Hambledon Mining

Hambledon Mining plc is an AIM-listed gold mining and exploration company which is producing gold at and developing the Sekisovskoye gold deposit and owns the Ognevka processing plant, both of which are close to Oskemen (formerly Ust-Kamenogorsk) in East Kazakhstan.
At Sekisovskoye, the Company is mining from an open pit and has constructed an 850,000 tonnes per year treatment plant which started operating in December 2007.
Production from the open pit will average over 40,000 ounces per annum. After the start of open pit processing, the Company plans to develop the much larger underground resource which is expected to lead to a combined production rate of around 100,000 ounces per year.
The Ognevka processing plant has been refurbished and restarted operations in November 2007 to produce concentrates containing gold, silver, copper, iron and coke from the retreatment of zinc smelter residues.

Management

Directors

George Eccles Chairman (Non-executive)
George graduated with a law degree from the London School of Economics and then trained as a Chartered Accountant. He became a French Pinel law investors in the London office of Deloitte Haskins & Sells before moving to Moscow where he was a Partner in Coopers & Lybrand and later in Deloitte & Touche. More recently, he has worked in Kazakhstan as Chief Operating Officer of the Central Asian-American Enterprise Fund, a US government sponsored development fund.
George is a member of the Audit and Remuneration Committees.

Chris Thomas
Non-executive Director
Chris has been a non-executive director of Hambledon Mining Company since its formation in 1997, and subsequently of Hambledon Mining plc since the reorganization. He has had a successful career in the advertising industry, having been a Director of Abbott Mead Vickers BBDO, Managing Director of Ammirati Puris Lintas and Managing Director of Lowe Lintas. In 2002 he became CEO of Proximity London, one of the largest integrated communications companies in the UK. In 2006 Chris took on the role of Chairman and CEO of BBDO and Proximity in Asia. He is married with four children and is based in Singapore. Chris is a member of the Audit and Remuneration Committees.

Nicholas Bridgen
Chief Executive
Nicholas trained in London with Peat Marwick Mitchell & Co. (now KPMG) as a Chartered Accountant and then spent 14 years with Rio Tinto plc group accounting, business evaluation and group planning. Since then, he has spent 13 years in companies operating in the FSU. In 1997 he formed Hambledon Mining Company (the forerunner of Hambledon Mining plc.). He lives in Kazakhstan with his family and speaks Russian.

Neil Stevenson
Technical Director
Neil is a mining engineer with a post graduate diploma in business administration from the University of Queensland . He has a wealth of experience of both underground and open pit operations and before joining Hambledon was Mining Manager and acting General Manager of Golden Star Resources' Bogoso, Prestea and New Century Mines.

Baurzhan Yerkeev
Executive Director
Baurzhan has a degree from the Tomsk Polytechnic Institute, Geological Faculty (Russia). He is an experienced exploration geologist, with extensive knowledge of Kazakhstan, the CIS and Altai Region (where Sekisovskoye is located). He has managed projects for the State Geophysical-Geochemical Expedition and the State Exploration Expedition. More recently, he has been a director of CRS, the Company's geological consultants. Baurzhan is experienced in working with the various State bodies responsible for approving the Company's development plans and has worked with many western and local companies. He has received specialist training in the UK from Datamine International and is a qualified Datamine trainer.

Other Management

Myrzaly Tilyayev Director of Government Relations
Hambledon-Mining Company Limited
Myrzaly has a diploma in Engineering from the Kazakh Chemical-Technological University . For 22 years he worked in the Pre-Caspian Mining and Metallurgical Kombinat, finally as its Director with a staff of some 48,000. He then became deputy director of Almaty Energy that comprised 17 separate enterprises with a total staff of 27,000 workers. He was also a department director in the Almaty regional municipal board.

William Morgan CFO & Company Secretary
Bill is a UK Chartered Accountant with 30 years accountancy and financial management experience. He has worked in the UK, Russia, the Far East, Africa and previously in Kazakhstan between 1994 and 1997. He has been instrumental in several successful start-ups and restructuring of companies, in the telecoms and mining industries

Sekisovskoye

The mineral rights to the Sekisovskoye project are held by a 100% owned subsidiary, TOO Sekisovskoye and the processing plant is being built by the 100% owned subsidiary TOO Altai Ken-Bayitu. .

Location
Geology & Mineralisation
Resource
Exploration
Location

The Sekisovskoye deposit is located at the village of Sekisovka , approximately 40 kilometres from the East Kazakhstan regional capital, Ust Kamenogorsk. The road from Ust Kamenogorsk to Sekisovka is sealed and provides the main route between Ust Kamenogorsk and Ridder (formerly Leninogorsk) and further on in to Russia.

