China Nonferrous Gold Limited UK Regulatory Announcement: Pakrut Gold Mine Independent Technical Report

Beijing General Research Institute of Mining and Metallurgy

China Nonferrous Gold Limited, formerly as Kryso Resources Corporation Limited, which was reformed from Kryso Resource Plc

Independent Technical Review

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), December 2012.

thousand tonnes

million tonnes

million tonnes per annum

SRK Consulting China Ltd

tonnes per annum

A mineral resource/reserve category in accordance with Russian resource/reserve classification system; the overall level of its geological control and studies is higher than Category P1 and lower than Category C1

A mineral resource/reserve category in accordance with Russian resource/reserve classification system; the overall level of its geological control and studies is higher than Category P2 and lower than Category C2

gold mineralised zone; GMZs are used for describing generally the zones and/or bodies with gold mineral resources defined in the Pakrut Project and the Eastern Pakrut Project

gram per tonne, equal to part per million

That part of a resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed

That part of a resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes which may be limited or of uncertain quality and reliability

life of mine, same as ROM

That part of a resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes

million tonnes

The economically mineable part of an indicated, and in some circumstances measured, resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and government factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

The economically mineable part of a measured resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and government factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

quality assurance/quality control

• Splitting drill cores and sampling of reverse circulation (“RC”) drill chips have been applied to the Pakrut Project. Channel sampling of trenches and underground crosscuts were also applied and addressed in this Report. The channel sampling of all types of trenches (shallow and deep) were conducted along one side at the contact with the floor. All channel samples were collected manually and/or using mechanical devices such as pneumatic hammers and diamond saws. Specific gravity samples were taken from oxidised outcrops and fresh zones (drill cores).
• The data used for Mineral Resource estimation was derived from drill holes (including RC drillholes and diamond drillholes), trenches and underground channels. There were sufficient underground channels and drill holes that had been sampled at the Pakrut Project for confident Mineral Resource estimates and resource classification (Measured and Indicated categories at the Pakrut Project).
• The drill core samples taken by LLC Pakrut (since 2004) at the Pakrut Project were about 1.5 m long and a few of them vary from 0.5 m up to 2 m. The average length of samples previously taken by former Soviet Union’s exploration team (prior to 2004) was about 1 m length.
• The RC chips were sampled with an interval of every 1 m.
• Sample representativity was guaranteed by drilling and trenching/underground channelling conducted in an exploration grid of 40 m by 40 m at Pakrut Project. On the surface, the Pakrut deposit was investigated with trenches of different lengths and depths excavated across the orientation of mineralisation zones and spaced in a 20 – 40 m grid. Underground, five adits were accompanied with drifts and crosscuts were driven along the strikes of mineralised zones to trace the continuity and changeability of the gold mineralisation with continuous channel sampling.

• In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.

• Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).

• Core diameters were HQ-size (63.5 mm) or NQ-size (47.6 mm). The drilling started from HQ-size diameter on surface and changed to NQ-size at a depth of about 100 m. Most underground drill holes were completed with NQ-size diameter. The split of drill cores was determined by core diameters. The HQ sized cores were split into two halves and one half was sampled. No splitting was applied to cores of NQ size and all of the sampled material was crushed.
• Drilling core samples and channel samples were collected from all hydrothermally altered sections. From 2005 to the present the samples were taken from the entire length of the boreholes. The length of the samples varies from 0.4 m – 3.0 m and depends on the variability of mineralisation and rock features. In the case of large thickness of altered rocks the samples were taken at equal intervals of 1 m or 1.5 m, and rarely 2.0 m.
• RC drilling was conducted using standard RC rigs and samples were taken every 1 m interval.

• The average core recovery was about 82% for the Pakrut Project (LLC Pakrut’s core samples). The core loss was predominately due to local structures/fractures and surface soil/overburden. The average recovery of mineralised intervals was about 90%.
• The gold mineralisation is related to hydrothermally altered zones and drill core samples and channel samples were collected from all hydrothermally altered sections. From 2005 to the present the samples were taken from the entire length of the boreholes.
• Swiss (ONRAM-1000) and American (LY-38) drilling rigs and Chinese rigs of type CSD1800A have been employed in the drilling programme of the Pakrut Project.

• Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

• The cores have been geologically (lithology, structure, alteration, mineralisation, geotechnical features logged to a level of detail to support appropriate geological interpretation and Mineral Resource estimation.
• Underground tunnels developed prior to 2004 have been studied and re-logged by LLC Pakrut with a systematic channel sampling programme.
• All cores have been logged and the logs were recorded in a format of standard logging sheet and then typed to electronic copies of the logging sheet and were incorporated into database.
• Photographs of drill cores were taken during logging. In the earlier days when the digital camera was not wildly used the drill cores had not been photographed and instead of this histogram with logs of drillhole was completed.
• All cores and channels including trenches used in resource estimation were logged or re-logged by LLC Pakrut.

• The total length and percentage of the relevant intersections logged.

