Ann: Mineral Hill Operations Update and Funding Arrangements-KBL.AX, page-34

Some people are not familiar with the goings on with KBL.

In March 2013 KBL borrowed $10M from Capri Mining run by the son of John Kinghorn of RAMS fame. The loan was for 2 years with $2M interest due at the end of the term. The security was the Mineral Hill mine.

The Quintana financing was US$23M (about $30M) and was available in stages for specific purposes. First $12M was used to settle the Capri Mining loan when it became due. The full amount was drawn down as the stages were completed; mainly as plant upgrades.

Commissioning the plant took longer than expected. Initial recoveries were below expectations and metal prices were below expectation which resulted in debt to suppliers. The plant is now operating properly and expected cashflow is $6.5M per quarter.

The haul road in the Pearce open pit has washed out, so once the current stockpile is processed, they will have to get ore from other sources or repair the haul road to mine ore from Pearce. The mine can produce copper, zinc, lead, gold and silver, but pearce gold and silver production is most profitable so they will give priority to repairing the haul road. This quarter production should be in line with expectation, but next quarter the stockpile will be finished. No more ore from Pearce until the haul road is repaired. Other ore sources are not so profitable.

Repairing the haul road is an unbudgeted expense and they dont have any spare cash so they need to raise some cash.

This is my understanding of the situation. All welcome to correct any errors.

DYOR