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 KAGEM MINING LTD












































PROPOSED PROGRAMME FOR PROSPECTING AND


MINING OPERATIONS


(Appendix No. 2)








KAGEM MINING LICENCE


(GL-713)



































APRIL 2009


 PROJECT DESCRIPTION





Project Motivation


KML is injecting investment into the Kagem Emerald Project for the following


reasons:-


• The Kagem emerald field has continued to operate economically and


profitably. However there has not been an estimate of the resource and


lifetime of the Kagem deposit. Further exploration activities will enhance the


future development potential of the project;


• Kagem mine employs 397 workers who depend on the mine for their income.


The continuation of the project and possible future expansions will increase


job opportunities for the regional population;


• The skills of the employees will be increased through job training programs;


• Income will be generated for local and central government through the


payment of taxes and royalties and the revenue generated through the


Lusaka emerald exchange. This will assist the government in rejuvenating


and stabilizing the Zambian economy; and


• There are positive multiplier effects throughout the economy from the


preferential use of local suppliers and developers.


Project Outline


Kagem Mining Limited currently mines emeralds from the Fwaya Fwaya, F10 and


Chama open pits. A new wash plant was constructed on the site and the current


rated throughput is 50 tonnes per hour (tph). It is proposed to increase the capacity


of the wash plant to 100tph by April 2009. The wash plant will operate on an 8-12hr


shift depending on activities onsite.


An old wash plant exists on the site approximately 200m from the Kafubu River.


Operations at this plant were discontinued in March 2008.


Capital Investment and Employment


The estimated initial capital investment for Phase 1 is US$24.05 million.


The annual operational costs for the project are estimated to be US$48 million at the


optimal level of operation. A part of this operational cost will be generated for


environmental management activities.


Exploration Program


Airborne high resolution radiometric and magnetic survey was conducted over the


licence area in order to delineate potential prospects for detail exploration.


Historically there have been very short term estimates of the emerald resource of the


Kagem emerald ore bodies. Exploration drilling along targets has been conducted


and will be ongoing during the project.


Up to the 18,n of January 2008, a total of 21,395m of diamond core drilling had been


conducted. This exploration has allowed an estimated resource of 24 million tonnes


(MT) that extends to a vertical depth of 150m and which covers a strike length of


920m. The drill holes have a diameter of 46mm.


Exploration is planned to continue during the mining operations using diamond


drilling techniques. A total of 15,325m of drilling in 98 drillholes has been conducted


in 2008-09in Fwayafwaya belt and Dabwisa.


Total investment on exploration since November 2008 is about US$ 3 million.


Exploration work will be continued in other prospects within the Kagem licence area


during subsequent years.


Mining Methods, Equipment, Treatment and Disposal


Bulk blasting techniques will be used in the open pits. It is anticipated that the


Fwayafwaya, Chama and F10 pits will evolve into one large open pit. Bulk blasting


will remove the waste rock and then small scale blasting will be conducted closer to


the biotite-phlogopite contact zones between the quartz-tourmaline veins and the


TCTM schists. A hydraulic excavator will load the material into trucks which will


transport the reaction zone material to the wash plant (1.95km). A total of 236.23MT


of material will be removed from the open pit of which 22.5MT is ore and 213.73MT is


waste. This is a stripping ratio of approximately 1:9. The final open pit will be 1,500m


long, 815m wide and 150m deep.


The waste rock will be removed by dump trucks to the waste rock dumps (more than


0.6km) on the footwall of the ore body to the northwest of the open pit. The waste


rock dumps will be engineered to maximise the angle of repose of the material.


During mining operations backfilling of the open pit will be conducted. This will


reduce the impact of the mining activities on the landscape. Backfilling will be


conducted at a rate of 16 Mt/annum at optimal level of production.


The mining activities were historically mechanised. The equipment fleet will be


expanded over the first three years of the project.


Noise will be generated during blasting operations and it is advisable that employees


in the area and mining equipment operators are supplied with personal protective


equipment (PPE). Table 1 shows the preliminary mining schedule for 2008 to 2017.





Table 1 Preliminary mining schedule from 2008 to 2018


Year Ore (MT) Waste (MT) Total (MT)


2007 - 2008 0.12 2.28 2.40


2008 1.46 8.11 9.57


2009 2.00 14.00 16.00


2010 2.50 20.00 22.50


2011 2.50 22.50 25.00


2012 2.50 20.00 22.50


2013 2.50 22.50 25.00


2014 2.50 23.75 26.25


2015 2.50 23.75 26.25


2016 2.50 25.00 27.50


2017 1.42 31.84 33.26


Total 22.5 213.73 236.23