Ampella Mining Ltd. : Ampella Teleconference Transcript - Metallurgy Test Results for Konkera

ASX / MEDIA ANNOUNCEMENT 1 February 2012 AMPELLA TELECONFERENCE TO INVESTORS ON METALLURGY TEST RESULTS AT BATIE WEST PROJECT

Ampella Mining Managing Director, Dr Paul Kitto participated in a teleconference on 31 January to discuss the positive results from the Metallurgy Test Work program. Please find attached the transcript of the call.

For further information, please contact: Evan Cranston - Executive Director - Corporate: [phone] Karen Oswald - Purple Communications: [phone]

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Conference Reference: 165141 Company: Ampella Mining Ltd Title: Ampella Metallurgical Testwork Announcement Date: 31st January 2012 Warrick Hazeldine:

Good morning everybody Warrick Hazeldine here and thank you for your interest in
Ampella today. Dr Kitto will make a statement following on from the ASX announcement yesterday about the metallurgical test results and there'll be an opportunity to ask some questions at the end. I'd now like to hand over to Paul.

Dr Paul Kitto:

Thanks Warrick and thank you to all you for joining in to our teleconference. Ampella as
most of you are aware was established to bring the considerable skills and experience of its board and key management team to bring on a suite of quality exploration assets in Burkina Faso.
We announced to the market yesterday positive results of our metallurgical testwork program for the 3.1 million ounce Konkera gold resource at Batie West in Burkina Faso. And we're pleased to confirm that excellent gold recoveries can be achieved at Konkera for all ore types using conventional metallurgical processes. Looking first at the oxide and transition ores results of the testwork on oxide and transition ores show that more than 30 percent of the gold is easily recoverable by conventional gravity methods with the remainder recoverable by conventional leaching at a modest grind size of 106 microns. Overall gold recoveries including gravity for oxide in this range from 94 to 98 percent. Overall gold recoveries including gravity for transition ores range from 88 to 95 percent.
Looking now at the sulphide ores, the sulphide ores at Kouglaga are mineral to gold extraction by conventional gravity and leaching methods at a grind size of 106 microns. Fifty percent of the gold is recoverable by conventional gravity methods and overall recoveries of up to 98 percent are achievable. Initial leach tests on Konkera North sulphide ores show that 80 percent of the gold is recoverable by leaching at a grind of 75 microns. The ore responds well to flotation with 92 percent of the gold reporting to a flotation concentrate comprising less than six percent of the feed mass. Ultra-fine grinding to 10 microns and subsequent cyanide leaching tests on the north concentrate showed that 92 percent of the gold reporting to the concentrate is recoverable. In addition leaching of the flotation tail showed that 78 percent of the gold reporting to the flotation tail is recoverable providing an overall recovery of 91 percent for the north sulphide ore. Initial leach tests on Konkera Main/East shows that 56 percent of the gold is recoverable by leaching at 75 microns. The ore responds well to flotation with 95 percent of the gold reporting to a flotation concentrate comprising less than five percent of the feed mass. UFG eight microns and subsequent cyanide leaching tests on the Main/East concentrate shows that 72 percent of the gold reporting to the concentrate is recoverable. In addition leeching of the flotation tail shows that 67 percent of the gold reporting to the flotation tail is recoverable providing an overall recovery of 71 percent for the Main/East sulphide ores.

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Treatment of the Konkera North mainly sulphide ore would require flotation and ultra- fine grinding to improve the CIL recoveries to an overall 84 percent. However an oxidative treatment process called Albion on Konkera North and Main/East sulphide ores could increase those recoveries from 84 to 95 percent. The overall recovery for the life of mine of between 84 for CIL and 95 for Albion will provide the basis for a profitable long life mining operation for the company even without the addition of new resources from the two new discoveries at Foumbiri and Doubema announced in late 2011 or from additional exploration success this year along the 110 kilometre long Batie West shear zone.
Ampella is continuing to fund its exploration activities with over 30 million spent on exploration activities last year and a similar spend expected to be announced for this year.
Finally, we have a strong cash position with the end of Q3 2011 we had approximately
$28 million in the kitty.
Thank you for your time today in sharing this exciting milestone in Ampella's growth. I think you'll all agree this is a significant milestone for the company and underlines our commitment to develop our suite of assets in Burkina Faso. I would now like to take any questions that you may have, thank you.

Michael - Credit Suisse:

I've got a number of questions. First of all can you talk about the distribution of the
resource in the various categories between the … because it's not clear in my mind, I can understand the recoveries that you've presented but the answers that that applies to in each case please?

Dr Paul Kitto:

The breakdown of the resource, the oxide and transition occupies almost 25 percent so a
quarter of the resource and then it's almost equally broken down between Konkera Main/East and Konkera North in terms of what we expect to go into the pit shelves. And then you'll remember that below Konkera North you've got significant underground potential which we'll be looking at in 2012.

