration pipeline”.

1.2 Objectives

The principal objective of the review is to establish a database of historic exploration at

Kidston, specifically:
 To review annual technical reports expenditures to establish the number of exploration
projects at each exploration stage, annual exploration expenditures and to pin down key
decision points that relate to exploration stages
 To synthesize historic data to determine the exploration costs and probabilities of
advancing projects through the exploration pipeline
 To provide a methodology to undertake project ranking in North Queensland
 To review deposit sizes and NPV’s for an assessment of how successfully exploration
dollars have been spent

1.3 Work Program

The review commenced in December 2000 with the work program consisting of:
 Data collection phase, undertaken by KGM
 Analysis of historical exploration data base, with respect to probabilities of projects
advancing through the exploration pipeline and the associated costs of project
advancement through defined exploration stages

6
 Preparation of final report.

2. Methodology

The methodology used was that devised by SRK in conjunction with Placer (Granny Smith).
This is described in Section 4 of SRK’s Laverton Historic Exploration Review, 2000.

1.4 Definition of Exploration Stages

The principal exploration stages are shown in Table 1, below:

Stage A. Ground Acquisition Goals:  To build an expert team for the belt/region
(Project Generation)  To have knowledge, knowledge management and data /
information availability for the belt
 To acquire ground in well endowed belts, considering availability,
political/environmental risks
Probabilities/risks associated with progressing from Stage A to Stage B, i.e. P(A-B)
Probability that the process of Ground Acquisition (A) will result in the acquisition of high quality, well
endowed and available ground that is worthy of further work
Stage B. Prospect Definition Goals:  To define drillable targets
(Reconnaissance Exploration)  To build area knowledge, quality data management systems,
suitable geological models
 To use efficient exploration methods, geologic skills of exploration
team
 To define prospect risks and target ranking tools, exploration
audit process
 To test presence of mineralising system
Probabilities/risks associated with progressing from Stage B to Stage C, i.e. P(B-C)
Probability that this process will define drillable targets (features that meet criteria of the geological model
and knowledge of the area)
Stage C. Drill Testing Goals:  To test geological and mineralisation models, interpreted from
(Systematic RC, DD) mapping and geochemical sampling
 To test geological information gathered during prospect definition
 To test presence of mineralising system to the stage of indication
of sufficient continuity and grade as to indicate to potential for
an economic resource.
Probabilities/risks associated with progressing from Stage C to Stage D, i.e. P (C-D)
Probability that the drill testing phase will result in one or more "economic drill intersections" that would be
further drill tested
The decision to continue would be supported by other geological information that would give some initial
confidence in the continuity of mineralisation
Stage D. Resource Delineation Goals:  To have confidence in size and grade potential, continuity of
grade and geological setting
 To understand controls on grade distribution (low cost curve
position)
Probabilities/risks associated with progressing from Stage D to Stage E, i.e. P(D-E)
Probability that a "drill-out" will result in the definition of a preliminary resource that is sufficiently robust at
present prices to warrant proceeding to feasibility
Stage E. Feasibility Goals:  To determine metallurgy, metal prices, mineability, cost, prices,
mineral balance sheet
 To result in decision to mine, asset with defined NPV
Probabilities/risks associated with progressing from Stage E to target NPV
Probability that the feasibility study will deliver an ore reserve

Table 1. Definition of Exploration Stages (from Laverton Review)

7
As applied to projects at Kidston, these are defined more specifically and are discussed
further in Section 1.6.

3. Results of the Kidston Exploration Review

1.5 Data Summary Sheets

A list of exploration projects at Kidston was generated. The principal sources of information
for the review were Department of Minerals and Energy Annual Technical Reports for
exploration projects held at Kidston.

Expenditures for individual Exploration Permits were acquired from the DME for the period
from 1985-1995. Exploration expenditures for individual Exploration Permits for the period
1995-2000 were recorded at Kidston. The Accounting Department at Kidston provided total
annual expenditure, for delineation and exploration. Due to their being no requirement to
provide the DME with exploration details or expenditures for exploration on mine leases, no
expenditure information was available for the drill out of the original Wises Hill resource, or
other exploration, from the time of Placers acquisition of the project in 1978, to start of
mining in 1985.

The fourteen exploration projects reviewed are listed below, in order of decreasing
expenditure (Table 2). Total cumulative exploration expenditure at Kidston to end 2000
amounts to $23,910,949.