Geology & Mineralisation

The deposit occurs in the northwest marginal zone of the 40 thousand sq.km Rudny Altai Palaeozoic metallogenic belt that occupies the eastern border of Kazakhstan and the Altaisky region of Russia. The mineral hosting intrusives are of late Devonian age.

Hambledon's extensive infill diamond drilling programmes within the upper horizons of the deposit have provided a higher confidence in the delineation of the gold zones, which better reflects the complexity of the gold distributions, in both shape and spatial continuity. Consequently, the number of mineralised zones has increased significantly: totalling 244 zones within the higher levels above the 250m elevation and a total of 307 zones for potential underground exploitation below the 250m level. True thickness of these tabular-like zones may change rapidly along strike and down dip, with a maximum delineated thickness of 45m, and the continuity of mineralisation may reach 700m downdip and 150m along strike. Most of these zones are parallel to sub-parallel within the hosting breccia pipe, with dips averaging 65 to 80 degrees northeasterly. It has now been shown that several of the “barren” igneous dykes within the hosting breccias can contain noteworthy gold levels and these have been incorporated into the modelling of the gold zones.

Gold is associated with hydrothermal alteration of the breccia zone matrix and also with hydrothermal sulphide veining. A high percentage of the gold occurs as intergrowths and free grains, with only a minor percentage locked within sulphides. Gold particles can be coarse, up to 0.4mm, and this contributes to an erratic grade distribution, in addition to the presence of unmineralised breccia fragments. CRS suggest that the presence of listvenite alteration indicates that the gold and silver mineralization may have emanated from hydrothermal solutions that developed from differentiated deep-seated ultrabasic magmas.

History

The deposit was discovered in 1833 by mining engineer, Ivan Zubarev, with mining from surface taking place between 1833 and 1847, 1932 to 1935 and 1943 to 1946. From 1975 to 1986 a range of exploration work was carried out, starting from additional geological appraisal at 1:50,000 scale and finishing with preliminary exploration. Between 1978 and 1982 “AltaiZoloto” of the Ministry of Non-Ferrous Industry, KazSSR, mined the oxidised area of ore body 2. The open pit was excavated to a depth of 35m and a total of 3,406 kg of gold and 3,431 kg of silver was mined.

Starting in 2003, the exploration geology department of TOO Sekisovskoye has been carrying out further exploration. From 2003-2005, 75 holes were drilled from surface producing a total of 8,245m of core, and in 2005-2006, 55 underground holes were drilled from the 441m underground level, producing 4,027m of core. All the samples have undergone fire assay for gold content, and atomic absorption analysis for silver content at the internationally certified Alex Stewart laboratory in Kyrgyzstan

A computer model, using Datamine software, of ore-containing breccias and ore bodies at different cut-off grades has been created and comparative reserve calculations have been made.

Within the licensed area, a detailed topographic survey has been carried out at 1:1,000 scale.

Exploration

Current exploration drilling is centred within the western margins of the open pit, where extensions of orebody 11 are being defined for both open pit and future underground exploitation. Known gold mineralisation, immediately along strike to the Sekisovskoye deposit, will also be drilled to help better define the extent of gold resources in these areas. Next year, underground drilling will be focussed on upgrading the resources and reserves for underground extraction.

In May 2007, 189 sample results from the surface drilling programme that is targeting extensions of modelled ore zones along the upper western fringes of the Sekisovskoye deposit indicated that the gold grade distributions supports the integrity of the resource model with a number zones showing up-dip extensions, including Orebody ‘11’.

Open pit project

The Sekisovskoye deposit consists of a steeply dipping series of lenticular zones striking NW/SE and dipping to NE. The mine planning has an open pit being developed from surface to a depth of 340 m above sea level to produce a pit of approximately 150 m deep. The underground is planned from the base of the pit to at least another 700 m deep.

Open pit operations at Sekisovskoye commenced in July 2006.

Infrastructure

Infrastructure requirements for the project have proven to be minor as the deposit is located on the main road between the mining centres at Belousovka and Ridder, 40 kms to the north of Ust Kamenogorsk. Ust-Kamenogosk is the capital of the East Kazakhstan region that has been a mining and mineral processing centre for over half a century. Appropriately qualified staff, mining supplies, equipment and engineering facilities are readily available in the region. An adequate power supply exists from a nearby power grid and a site substation consisting of a 14Mw, 110/6 kV transformer and switch gear has been installed. Water and telephone connections are available nearby and an existing building has been acquired and renovated for use as office, kitchen facilities and temporary laboratory.