Michael - Credit Suisse:

Thank you. Following on from that again it's not entirely clear to me where you will stop
with the process, have you decided whether you go onto Albion and can you talk about the capital for the various alternatives, does adding Albion cost a significant amount of additional capital? Can you talk about broadly where the capital sits and what the operating costs might be with ultra-fine grinding and then the Albion process please?

Dr Paul Kitto:

If we look at what we expect to happen, right now we've got 84 percent essentially for
CIL, 95 percent for Albion. What it's telling us about the ore itself is that the gold is not locked up it's just fine grain gold. So we expect that we can tweak any CIL process and increase our recoveries. So 84 is the minimum and we can get 95 if we went to the Albion process. We don't know at this point in time whether we'll go to the Albion, we don't think we will. But having said that over the next 12 months and as part of the BFS study we'll be looking at what we can do to tweak the process to increase those recoveries.

Michael - Credit Suisse:

If you go just to the 84 percent using ultra-fine grinding what is the indicative capex for
that grinding capacity that you'd need, so what does the total capex for the project look

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like? And with that recovery and the extra energy intensity what do the operating costs look like now please?

Dr Paul Kitto:

Let's look at what sort of size we're thinking of building in the first place. So our base
case is looking at least a three million ton per annum plant and obviously if it produces above the capacity so up to three and a half to four million tons then the cost for that would be in the vicinity of we believe around $160 to $180 million. And then we need to add on top of that another 10 percent to bring in the UFG etc. So we're looking at a total cost of something close to $200 million.

Michael - Credit Suisse:

And then the cash cost that flows from that with the energy intensive, the ultra-fine
grinding, please?

Dr Paul Kitto:

The ultra-fine grinding is probably going to add a 10 to 15 percent increase on top of the
operation cost. For example the oxide will not change so let's say it was $10, for the sulphide let's say that was around 14 so you'd be able to add another $2 to that to take it to $16. But right now we don't have those costs I'm just giving you numbers out of the air, those numbers will come very shortly and they'll be released in the BFS.

Michael - Credit Suisse:

Thanks very much.

Stuart McIntyre - RBC:

I think Michael covered off the key points there on capital and operating costs.
Obviously the stock was down 13 percent yesterday and I guess I'd just like to hear your thoughts on I guess feedback from clients and theories as to why the stock got hit as hard as it did yesterday.

Dr Paul Kitto:

One of the points that seems to have come out from the people we've spoken to currently
is that people didn't understand that the 84 percent recoveries was our base case and that's knocked us down. One of the things we've said from day one is that the ores at Konkera are essentially identical to Semafo's Mana deposit 300 kms up the road and we've always said that manor has got a recovery mid 80s, 84 - 85 percent and that ours would be similar to it at this point in time unless we can come up with something else. And the something else we've come up with obviously is the Albion process.
If we look at Mana itself the ore body there is identical in all respects so the mineralogy is the same, the host rock is the same, the alteration is the same, the gold particle size is the same as well. And those guys are producing gold at around about $520, $550 an ounce and they're producing about 180,000 ounces per annum. Now they're doing that by blending two ores from two deposits; one is a higher-grade ore and one is a lower-grade ore. One has got a lot of oxide and transition and one has got a lot of sulphide. So Semafo's Mana operation is comparable in all aspects with the Konkera resource.
The difference between them and us is that their two deposits are about 14 kilometres apart and ours is coming from a resource which is five kilometres long.
So if we use Semafo as our base case scenario we're quite happy with it. We've tried to explain that to the market from day one but I don't think the market has actually understood that. So I think there was a little bit of a shock when we said our base case recoveries were in the mid 80s.

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Stuart McIntyre - RBC:

Just to follow on from Michael's question on the cash cost. You say it's going to add two
bucks a ton to the processing of the sulphide ores for this ultra-fine grinding, what does that actually equate to as a total cash cost number to the nearest 100 bucks an ounce, what are you thinking?

Dr Paul Kitto:

The answer to that Stuart is we don't know just yet, we're just running through the BFS
and putting in all those costs right now so we're currently generating all of those cash costs and mining costs etc so I don't have an answer for you. But the BFS, we're expected to have the BFS coming out at the end of Q1 of this year. It's going to be delayed by about a month so we're expecting it in Q2 now. The reason for the delay has been the labs have delayed our metallurgy and so therefore that's delaying what's going into the BFS for the final result.

Stuart McIntyre - RBC:

Thanks guys.

Alex Passmores - Patersons:

It seems to me you can put the oxide and transitional to one side, then you've got
Kouglaga which is a reasonable sulphide or it's easier to process and then you've got Konkera North and Main/East. What's the breakdown in tonnages that you're thinking currently for Kouglaga versus Konkera Main/East and North.

