Updated Valuation and SWOT - RSG, page-12

@brianchu82

There are other subjective aspects that can be considered. Going back to my NST example they are mining very narrow ore bodies at the EKJV using long hole stoping methods with paste fill which is basically a technique that uses cememt, sand an tailings material to backfill mined out stopes before mining proceeds along the stope. As you would appreciate this mining technique is less efficeint than the sub level cave mining technique which is used to mine bulk commodities like iron ore UG and uses a top down retreat method where the waste (overdraw) just remains in situ and there is no need for this reinforcing fill. You would also appreciate that as the depths of the NST EKJV mines get deeper the cost of hauling ore to the surface increases plus there is also a cost and potential bottelnecks associated with bringing the paste fill all the way back down to the base of the mine. Companies like NST generally won't emphasise these issues.

Also going back to the example of the EKJV. The current 1.24Moz ore reserve is mined from 4 deposits, Raleigh being one which is accessed from one opening/decline and Pegasus, Hornet, Rubicon which are accessed from the original decline sunk into the Rubicon deposit. Access to Hornet and Pegasus is via horizontal drives built UG. As you can appreciate the abilty to scale such an UG mining complex is very difficult as all the ore from these three mines needs to come up through one opening and the empty ore haul trucks and those containing paste fill material need to go down through the same opening. It doesn't take much imagination to understand what a difficult scheduling problem this is with haul trucks coming and going UG. Remember the mine openings are only wide enough for movement in one direction so when haul trucks need to pass each other when one is going up and the other is going down then they need to do this at a designated points in the mine where the UG mine opening has been widened to allow trucks to pass each other. You can imagine that if trucks going up and down aren't at the exact passing positions at the same time then one haul truck would need to wait for the other haul truck causing delay. This as you can imagine is a difficult scheduling problem and without automation you are left with verbal communications between drivers. I'd image that the EKJV is automated at least to the extent of having a remote monitoring system to know where each piece of equipment is.

Now contrast that with the Syama UG mine when operating at full DFS capacity under an automated system. For starters the mine doesn't use a paste fill system so there is no downward traffic to bring paste fill material down to the lower reaches of the mine. Secondly Syama has twin declines which shoud help prevent mining bottelnecks (one decline can be used for upwards traffic and the other for downward traffic in theory) and two declines should actually allow UG mine production to be scaled from 2.4 Mt per annum to 4 Mt per annum (as per the independent consultant's estimations). This would simply be impossible for narrow vein mining operations like at Kundana. Also given the relatively small ore reserves at Pegasus, Rubicon and Hornet the cost of building a second decline would be prohibitive IMO. If they were going to do this I would say they should have done it much earlier before the mine had advanced to such deep vertical levels. Speaking of vertical depths, intially the Syama UG is going to have a cost advantage over mines like Kundana becasue its horizontal footprint is large and its vertical depth initially will be much shallower, meaning lower costs running the ore to surface.

OK lets talk about the automation advantages. As you can probaly understand from the commentary above efficient low cost mining is about good scheduling. You don't want equipment and a high rent machine operators parked up in an UG siding waiting for another machine to pass. At Syama the system will be automated so scheduling will be done by computers that know where every piece of equipment is in the mine. If one is delayed the system will automatically compensate. What's more the machines run autonomously and more than one machine can be monitored by one remotely located operator. Being in Africa even these high skilled people will be locals on pay scales well below expat workers and very much below the pay scales of the cashed up bogans you find to work as machine operators in deep UG mines in Australia. The automation will also allow for around the clock productivity. The drills, boggers and haul trucks can keep working on one mine levels while blasting occurs on another level. In human operated mines the operators of these machines would need to retreat to safe areas while blasting occurs which limits the around the clock efficiency of the non-automated mines. What's more non-automated mines have shift change-overs after 12 hours where handover procedures need to be followed and staff need to gain ingress and egress to the UG workings. With the automated mine the equipment keeps operating while the equipment monitors facilitate their shift change at some remote location possibly at surface in an airconditioned office. I could go on to explain more reasons and cost benefits at Syama that might put that mine into an enviable postition in the future compared to its narrow vein non-automated peers but I will stop here for the moment.

Be careful to try and understand how AISCs come about before taking a rule of thumb approach, fuel costs are only one variable IMO. It won't be long before automated electric vehciles are operating in this mine and are being charged from the hybrid solar panel arrays. By that time Syama will have left most of its non-automated peers in its wake IMO and the pesky shorters and downrampers will be asking how Eshmun got it so right. Esh