Mining

The current open pit design consists of some 4.2 million tonnes of ore at a gold grade (diluted) of 1.6 g/t and a stripping ratio of 4.7:1, estimated to yield 213,352 ounces of gold and 366,280 of silver. This pit was deliberately curtailed in depth because of the benefit of keeping use of certain existing underground development which reduces the cost of mining from underground ore which would otherwise be economic from open pit. In the light of recent rises in the gold price this plan is being reviewed. Sekisovskoye’s drilling programmes and early mining results consistently (and statistically reliablly) show grades some 19% higher than the grade shown in the geological model which was largely based on Soviet era drilling. This increase in grade is likely to compensate for the slightly lower grade of near-surface ore which will be mined in the first years of the pit life. Later, the grade will rise and production is likely to rise above 40,000 ounces.

The planned mining rate of 850,000 tonne per annum gives a pit life of approximately 5 years. Mining operations are conventional drill and blast with excavator and truck haulage. Mining is carried out by Sekisovskoye’s own mining fleet as a detailed cost analysis conducted prior to commencement of operations showed there were considerable cost savings to be gained. The mining fleet consists of two Hitachi Zaxis 850H, 85 tonne excavators with a fleet of 45 tonne BelAZ 7547 mining trucks. Drilling is carried out using Atlas Copco COPL7 drilling rigs. Ancillary mining equipment is a mixture of Russian and Chinese equipment.

Before the start of processing, mining was focused on producing waste material for use in the construction of the processing plant. The waste material generated from the pit was tested in a laboratory and found to be ideal for this use and may in future, be sold to third parties. This material was therefore used in the construction of all roadways, ore stockpile, plant site fill and for the construction of the tailings dam. The tailings dam site also contains a large depth of clay. This material has been excavated to deepen the tailings dam as well as to provide material to construct an impermeable layer under the plastic liner of the dam.

As at the end of December 2007 a total of over 2.0 million m3 of material has been mined including 168,000 tonnes of ore. Cost analysis of the mining equipment operation has shown that the equipment is mining ore and waste at even lower costs than those projected in the original equipment purchase justification. Cash mining cost, excluding depreciation and G&A, are currently around $1.10 per tonne, though this is expected to rise as the equipment ages and longer haul runs are needed.

Initially, it was planned to use contractors to carry out the construction of the mine tailings facilities. However, contractor costs have proved to be so high on a unit basis that a cost analysis determined that the tailings dam construction could be carried out by the company at much lower cost with the purchase of a small civil earthworks fleet. Board approval for this was received in May 2007 and the fleet purchased. All future tailings facilities will now be built by Sekisovskoye equipment generating significant savings for the operation.

Processing

The Processing plant was commissioned in mid December 2007. Some minor problems were encountered after start-up with the plant having to be shut down for two weeks to rectify the problems experienced with the primary and secondary mill bearings. These problems were rectified and the process plant is now being ramped up to the full design capacity of 850,000 tonne per annum. All other sections of the plant were able to be commissioned from the initial milling prior to the shut down with a small gold pour being carried out to commission the elution, electrowin and gold room.

The metallurgical testwork used in the design of the processing facility was carried out in Australia and Kazakhstan. The results support the very high recoveries encountered in previous testing and an average recovery of 92 per cent is expected using a conventional CIL circuit. Sufficient data has not yet been generated from actual operations to confirm this estimate.

The circuit consists of a 3-stage crushing plant followed by primary and secondary grinding with gravity recovery and fine grinding of the gravity concentrate. The gravity concentrate will be leached in a small, dedicated intensive cyanidation circuit. A 6-stage CIL cyanidation leach system will recover the gold and silver from the ore and concentrate through adsorption onto activated carbon. The carbon is eventually “stripped” of the precious metals that are then electrodeposited onto cathodes. The cathodes are ultimately smelted into doré bullion for shipment to a refinery. Processing costs are expected to be a little over US $10 per tonne. The ore contains no environmentally deleterious components and environmental testing supports the expectation that there will be no acid rock drainage issues.

The planned ore throughput for the open pit ore is 850,000 tonnes per annum to produce approximately 40,000 ounces of gold per annum. The same plant will be capable of treating underground ore which, being of higher grade, will result in production of over 100,000 ounces of gold per annum although there is the ability to increase the throughput of underground ore with the addition of extra grinding and leaching capacity.

Underground

As a part of the permitting of the open pit operation, an initial assessment of the underground operation was carried out. Preliminary access layouts and detailed stope layouts of the known resource were developed. This planning work envisaged that access to the western orebodies would be developed via a spiral ramp commenced from surface to the south of the open pit operations, with mining being carried out using long-hole open stoping in the larger orebodies and overhand cut and fill mining being used in the smaller and narrower orebodies. To further this conceptual design work the consulting group AMC Consultants have been awarded a contract to carry out a full feasibility study on the underground mining operation.

It is anticipated that underground mining will start at a low level and build up to a rate of some 500,000 tonnes per year. At that stage it is likely that the processing facility will be expanded to enable open pit production to continue in parallel. The start-up of underground mining will greatly increase the gold production rate and significantly lower the cash cost of production.