Project Years Total

Expenditure
Kidston Lease 1985-2000 $14,731,867
Kidston Environs 1988-2000 $4,818,521
Georgetown West 1994-2000 $949,783
Mt Turner JV 1994-1997 $871,016
Forsayth West JV 1996-2000 $776,264
Bald Mountain 1994-2000 $502,819
Project Generation 1994-2000 $371,768
Wandoo Option 1999-2000 $320,746
Percyville JV 2000 $257,193
Gilberton JV 1991-1992 $99,800
Mt Hogan 1988 $95,322
Quartz Blow Creek 1995-1997 $58,802
Galloway 1994-1995 $33,959
Christmas Hill Option 1989 $23,089
Table 2. Summary of exploration projects reviewed at Kidston

Data summary spreadsheets were developed by Marcus Willson and Deborah Lord for the
Laverton Project and adapted for the Kidston Project. The Project Summary, which includes

8
the number of prospects at each Exploration Stage, and corresponding expenditure are
included in Appendix I.

9
The following information was summarised for each exploration project area for each year:
 Tenement history - lease numbers and years
 Project Summary - how many exploration prospects were at each Exploration Stage each
year (taking into account projects at the same stage that have been on-going over multiple
years or reporting periods), plus associated exploration costs per Exploration Stage
 Cost details – spreadsheets compiling relevant expenditure, amalgamated for the
exploration project but spilt into the various Exploration Stages. Where reported costs
were attributable to more than one Exploration Stage, costs were divided according to the
ratio of metres drilled and samples collected (allows division where geochemical
sampling was conducted) at estimated cost to determine a percentage to be attributed.
Where possible real costs were then apportioned to the relevant Exploration Stage
accordingly. Exploration expenditure relates to dollars spent on particular exploration
programs during the reporting periods.

1.6 Discussion of Exploration Stages

The general Exploration Stages defined in Section 2.1 were applied during the data review.
More specific comments for the Kidston Historical Review should be noted:
 Stage A Project Generation Stage. This Exploration Stage includes ground selection
and tenement acquisition which, occurs prior to an Exploration Project commencing.
Often very little of this type of activity is recorded in easily retrievable technical reports.
From 1994 onwards a project generation cost code was used to capture expenditure for
activities associated with this Stage, such as prospect reviews and university studies.
Costs for items such as aeromagnetic data purchase, reconnaissance stream sampling,
regional I.P., image interpretation and regional mapping were attributed to the
Exploration Permits. An estimate of the proportion of the salaries of the geological team
attributable to project generation was also used as a cost estimate. Unfortunately, not all
targets developed from the interpretation of aeromagnetics and stream geochemistry were
listed in the reports. Generally only those prospects where reconnaissance rock samples
were collected were reported. Costs associated with orientation studies over known
mineralisation, i.e. the Eldridge multi-element geochemistry study were also allocated to
this Stage, as they are considered applicable to determining the Kidston signature.
Similarly the Datamine study of the Kidston mineralisation is included in this stage as this
was to aid in targeting in the Generative Stage through to the Reconnaissance Stage.
 Stage B Reconnaissance Exploration Stage. Generally exploration activity related to
this Stage includes all grid based geochemical sampling programs (rock, soils, RAB
drilling), mapping, and ground geophysics (ground magnetics, I.P. EM) utilised to define
drillable targets. This stage may also include RC, or diamond drilling where conceptual
targets required this type of drilling to test at an early stage (e.g. where surface or near
surface sampling is not possible).
 Stage C Drill Testing / Systematic Exploration Stage. Exploration activity related to
this Stage includes selected drill testing of an anomaly or pattern drill testing up to the
point of obtaining one or more ‘economic’ drill intercepts. RC diamond and some RAB
drilling are included in costs associated with this Exploration Stage. Some ground
geophysics may also be assigned here where it is used to aid located extensions to

10
 mineralised intercepts (e.g. down hole I.P.). Since the definition of a single ‘economic’
intersection is difficult it is perhaps better to consider this Stage as continuing up to when
there is indication of the potential of an economic resource. Sometimes a single promising
drill intercept may have been obtained during Stage B, but its significance not known.
Stage C exploration is concerned with defining the likelihood that there is sufficient
continuity and grade to indicate the potential for an economic resource and without this,
the project would not move to delineation stage.
 An example of Stage C includes the drilling program at Wandoo in 2000 where 7 RC
Diamond holes were drilled to determine if continuity existed, and potential for a +1 Moz
deposit existed between the broadly spaced intercepts in the earlier drill programs.
 Stage D Resource Delineation Stage. Pattern grid drilling to determine the extent and
continuity of mineralisation consisting primarily of diamond and RC drilling,
geotechnical, hydrogeological and metallurgical testwork, preliminary resource modeling.
 Stage E Feasibility Stage. Infill drilling during prefeasibility to feasibility Exploration
Stage including detailed diamond drilling, other testwork, resource modeling etc. Separate
costings for the Delineation and Feasibility drilling were not available for the Wises
Extension and the Eldridge ore bodies. The 2 costs were combined into the Delineation
Stage.

1.7 Kidston Exploration Probabilities and Costs

The number of prospects/exploration projects at each Exploration Stage versus associated

exploration costs the following table is summarised in Table 3.

