Tasmania Mines : Ore Reserve Report January 2016

Tasmania Mines Kara No 1 Magnetite Deposit Ore Reserve Report January 2016

Prepared by:

Of: -

Alan D Fudge MSc BSc MAusIMM

Polberro Consulting Table Cape, TAS, 7325

Tel [phone]

[e-mail]

On behalf of: -

Tasmania Mines Ltd

Executive Summary

This reserve estimate is produced for Tasmania Mines for annual reporting and audit purposes. The Kara No 1 reserve has been estimated based upon the November 2014 digital resource model as described in the December 2014 Kara No 1 Resource report (Resource and Exploration Geology) utilising an FeO>30% mineralised cut off. References to Global Resource (in-situ) in this report correspond to the depleted portion of the above resource.

Reference to minable resource referred to in this report represents the FeO>30% component of the global in-situ resource that falls within current economic pit design boundaries and which has not been sterilised by its location.

• Kara No 1 Global Resource is 14,957,000 tonnes at 49.4% FeO

• Kara No 1 Minable Resource is 10,553,000 tonnes at 50.1% FeO
• Kara No 1 Total Ore Reserve is 9,987,000 tonnes at 49.6% FeO

The Kara No 1 pit life based upon the current production rate of 400,000 tonnes of ore per annum is 25 years.

The reserve estimate excludes 96,000 tonnes of inferred resources (59.5% FeO) that lie within the economic pit boundary and will be mined during the normal operation of the open pit.

It is estimated that 8.5% of the material reporting to reserves within the pit design shell contains material classified as oxidised. It is currently considered that 50% of this oxidised material is unsuitable for generation of a magnetite product and has weathered to limonite, goethite, haematite etc. The estimate for oxide material has been adjusted in this mining reserve estimate accordingly - a 50% resource reduction factor is applied to reserve estimates and reflects current applied practice in the open cut.

Table of Contents

Executive Summary 2

Introduction 4

Location 5

Geology 6

History 8

Production 9

Processing 10

Reconciliation 11

Resource Estimates 12

Reserve Estimation 13

Mineralised Resources 15

Current and Future Work 18

References 19

Limitations and Consent 20

Appendix 1 Conversions Used 21

Appendix 2 Competent Person Statement 23

Appendix 3 Reserve Estimation Worksheets 24

Appendix 4 Break Even estimations 40

Appendix 5 Sensitivity Analysis 43

Appendix 6 JORC 2012 Check List 45

List of Figures

Figure 1 Site Location 5

Figure 2 Ore and Waste Production Chart 2008 to 2015 9

Figure 3 Optimial pit shell 2015 vs LOM pit design 14

Figure 4 Location of Deposits 17

List of Images

Photograph 1 Kara No 1 440 Bench 6

Photograph 2 Kara No 1 Open cut view looking north 7

Photograph 3 Kara No 1 Eastern pit wall (440) 8

Photograph 4 Kara No 1 Haul Road works and Bob's Bonanza rehabilitation work 10

List of Tables

Table 1 Reconciliation Estimate 11 Table 2 Kara No 1 Global Resource Estimate 12 Table 3 Kara No 1 Minable Resource Estimate 12 Table 4 Kara No 1 Mining Reserve Estimate 14 Table 5 Tasmania Mines Site Mineral Resource Summary 16

1. Introduction

Tasmania Mines operates the Kara No 1 open cut mine in north-west Tasmania producing both magnetite and scheelite products.

Resources in Kara No 1 orebody were estimated in November 2014 by Resource and Exploration Geology who generated a digital resource block model based upon data supplied to them by Tasmania Mines. No new exploration or in fill drilling has taken place since the generation of that digital resource model (see Kara No 1 Ore Resource report - December 2014- Resource and Exploration Geology.)

This ore reserve estimate utilises the above digital geological resource model estimate.

The global in-situ resource estimate referred to in this report was derived by evaluating the resource model remaining below the December 2015 surface surveyed digital terrain model (DTM).

This reserve estimate was produced by A.D.Fudge of Polberro Consulting who is a Member of the Aus IMM and has significant experience with resource/reserve estimation in skarn style mineralisation.

The reserve estimate is based upon a long term pit design derived from a FeO>=30% grade cut off with a manual boundary established where the stripping ratio exceeded 4:1 - the long term pit shell was confirmed in January 2015 utilising pit optimisation software (Threedify Flowpit) which derived a close fit to the manual pit shell from which long term designs for pit benches, access and boundaries were designed.

This reserve estimate utilises shape information constructed from perimeter sets which include planned dilution at mining boundaries and internal dilution, by waste and low grade material reflecting, as far as is possible, operating practice. All data is accommodated within the mining reserve shapes such that the material quantity and grade may be estimated directly from the digital resource model.

Recovery loss is accommodated both within the mining perimeters and by the application of a global mining recovery factor of 95%.

The practice at the Kara No 1 operation of in-pit ore sorting (grade control) is accommodated in the reserve estimation by the elimination of some diluents and a reduction in the global mining recovery.

In addition the Kara No 1 reserve estimate addresses the issue of near surface weathered resources. At this time 8.5% of the tonnage reporting to reserve is categorised as oxidised - it is assumed in this estimate that 50% of the weathered resource material is not recovered. This material has thus been removed from the mining reserve estimate as a stage of the estimation process.

A haematite product produced from the oxidised material would be of a lower value than the core magnetite product and is not considered to be economically viable at this time.

No reserve estimate is produced for scheelite or aggregates (granite/quartzite) which are recovered as secondary products.