• Drill cores were sampled by split cuts and core samples were taken a half of core. RC drilling chips were collected every 1 m interval. Both core and RC chips were sampled in the logging and sampling yard by field geologists from LLC Pakrut and/or former Soviet/Tajikistan geological team, after logging and photographing.
• Drilling and sampling were supervised by LLC Pakrut geologists and the initial sample preparation was done in LLC Pakrut laboratory located in Dushanbe (prior to 2004, sample preparation was done by geological team supervised by Tajikistan governmental geological department).
• Drill cores were stowed in wooden boxes with proper markers after being taken from drilling pipes, then were logged and recorded with standard sheets at Pakrut camp before being transported to LLC Pakrut’s laboratory in Dushanbe.
• From 1975 to1981, preparation of all types of samples was carried out firstly by crushing the rocks down to 1 mm in the preparation laboratory of the South Tajik Geological Exploration Expedition by mechanical grinding according to the Richards-Chechetta formula Q = kd². In this formula, Q = sample mass, d = maximum diameter of the particles in the sample, in mm; and k = coefficient of uneven distribution of gold in the ore. Pulverizing the ore down to 0.75 mm (-200 mesh) was carried out by the Central Laboratory of Unified Enterprise of the Tajik SSR.
• From 2004 to the present, sample preparation has been carried out at LLC Pakrut’s laboratory in Dushanbe using two steps of jaw crushing and vibrating pulverisers. The required -200 mesh sample is obtained by selective splitting and sieving. Sample preparation methodology is subject to continuous quality control monitoring.
• Original core samples and channel samples were at a range of 3 kg – 10 kg depending on the recovery of cores and sample length. Core and chip samples were further split into coarse samples after crushing. Samples were further pulverised to fine pulps and about 200 grams were taken and packed for chemical assaying.
• Sample sizes were appropriate to the grain size of the material being sampled.

• Whether sample sizes are appropriate to the grain size of the material being sampled.

• From 1975 to 1981 all primary analyses were conducted at the Central Laboratory of Unified Enterprise of the Tajik SSR (“CLUETS”).
• Semi-quantitative spectral analysis was used to determine the grades of 13 components: gold, silver, arsenic, tin, tungsten, molybdenum, copper, lead, zinc, antimony, mercury, tellurium, and bismuth, including a full spectral analysis for gold and silver, together with traditional chemical analysis for gold. At the same time a series of analyses were carried out to determine the samples’ bulk density, moisture, carbonate-silica ratio and other characteristics.
• During the second stage of exploration (2005 – 2010) the primary analyses for gold, silver, and arsenic of channel and core samples were performed by the LLC Pakrut laboratory in Dushanbe using aqua-regia digestion and atomic absorption spectrometry. The samples which returned grades greater than 0.15 g/t were reanalysed using fire assays by the SGS Laboratory in South Africa and by the Central Governmental Laboratory of the Republic of Tajikistan. During these periods a total of 26,358 samples were analysed using AAS and 7,243 by fire assay. These samples were taken from Pakrut Project.
• Since 2011, samples with gold grades ≥0.5 g/t as determined by LLC Pakrut laboratory have been reanalysed at the Intertek Laboratory in Beijing by fire assays.
• For quality assurance purposes, internal and external laboratory testing for gold and arsenic was performed in the process of conducting analytical work in 2009 and 2010. For internal control purposes, a portion of encrypted sample duplicates (taken from the other half of the primary sample) were included in the stream of primary samples and analysed using the same methodology. Additionally, two industrial standards were inserted in every batch of 20 to 25 samples. The standards were purchased from international sources and vary in grade from 0.26 g/t to 13.64 g/t. The results were analysed and reported by quality control personnel.
• External quality control tests were carried out by re-analysing duplicate samples in the Central Governmental Laboratory of the Republic of Tajikistan. Generally the samples for external control were submitted quarterly, but during periods of low sampling activity they were submitted every six months or even annually.
• The internal and external control results were both compared with the primary assays; if the discrepancy exceeded that permitted by regulation all results from that batch were rejected and the samples assayed again.
• All core and channel samples were first analysed for gold (and sometimes but not always for silver and arsenic) by a modified aqua regia method and gold content was determined by AAS. Samples returning gold values were subsequently sent to the Intertek Laboratory (“Intertek”) in Beijing, China, a branch of an internationally recognized establishment, where the gold concentration was determined by fire assay. It should be noted that in the drilling program from 2004 – 2010, all mineralised samples were sent to the SGS Laboratory (“SGS”) in South Africa for fire assays.
• LLC Pakrut’s QA/QC protocols for sample assaying include the insertion of commercial standards into each sample run prior to submission to the laboratories, along with pulp duplicate samples taken after pulverisation of the samples. These QA/QC samples are inserted at a rate of approximately 1 in 20 to 25 samples.
• A total of 2,906 commercial standard samples in 15 types with certified mean and standard deviation values of gold grades have been adopted by LLC Pakrut in routine sample batches to monitor the laboratory’s analytical accuracy through its internal laboratory and Intertek. The standards range in grade from 0.25 g/t gold up to 13.65 g/t.
• One type of standard blank sample, GLG304-3, was submitted to the LLC Pakrut laboratory to monitor for any significant contamination during the assaying process. This standard blank sample has an expected gold grade of 2.0 to 2.7 parts per billion (“PPB”), far below the lower detection limit of normal fire assay and/or aqua regia methods.
• Pulp duplicates were sent to Intertek and/or SGS to assess the assays’ level precision. A total of 3,396 duplicate samples were inserted in the routine samples at a frequency beyond 1:20. All samples identified by LLC Pakrut as containing gold values could be used for comparisons between LLC Pakrut’s gold grades using the aqua regia digestion method and Intertek’s or SGS’s results using fire assays. The results show that overall there is no significant difference between the laboratories in the mineralised grade ranges and the mineralised intervals derived from the two laboratories’ results are similar.
• Larger differences occurred in a few samples. For the pulp duplicates, the variability between duplicate assays is caused primarily by the pulp sub-sampling methodology, digestion (in this case using aqua regia) and the final analysis.
• Additionally, SGS and Intertek each have their own laboratory QA/QC protocols for sample assaying, including the insertion of standards, duplicates and blanks. The final database of sample analyses contained only the fire assay results returned from SGS and/or Intertek.

• Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established.

• Besides verification of data provided by LLC Pakrut, an independent sampling verification programme is detailed in Section 11 of this Report.
• No twin holes had been used. SRK as SRK had observed/inspected the on-going drilling programme including sampling and sample preparation in 2011 and 2012. All prepared samples were dispatched to Intertek for analytical process and SRK selected duplicate pulps for verification. The competent person opined there was no need to drill any twin holes for this project to achieve a Mineral Resource estimate.
• Exploration data was properly documented and presented.
• CNG was listed on London AIM therefore material exploration data/progress of the Pakrut Project was released publicly from time to time, and there was competent person to endorse the exploration data prepared as it presented.
• Sample assay results were obtained from accredited laboratories such as SGS and Intertek. By considering the reputation and internal QC protocols of such laboratories, as well as external checks and verifications, there was no adjustment needed to be performed to assay data.

• Discuss any adjustment to assay data.

• Before drilling, survey was performed to ensure the rig installation was placed on a correct and accurate location as designed. After the drilling was completed, a repeated survey was performed to check the location of drill holes. Drill holes were sealed with cement and marked with borehole name, depth and date.
• Downhole survey had been performed every 50 m footage using anti-magnetic downhole compass. The drilling and downhole survey was logged by drillers with standardised logging sheet. LLC Pakrut geologists checked the logs and drill cores regularly to ensure the drilling programs were performed in line with a designed standard.
• The sample data was prepared in a local UTM grid system that was adopted by Tajikistan governmental geological department. This was not only to ensure the accuracy of the survey of local mining area, but also to be compliant to local country surveying and licensing requirement.

• Quality and adequacy of topographic control.

• Sampling was conducted with a basic length of 1 m or 1.5 m as detailed in this Report context. Samples were continuously taken to cover all drill cores and mineralised sections (trench and underground channels).
• In Pakrut Project, sampling has been conducted in a relatively dense grid as shown in Figure 9‑1 in this Report. More than 500 drillholes were completed in Pakrut area with a total footage over 79,000 m, in addition to considerable amount of trenching and underground channelling samples.
• The data spacing varied from 10 m to 100 m and generally within a grade of 10 m – 40 by 40 m at Pakrut deposit area, which is sufficient to support a reasonable Mineral Resource estimate.

• Whether sample compositing has been applied.

• Where possible the drill holes were designed and completed spacing in exploration lines perpendicular to the overall strike azimuth of gold veins.
• Holes have been drilled at varying dip angle from -55° – -90° depending on terrain and to achieve the best angle to intercept the mineralisation at near perpendicular, by considering the realistic drilling techniques.
• There was no sample bias related to the angle of drilling.
• The dip angle and azimuth were used in a 3D modelling to reflect actual sampling location and orientation.
• Channel samples taken from trenches and underground crosscuts were generally designed and completed perpendicular to the vein strike orientation.

• If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

• The measures taken to ensure sample security.

• The sample security prior to LLC Pakrut’s management of this project is unknown. Previous sample rejects and duplicates are not available. Those samples were not used for resource estimation.
• LLC Parkut’s samples were taken and secured by CNG. Cores and channel chips were packed and transported to the laboratory located in Dushanbe with CNG’s own vehicles and secured by Company staff.
• In the laboratory located in Dushanbe, the samples were secured by CNG security staff, and all remained drill cores, coarse rejects and pulps were secured at a warehouse near LLC Pakrut office building in Dushanbe.
• Pulp samples for SGS or Intertek chemical assaying were transported by international commercial courier.

• The results of any audits or reviews of sampling techniques and data.

• Site visits and sampling verification had been performed by SRK geologists. Exploration, sampling techniques, QA/QC protocols and data collection had been reviewed during the time to ensure correct procedures and protocols were followed and that the data collected was reliable and accurate for Mineral Resource estimation and reporting to the JORC Code (best practice).
• Snowden Consultants, an independent consultancy had been engaged by CNG to review the Mineral Resource estimation and resource estimates were conducted by Snowden in 2012. Considering some updates of in-fill drillings, there were no material discrepancies between the resource results estimated by SRK and Snowden.