This table generates average exploration expenditures to advance exploration prospects

through the ‘exploration pipeline’ based on Kidston Gold Mines Ltd’s sixteen years
exploration history in North Queensland.

It also provides a summary of the number of prospects, which advance through the pipeline
allowing a probability calculation to be made as discussed further below.

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Kidston Historic Exploration Review

Project Name Project Generation Reconnaissance Stage Drill Testing Stage (C) Resource Delineation Feasibility Stage (E) Total Project Exploration
Stage (A) (B) Stage (D) Expenditure

Kidston Lease
Number of Prospects 11 0 11 2 2
Combined Cost $1,030,735 $0 $2,097,132 $11,906,000 $14,713,867
Cost per Prospect $93,703 $0 $110,648 $5,802000
Kidston Environs
Number of Prospects 54 35 15 0 0
Combined Cost $2,007,386 $2,423,934 $387,201 $0 $0 $4,818,521
Cost per Prospect $37,174 $69,255 $25,813 $0 $0
Georgetown West
Number of Prospects 25 14 4 0 0
Combined Cost $217,875 $605,901 $126,007 $0 $0 $949,783
Cost per Prospect $8,715 $43,279 $42,002 $0 $0
Mt Turner JV
Number of Prospects 10 9 3 0 0
Combined Cost $80,155 $497,930 $292,931 $0 $0 $871,016
Cost per Prospect $8,816 $55,326 $97,644 $0 $0
Forsayth West JV
Number of Prospects 14 6 5 0 0
Combined Cost $85,712 $511,695 $178,857 $0 $0 $776,264
Cost per Prospect $6,122 $85,283 $35,771 $0 $0
Bald Mountain
Number of Prospects 4 2 1 0 0
Combined Cost $157,431 $108,935 $236,453 $0 $0 $502,819
Cost per Prospect $39,358 $54,468 $236,453 $0 $0
Wandoo Option
Number of Prospects 1 1 1 0 0
Combined Cost $12,100 $44,987 $263,659 $0 $0 $320,746
Cost per Prospect $12,100 $44,987 $263,659 $0 $0
Percyville JV
Number of Prospects 4 1 1 0 0
Combined Cost $2,200 $162,850 $92,143 $0 $0 $257,193
Cost per Prospect $550 $162,850 $92,143 $0 $0
Gilberton JV
Number of Prospects 1 5 0 0 0
Combined Cost $1,000 $98,800 $0 $0 $0 $99,800
Cost per Prospect $1,000 $19,760 $0 $0 $0

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Kidston Historic Exploration Review

Project Name (cont…) Project Generation Reconnaissance Stage Drill Testing Stage (C) Resource Delineation Feasibility Stage (E) Total Project Exploration
Stage (A) (B) Stage (D) Expenditure

Mt Hogan
Number of Prospects 8 6 2 0 0
Combined Cost $9,350 $57,532 $28,440 $0 $0 $95,322
Cost per Prospect $1,169 $9,589 $14,220 $0 $0
Quartz Blow Creek
Number of Prospects 2 1 0 0 0
Combined Cost $40,157 $18,645 $0 $0 $0 $58,802
Cost per Prospect $20,079 $18,645 $0 $0 $0
Galloway
Number of Prospects 1 2 0 0 0
Combined Cost $2,940 $31,019 $0 $0 $0 $130,701
Cost per Prospect $2,940 $15,510 $0 $0 $0
Christmas Hill Option
Number of Prospects 0 1 0 0 0
Combined Cost $0 $23,089 $0 $0 $0 $115,897
Cost per Prospect $0 $23,089 $0 $0 $0
Project Generation
Number of Prospects 32 0 0 0 0
Combined Cost $371,768 $0 $0 $0 $0 $110,777
Cost per Prospect $11,618 $0 $0 $0 $0
Total number of Prospects 169 83 46 2 2
Probability of advancing (from previous stage) 0.49 0.49 0.05 1.00

Total cost for all Prospects at each Exploration $3,920,318 $4,644416 $3,751,645 $11,604,000 $23,910,949
Stage
Average cost for all Prospects at each $23197 $55,957 $81,558 $5,802,000
Exploration Stage

Table 3. Summary table of Kidston projects showing number of exploration prospects, cost of exploration, and average cost
per prospects for each of the Exploration Stages. Note that Stage E is not represented in this data set (see discussion below).

