KGL Resources Ltd. Jervois Prefeasibility Study Update

Brisbane, Australia (ABN Newswire) - KGL Resources Ltd. (ASX:KGL) is pleased to announce a Pre-Feasibility Study (PFS) update for KGL's 100% 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 of KGL Resources 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. 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."

The additional works program is targeting $100m - $200m of additional free cash flow over the life of the project in an optimised pre-feasibility study. At the completion of this additional work programme, we expect improved economic parameters for the project will have been realised and will be made available to the market. The cost of the additional work programme is estimated at $2.7m and will be funded from existing cash reserves (cash at hand was $12.7M as at the end of September).

Summary of Pre-Feasibility Study work to date

- Based on Resources of 25.3Mt containing 280kt copper, 18Moz silver, 120kt lead/zinc and 113koz gold (includes inferred resources detailed in Table 2)

- Throughput estimated at 2 Mtpa over an initial 7 year mine life (4.5 years open cut)

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

- Capex estimated at A$189M including $22M in contingency.

- Estimated C1 cash costs of US$1.51/lb *

* (After by-product credits and using an exchange rate of A$/USD 0.845 and silver price of USD 20/oz)

There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.

Significant upside identified

The Jervois project's value can be significantly increased by further drilling and metallurgical work aimed at:

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

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 (1m @ 2350 g/t silver from 19m Hole JOC266 at Reward) and more gold intersections (including 28m @ 2.49 g/t gold from 2m 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, the Board has 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 deposit. 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 level required for a PFS.

The metallurgical recoveries used in the PFS to date are shown in Table 1. Further metallurgical test work is expected to result in increased precious metal recoveries.

Metal Marshall- Reward Bellbird

Copper   92.0% 89.2%
Silver   60.0% 62.9%
Gold     53.5% 53.1%

Table 1. Metallurgical Recoveries

Additional Metallurgical Test work

- Metallurgical test work to date has focussed on the recovery of copper from the ore. Conducting some additional test work to optimise the recovery of silver and gold through the use of precious metal specific collectors and promoter reagents is likely to enhance the recovery of precious metals to the concentrate.

- Examination of the production of a bulk lead-zinc concentrate. Currently the PFS envisages spending an additional $35*M in the third year of operations to modify the plant to produce separate lead, zinc and copper concentrates. Recent discussions with smelters and traders have suggested that there is demand for a mixed lead-zinc concentrate. The benefit of this is that fine grinding would not be required to separate the lead from the zinc, hence the capital and operating costs would be greatly reduced. It would also mean a substantial reduction in the additional requirement for flotation cells, storage tanks, reagents and concentrate filters.

If the circuit was built to produce a mixed lead-zinc concentrate, then this would be installed at the start of the operation which would have the beneficial effect of bringing forward the cash flows from the later years and defer processing of low grade stockpiles.

- Further metallurgical test work will be conducted on some fresh samples of the transitional ore which occurs near the surface. Improvements in metallurgical recoveries from this ore will add substantial additional concentrate production and revenues.

Geotechnical Drilling and Design

A geotechnical drilling programme will be undertaken with the aim of improving the designed open pit wall angles. Given the extensive length of the pit walls, small increases in the pit wall angle have the potential to result in substantial reductions in the volume of waste to be mined.

The Jervois Project is located approximately 300km north east of Alice Springs (Figure 1). The work in the PFS to date investigates open pit mining of several deposits followed by underground mining to feed a 2 Mtpa flotation plant producing 80-100,000 tpa of copper concentrate plus separate lead and zinc concentrates.

The project is forecast to produce a total of 576,000 tonnes of copper concentrate at a grade of approximately 24% copper and 240 g/t silver. This equates to approximately 21,000 tonnes per annum of contained copper and 1 million ounces per annum of contained silver. The Jervois project will also produce approximately 71,000 tonnes of lead concentrate at a grade of 65% lead and 1,440 g/t silver and 29,000 tonnes of zinc concentrate at a grade of 55% zinc over the life of mine.

The following companies and consultants contributed to the PFS:

- Geology - KGL Resources
- Mineral Resources - H&S Consultants
- Geotechnical - Peter O'Bryan & Associates
- Open Pit and Underground Mining - Auralia Mining Consulting
- Metallurgy - AMEC & ALS Ammtec Metallurgy
- Process plant - AMEC and Lycopodium
- Infrastructure - Lycopodium
- Waste rock geochemistry - Knight Piesold
- Tailings management, water management and related infrastructure - Knight Piesold
- Environmental, social and permitting - Environ & KGL Resources
- Transport and concentrate marketing - Solution Development
- Capital and operating cost estimates - Lycopodium

The PFS is based on an indicated and inferred resource of 25.3 Mt containing 280,000 t copper, 18.0 Moz silver, 120,000 t lead / zinc and 113,000 oz gold. Refer to Table 2 in link below.

To view all tables and figures, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-KGL-416336.pdf


About KGL Resources Limited:

KGL Resources Ltd. (ASX:KGL) is an Australian mineral exploration company focussed on increasing the high grade Resource at the Jervois Copper-Silver-Gold Project in the Northern Territory and developing it into a multi-metal mine.



Contact:

KGL Resources Ltd.
Simon Milroy MD
T: +61-7-3071-9003
F: +61-7-3071-9008
www.kglresources.com.au