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Kidston Historic Exploration Review

Synthesizing the above data a summary table (Table 4), was generated (note all are AUD$,
and unadjusted to current dollars);

Exploration Stage Number of Expenditure Cost / Probability of advancing

prospects (1985-2000) Prospect from previous Stage
Generative 169 $3.9M $23K
Reconnaissance 83 $4.6M $56K 0.49: 1 in 2
Systematic Drill 46 $3.7M $81K 0.49: 1 in 2
Testing
Resource Delineation 2 $11.6M $5,802K 0.05: 1 in 20
Feasibility 2 1.00: 2 of 2
Mine 2 1.00: 2 of 2

Table 4. Synthesis of historical exploration activity by Exploration Stage

The cost per prospect in the Generative stage due in part to the large area explored by KGM.
Under an agreement with Placer Exploration Ltd, Placer was restricted from exploring within
a 100 km radius of Kidston, allowing KGM to test this area for resources in its own right.
Generative exploration had a heavy reliance on regional stream geochemical surveys over
large areas (+5,000 square km) and regional I.P. surveys to identify the “Kidston signature”,
along with regional mapping to identify breccia pipes. A large component was also
attributable to the flying, and interpretation of >30,000 ln km of aeromagnetics/radiometrics.
The multi-element geochemistry study of Eldridge core was attributed to this stage as this
was the basis to defining the “Kidston signature” and was a major cost contributor.

The relatively low cost/prospect for the Reconnaissance reflects the early identification of
drill targets.

The relatively low Systematic Drill Testing component reflects the early recognition of
targets that will not meet KGM’s investment criteria. This cost is much lower than that
found in the Laverton review. This is largely due to the high Au endowment of the Laverton
area, and the nature of Archean Au mineralisation, but also due to the superior exposure in
the Kidston region. This led to far greater surface geological knowledge and the ability to test
targets with 2 or 3 selected drill holes.

The Kidston Environs Project has an anomalously large expenditure commitment for a
project where no prospects advanced to the delineation stage. This is largely due to the size of
the area that was encompassed by the Project. In the period 1988-1994, all wholly owned
KGM Exploration Permits were reported as a single project. These exploration permits were
enclosed in an area approximately 80 km in diameter. This is almost 10x the average sized
project. The average cost of evaluating targets in each stage is consistent with the other
projects.

Costs for the feasibility studies have not been included. The Wises expansion occurred in a
number of phases (final stage 5 pit). Although a feasibility study was completed for Eldridge,
infill drilling was conducted concurrently with step out drilling. All costs related to feasibility
have been captured as delineation. Hence the very large cost figure in the Delineation Stage is
really a combination of the resource Delineation and Feasibility Stages.

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Kidston Historic Exploration Review

4. Resources Defined and Project Expenditures

A summary of resources defined for relevant exploration projects between 1985 and 2000 is
shown in Table 5.

Project Total expenditure to Resources defined or Estimated NPV / Profit

1999 ounces produced
Kidston Lease $14,731,867 2,210,000 $138M
Kidston Environs $4,818,521 None $0
Georgetown West $949,783 None $0
Mt Turner JV $871,016 None $0
Forsayth West JV $776,264 None $0
Bald Mountain $502,819 None $0
Wandoo Option $320,746 None $0

Table 5. Summary of exploration expenditure per project versus current resource or ounces
produced and profit.

All of the resources defined at Kidston have been located on the Kidston Lease project,
specifically within the Kidston pipe. Small deposits with were identified at Josephine on the
Kidston Project, Mountain Creek in the Mt Turner J.V., Wandoo on the Mt Wandoo J.V., and
Union on the Percyville J.V.. Early recognition that these prospects would not meet KGM’s
investment criteria (Josephine and Union – insufficient tonnes to pay for the strip ratio, road
building, and road maintenance (negative NPV); Mountain Creek and Wandoo – insufficient
ounces to support a stand-alone operation) led to their disposal by sale (Josephine), or
relinquishment prior to entering the delineation stage.
The Kidston Environs Project identified numerous mineralised systems, but with potential for
<20 Koz, these were quickly evaluated and disposed.
As part of the Generative Stage in the Kidston and Target Generation Projects, a number of
resources in the Kidston area were evaluated. These ranged in size from 8 Koz to 90 Koz, and
included Mt Hogan, Beverly, Jubilee/Plunger, Agate Creek/Sherwood, and Electric Light. All
failed to meet KGM’s investment criteria due to lack of tonnage to pay for road building and
maintenance (negative NPV), or in the case of Agate Creek, too late in the mine life to be
exploited.
Major intrusion related deposits in North Queensland have a similarly solitary nature. The
region surrounding the Mount Leyshon deposit of 5 Moz has also been extensively explored
with no additional reserves identified outside the breccia pipe. At Red Dome (1 Moz), no
additional reserves where identified away from the main intrusive centre. Similar situations
occur at Charters Towers (7 Moz), Ravenswood (3 Moz), and Mount Morgan (8 Moz). The

15
Kidston Historic Exploration Review

major intrusive related deposits are restricted to the primary structural anomaly (e.g. breccia
pipe) on the major transfer structure active at the time of emplacement. The bulk of the
mineralising fluid is focused on the major structural anomaly, with only very small deposits
are present in the peripheries of the system. In the case of Kidston this is the Gilberton Fault,
with the exploration of the Kidston Environs , Percyville J.V., Gilberton J.V., Christmas Hill,
and Mt Hogan projects highlighting the lack of significant deposits away from the Kidston
breccia pipe.
The implication of the statement above is that once the major deposit has been found, the
main structural anomaly and its immediate vicinity should be intensely explored. Once this is
completed, exploration should move on to finding the next major deposit on the another
transfer structure. In 1995, Campex at Kidston was essentially completed and exploration
focussed on goldfields, associated with Permo-Carboniferous intrusives, on major crustal
scale structures further afield. This occurred initially in the Georgetown/Forsayth area, and
then more selectively elsewhere in North Queensland, i.e. the Wandoo Project at Chillagoe.
These projects targeted +1 Moz deposits that would support a stand-alone operation. A
comparison between Kidston Campex and Focus Grass Roots exploration is made in Section
5.
Table 56 is based on more complete resource data and, where available, associated profit
and / or NPV data. Due to the in the pre-stripping, low grade reclaim, and direct production
from orebodies, the profit figures and cash costs per mine are approximated. Table 7 and
Figure 1 show exploration expenditure over time.

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Kidston Historic Exploration Review

Deposit Exploration Resources at DTM Resource Profit Actual Oz mined Total Cash Data Source / Comment
Project Oz at (Approx) Cost*
DTM
Wises Hill 37.04Mt @ 1.86g/t Au 2.22M A$306M* 2.2M A$265* Spread Sheet constructed by Gil Quickfall
Wises Kidston 33.96Mt @ 1.19 g/t Au 1.30M A$80M** 1.2M A$471*** Spread Sheet constructed by Gil Quickfall.
Expansion Lease
Eldridge Kidston 23.17Mt @ 1.24g/t Au 0.93M A$58M*** 0.7M A$471*** Spread Sheet constructed by Gil Quickfall
Lease (A$89M) (A$435#)

Table 6. Table of resources and estimated Net Present Value (NPV) or profit at Decision to Mine (DTM) for the deposits
defined at Kidston.

*1985-1993 profit and average mining cost

** 1994-2001 “profit” proportional to ounces – due to overlap of low grade reclaim and Eldridge stripping

***1994-2000 cash cost.

# 1995 Eldridge Feasibility Study

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Kidston Historic Exploration Review

Kidston Lease Kidston Environs Georgetown West Mt Turner Forsayth West Bald Mountain Project Generation Wandoo
1985 $272,000
1986 $787,000
1987 $0
1988 $624,000 $242,986
1989 $66,926 $734,883
1990 $1,531,000 $1,352,847
1991 $1,067,489 $573,266
1992 $119,708 $686,500
1993 $1,100,100 $497,100
1994 $5,606,480 $276,829 12,340 $136,122 $18,718 $22,007
1995 $3,049,570 $107,363 $170,846 $316,709 $11,115 $75,936
1996 $341,150 $153,181 $257,976 $207,244 $141,322 $22,534 $61,353
1997 $32,469 $99,385 $215,639 $210,941 $81,838 $141,839 $66,322
1998 $39,028 $25,566 $37,008 $58,479 $72,160 $34,667
1999 $56,765 $39,689 $213,961 $378,406 $236,453 $83,985 $129,741
2000 $38,182 $28,926 $42,013 $116,219 $9,199 $27,498 $191,005
Total $14,731,867 $4,818,521 $949,783 $871,016 $776,264 $502,819 $371,768 $320,746

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Kidston Historic Exploration Review

Percyville Gilberton Mt Hogan Quartz Blow Creek Gallaway Christmas Hill Annual Expenditure Cumulative
Expenditure
1985 $272,000 $272,000
1986 $787,000 $1,059,000
1987 $0 $1,059,000
1988 $95,322 $962,308 $2,021,308
1989 $23,089 $824,898 $2,846,206
1990 $2,883,847 $5,730,053
1991 $53,800 $1,694,555 $7,424,608
1992 $46,000 $852,208 $8,276,816
1993 $1,597,200 $9,874,016
1994 $20,725 $6,093,221 $15,967,237
1995 $15,448 $13,234 $3,760,221 $19,727,458
1996 $24,709 $1,209,469 $20,936,927
1997 $18,645 $867,321 $21,804,248
1998 $266,908 $22,071,156
1999 $1,138,991 $23,210,147
2000 $257,193 $710,235 $23,920,382
Total $257,193 $99,800 $95,322 $58,802 $33,959 $23,089 $23,920,382 23,920,382

Table 7. Exploration expenditure by year on Kidston Exploration Projects

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Kidston Historic Exploration Review

Historic Exploration Expenditure

30000000

Annual Expenditure

25000000 Cummulative Annual Expenditure

Kidston Lease
Kidston Environs
20000000 G'tow n West
Mt Turner
Expenditure $

Forsayth West
15000000 Bald Mountain
Wandoo
Percyville
10000000 Gilberton
Mt Hogan
Quartz Blow Ck
5000000 Gallow ay
Christmas Hill
Project Generation
0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year

Figure 1. Chart of historical exploration expenditure at Kidston, including project, annual and cumulative.

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Kidston Historic Exploration Review

Lost opportunities at Kidston include:

 Kidston Lease project. The late recognition of the Eldridge orebody resulted in the large
stripping program being conducted with production largely from low grade dumps, and
production of Eldridge ore at historic low gold prices. The later resource write-downs
may not have had such dire consequences for Kidston’s bottom line had there not been
such a long period of high cost mining with low production. This had a flow on effect to
other projects.
 Project Generation project. The Agate Creek target was identified in 1997. An
opportunity to acquire the project in 1998 was refused due to lack of funds caused by the
high stripping ratio at Eldridge. When the next opportunity arose in 2000, it was too late
in the mine life to conduct delineation drilling and have a Mining Lease granted. This
project would have added ~100 K high grade ounces to the resource at a time when they
were needed.

The prompt recognition and early drill testing of the best exploration targets is crucial is
realising value of exploration properties.

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Kidston Historic Exploration Review

5. Campex Vs FGR Exploration at Kidston

In 1995, KGM began what was essentially a Focussed Grass Roots exploration program in
the Georgetown/Forsayth region. This was later expanded to include targets throughout North
Queensland. It was Focussed Grass Roots in so far as exploration was targeted on goldfields,
associated with Permo-Carboniferous rhyolitic intrusives and crustal scale structures, and
based on the Kidston Model. Later targets tended towards the MSP side of the scale as mine
closure loomed.

Table 8 and Table 9 summarise the exploration expenditures as Campex and Focussed Grass
Roots.

Campex/Minex Focussed Grass Roots

Project Years Total Project Years Total
Expenditure Expenditure
Kidston Lease 1985-2000 $14,731,867 Georgetown West 1994-2000 $949,783
Kidston Environs 1988-2000 $4,818,521 Mt Turner JV 1994-1997 $871,016
Percyville JV 2000 $257,193 Forsayth West JV 1996-2000 $776,264
Gilberton JV 1991-1992 $99,800 Bald Mountain 1994-2000 $502,819
Mt Hogan 1988 $95,322 Project 1994-2000 $371,768
Generation
Christmas Hill 1989 $23,089 Wandoo Option 1999-2000 $320,746
Option
Quartz Blow 1995-1997 $58,802
Creek
Galloway 1994-1995 $33,959
Total $19,793,792 $3,888,158

Table 8. Summary of Campex and Focused Grass Roots exploration projects reviewed at
Kidston
Campex/Minex
Exploration Stage Number of Expenditure Cost / Probability of advancing
prospects (1985-2000) Prospect from previous Stage
Generative 78 $3.1M $39K
Reconnaissance 48 $2.8M $58K 0.62: 2 in 3
Systematic Drill 29 $2.8M $96K 0.60: 2 in 3
Testing
Resource Delineation 2 $11.6M $5,802K 0.07: 1 in 14
Feasibility 2 1.00: 2 of 2
Mine 2 1.00: 2 of 2
Focused Grass Roots
Exploration Stage Number of Expenditure Cost / Probability of advancing
prospects (1985-2000) Prospect from previous Stage
Generative 91 $0.8M $9K
Reconnaissance 35 $1.8M $51K 0.38: 2 in 5
Systematic Drill 17 $0.9M $53K 0.49: 1 in 2
Testing
Resource Delineation 0 0
Feasibility 0 0

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Kidston Historic Exploration Review

Mine 0 0

Table 9. Synthesis of historical exploration activity by Exploration Stage for Campex and
Focused Grass Roots exploration projects at Kidston.

The Generative cost per prospect for the Campex is very high. This cost included the flying
of aeromagnetics over virtually the entire region, regional I.P., and the Eldridge multi-
element geochemistry program. The Generative cost per prospect for Focused Grass Roots is
in line with that found in the Laverton review.

The Reconnaissance cost per prospect for Campex and FGR is remarkably similar. This is a
result of using a consistent exploration approach based on the Kidston model.

The probability of advancing from Generative to Reconnaissance, and from Reconnaissance

to Drill Testing is significantly higher for Campex prospects than for FGR prospects. This is
partly due to the area surrounding a major deposit being more highly endowed than other
areas, but also due to the following:

 Smaller target size for Campex than for FGR meaning that targets that would be passed
over in FGR would be tested in a Campex program.

 Testing for “buried Kidston” targets by drilling I.P. targets with or without a geochemical
signature.

Unfortunately, although significant economic intersections were returned from Wandoo –

Wandoo Option Project, Mountain Creek – Mt Turner JV Project, and Bald Mountain – Bald
Mountain Project, no FGR prospects advanced beyond the Systematic Drill Testing stage.

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Kidston Historic Exploration Review

6. Template for Ranking Exploration Projects

As part of the Laverton review, SRK in conjunction with Placer (Granny Smith) constructed a
valuation methodology that can be used to value exploration projects and as a means of
ranking prospects and prioritising exploration expenditure. The application of this
methodology, particularly to Project Generation and Reconnaissance Exploration Stage
prospects is outlined below.

The presence of various geological features present at each prospect location is used to
determine the probability that the prospect will advance to the next stage of the exploration
program. This relies on the geological model used for exploration, i.e. the Kidston model, and
the presence of key first order processes or critical success factors, without which a deposit
would not have formed.

For each feature of the geological model, a value between 1.0 and 0.0 is assigned, where a
value of a value of 1.0 indicates that feature is definitely present and 0.0 indicates the feature
is not present. A value of 0.5 is assigned where information about the feature is not known or
data are not available. A probability higher than 0.5 indicates that there is evidence that the
feature is present, whereas a probability below 0.5 is assigned where there is evidence that the
feature is not present.

Initial criteria to be used in assigning probabilities for individual prospects for the
Kidston/Intrusive related model are summarised on the following page.

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Kidston Historic Exploration Review

KIDSTON/INTRUSIVE RELATED MODEL – Possible ranking

criteria
Presence of rhyolitic intrusion of right age
Observed geological feature Probability assigned
Evidence of underlying magma source (<1km) 0.9
(Deep-seated gravity low; magnetics; rhyolite dykes)
Adjacent to known intrusive of right composition 0.8
Evidence of underlying magma source (<3km) 0.7
If Mo/W mineralisation present +0.1
Unknown / No information 0.5
Away from intrusive (>3 km) 0.4
Evidence of intrusive 0.3

Presence of crustal structure of right age

Observed geological feature Probability assigned
Within 3 km of major transfer fault 0.9
(e.g. Gilberton Fault)
Within 5 km of major transfer fault 0.7
or on subsidiary fault
(e.g. Noell Fault)
Within 3 km of orthogonal/head-wall listric faults 0.6
(e.g. Robertson River Fault)
Lesser transfer structure 0.6
or structure defined on magnetics
Unknown / No information 0.5
Structure of wrong age 0.3
(e.g. Delaney Fault)
No structure 0.3

Presence of dilational site

Observed geological feature Probability assigned
Zone of duplication or structural complexity 0.7
i.e. zone of multiple intercepts of crustal scale structures
Rheology contrast 0.6-0.7
i.e. granodiorite/metamorphic contact
If chemical trap add factor below to probability
i.e., carbonate sediment packages present +0.1
If zone of brecciation or magnetic feature
interpreted to represent alteration +0.1
Unknown / No information 0.5
No rheology contrast 0.3

Presence of Au bearing mineralising fluid at trap site

Observed geological feature Probability assigned
Presence of near economic drill intercepts 0.9
Significant soil anomaly # 0.7
Significant RAB anomaly 0.7
Moderate soil anomaly 0.6
Moderate RAB 0.6
If significant Pb/Zn Ag +/-Cu+/-As+/-Mo +0.1
If I.P. chargeability anomaly +0.1

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Kidston Historic Exploration Review

Unknown / No information 0.5

No significant anomalies, target tested 0.2
#note that definitions of what constitutes a ‘significant’ anomaly should be
defined and applied consistently, relates also to the regolith setting

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Kidston Historic Exploration Review

As was stated in the Laverton Report, these individual probability factors are multiplied
together to form an estimate of the probability that all essential components of the ore system
are present in the target region (example Table ). This is assumed to be the same as the
probability that there is mineralisation at the target region, and therefore that the prospect
could advance to the next phase of exploration.

Prospect Name Presence of Presence of Presence of Presence of Au Product of

Intrusion Structure Dilational Site at Trap Site Probabilities
assigned
Prospect A 1.0 0.9 0.9 0.9 0.73
Prospect A 0.9 0.9 0.9 0.9 0.66
Prospect B 1.0 0.7 0.7 0.9 0.44
Prospect C 0.8 0.7 0.7 0.6 0.24
Prospect B 0.5 0.7 0.7 0.9 0.22
Prospect C 0.7 0.7 0.7 0.6 0.21
Prospect D 0.7 0.6 0.3 0.6 0.08
Prospect D 0.5 0.6 0.3 0.6 0.05

Table 10. Example of Prospect Ranking Table (from Laverton Review)

The product of probabilities assigned is considered to represent the probability that the
exploration project or prospect could advance to the next Stage of exploration.

By assigning a NPV for the target deposit size being sought, the probabilities can be
transferred to a valuation spreadsheet and using the probabilities and exploration costs
documented during the review, an Expected Value of each prospect could also be calculated.

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Kidston Historic Exploration Review

7. Conclusions and Recommendations

The Kidston Historical Exploration Review examined exploration expenditure amounting to

around $24 million over sixteen years for 14 exploration projects. Data compilation of
exploration activity and associated expenditure concentrated on defining key exploration
stages and decision points. Initial findings of the analysis can be summarised as follows:

Exploration Stage Expenditure Number of Cost / Probability of advancing

(1985-2000) prospects Prospect from previous Stage
Generative $3.9M 169 $23K
Reconnaissance $4.6M 83 $56K 0.49: 1 in 2
Systematic Drill $3.8M 46 $268K 0.49: 1 in 2
Testing
Resource Delineation $11.6M 2 $5802K 0.05: 1 in 20
Feasibility 2 1.00: 2 of 2
Mine 2 100: 2 of 12

To examine the success of exploration the resources discovered per project and expected
NPV / Profit at decision to mine were also summarised and compared to the total exploration
expenditure;

Project Total expenditure Resources defined or Estimated Profit

1985-2000 ounces produced
Kidston Lease $14,731,867 2,210,000 $189M
Kidston Environs $4,818,521 None $0
Georgetown West $949,783 None $0
Mt Turner $871,016 None $0
Forsayth West $776,264 None $0
Bald Mountain $502,819 None $0
Wandoo $320,746 None $0

 The principal findings of this analysis include;

 The high generative component reflected the large area explored by KGM, and the heavy
reliance on large scale regional stream geochemistry, reconnaissance traversing and
regional mapping, and regional I.P. programs to identify a “Kidston signature”, as well as
large aeromagnetic surveys, photogeologic surveys and other studies.

 The relatively low cost/prospect for the Reconnaissance reflects the early identification of
drill targets.

 The relatively low Systematic Drill Testing component reflects the early recognition of
targets that will not meet KGM’s investment criteria.

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Kidston Historic Exploration Review

 All of the resources defined at Kidston were located in the Kidston Mine Lease, and
correspond with the highest funded exploration project by far.

 The Kidston Environs Project has a very high total expenditure commitment due to the
extremely large area encompassed by the project. Numerous small mineralised systems
were identified, but with potential for <20 Koz, these where were quickly evaluated and
disposed.
 Major intrusion related deposits are restricted to the primary structural anomaly (e.g.
breccia pipe) on the major transfer structure in the area.
 Once the major deposit has been found, the main structural anomaly and its immediate
vicinity should be intensely explored. Once this is completed, exploration should move on
to finding the next major deposit on the another transfer structure.
 The Georgetown West, Forsayth West, Mt Turner, Bald Mountain, and Wandoo Projects
tested targets on other transfer structures in Far North Queensland. These targeted stand
alone deposits of >1 Moz.
 The Reconnaissance cost per prospect for Campex and FGR at Kidston is remarkably
similar due to using a consistent exploration approach based on the Kidston model.

 The probability of advancing from Generative to Reconnaissance, and from

Reconnaissance to Drill Testing is significantly higher for Campex prospects than for
FGR prospects, largely due to the area surrounding a major deposit being more highly Au
endowed than other areas, but also due to the smaller target size for Campex than for FGR
Significant lost opportunities occurred at:
 Kidston Lease project. The late recognition of the Eldridge orebody resulted in the large
stripping program being conducted with production largely from low-grade dumps, and
production of Eldridge ore at historic low gold prices. The later resource write-downs
may not have had such dire consequences for Kidston’s bottom line had there not been
such a long period of high cost mining with low production. This had a flow on effect to
other projects.
 Project Generation project. The Agate Creek target was identified in 1997. An
opportunity to acquire the project in 1998 was refused due to lack of funds caused by the
high stripping ratio at Eldridge. When the next opportunity arose in 2000, it was too late
in the mine life to conduct delineation drilling and have a Mining Lease granted. This
project would have added ~100 K high-grade ounces to the resource at a time when they
were needed.
 Critical exploration effectiveness factors at both Laverton and Kidston include;

 Prompt recognition and early drill testing of key targets is critical in optimising and
realising exploration value.
 Exploration should aim to systematically test the best exploration targets, rather than
systematically exploring the project areas.
A template to rank and prioritise exploration targets, similar to that constructed for the
Laverton area is included in the body of this report.

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Kidston Historic Exploration Review

8. REFERENCES

SRK Consulting, Placer Granny Smith, 2000, “Laverton Historic Exploration Review”

Lord D., Etheridge M., Willson M., Hall, G., Uttley P., “Measuring Exploration Success: An
alternate to the discovery-cost-per-ounce method of quantifying exploration effectiveness.,
unpublished draft.”

Circosta G., Bobis R., Burgess K., “The Mack’s Knob Delineation and Mine Lease
Exploration Programs (1993-1995)”

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Kidston Historic Exploration Review

Appendix I

Project Summary Sheets and Exploration Costs for

Exploration Projects at Kidston

(Complete Data and Cost Tables are included in digital

format)

31