Dr Paul Kitto:

I actually don't have the numbers here in front of me but I'll answer your question in a
roundabout answer and see if it makes some sense. As you say in the oxide and transition no problem whatsoever. The Kouglaga sulphide also no problem whatsoever, 98 percent recoveries in normal CIL. Konkera North's 91 percent recoveries that's also great. The issue is Konkera Main and East with the 71 percent recoveries.
Now as you know we made two new discoveries just up the road at Doubema and Foumbiri. The grades on those look very very nice particularly at Doubema where we've got exceptional grades there. And in my mind right now we expect to displace what's coming out of Konkera Main and East to the back-end of any processing. So as you're making discoveries you'd be replacing the Konkera Main and East ores with the new discoveries. So in the life of mine you might blend the Konkera Main and East with some high-grade material such as we're likely to find at Doubema or even some of the higher-grade material we've got at Konkera North. So a roundabout answer to your question is Konkera Main and East I think you've just put it at the back-end of your operation or blend it with the higher-grade material as it comes on.

Alex Passmores - Patersons:

That sounds similar to what is going on at Mana with the blending strategy.

Dr Paul Kitto:

Yep that's right.

Alex Passmores - Patersons:

So what are they grinding to, what are Semafo grinding to at Mana?

Dr Paul Kitto:

I think Semafo has a very simple circuit. They've got a ball mill SAG mill and straight
into the leach tanks so they're not doing fine grind as far as I'm aware. The ball mill I
think is grinding down to 40 microns.

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Alex Passmores - Patersons:

Okay thanks a lot.

Reg Spencer, Chemical BGS:

Being so far back in the queue of questions I think most of mine have been largely
answered now courtesy of the other gents on the call. I guess it really comes down to the mine schedule now largely doesn't it Paul, if you're going to get good recoveries from those oxides and transition ore naturally you look to process them in the early years as you stipulated there. What is the depth of oxidation at Konkera, I know some of the guys asked on possible tonnages and you didn't have the answer but how deep does the oxide and transition ore go at Konkera?

Dr Paul Kitto:

The oxide is reasonably shallow, we're talking in the top 15 metres. But the transition is
quite deep, the transition is going down around 50 metres and then we hit fresh rock after that. And then up at Kouglaga the oxide and transition is deep it's essentially oxide and transition with very little fresh up there.
In respect to your question really what it means is that if we're processing the oxide and transition early in the life of mine the payback is extremely quick so just over the first year we expect to pay off the whole operation.

Reg Spencer, Chemical BGS:

Does that mean that when you go to build your plant and undertake your capital cost
estimates and your design etc will you just be starting out on a straight CIL and then add the float and the ultra-fine grind later on and the mine plan is an expansionary process or are you going to build it all in one go and have the ability to blend if required from day one?

Dr Paul Kitto:

That's a good question. We're looking at those alternatives right now but we'll probably
go for the oxide and transition up front and then add on pieces to the circuit as we go. So what you might end up doing is add the UFG, I mean you'd probably put the UFG in to start with but you wouldn't be using it it would be there ready to go. And then further down the track, five or six or seven years further down the track, you might then put on the Albion circuit. So you might actually add an oxygen circuit if you like.

Reg Spencer, Chemical BGS:

I guess it's still too early days to say one way or another what you're going to do given
that you're not too far into the process just yet. But look I guess if you're comparing yourselves to Mana, which I know you've been speaking to Warrick previously, the numbers that we hear have something similar where you were blending oxides. Does this mean now for your exploration program you will be looking at targeting prospects where there might be greater volumes of oxide mineralisation?

Dr Paul Kitto:

Yes that's right. What we're doing right now we've got a big dual program on those two
new discoveries so that's at Doubema and Foumbiri where the style of mineralisation there is a quartz vein hosted style mineralisation but it's quite different to what we see at Konkera Main/East and Konkera North. So it's more like the Kouglaga style where we're getting those 98 percent recoveries. So we're doing big drill programs there now to try and get a resource out of both of those that we can then feed straight into the Bankable Feasibility Study because obviously we'd like to be treating those ores rather than the Konkera Main/East where the recoveries are lower.

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Reg Spencer, Chemical BGS:

How far away from the proposed plant site are Doubema and Foumbiri?

Dr Paul Kitto:

Doubema is 14 kms north of Konkera and that's the higher-grade material that we'd love
to be blending as quickly as possible. And then Foumbiri is about another 10 kms north of that. So they're not huge distances they're all truckable type distances.

Reg Spencer, Chemical BGS:

That's good, thanks very much Paul much appreciated.

Dan - Patersons:

Actually a bit of the feedback from a few of the funds, is it possible to grind for such a
fine size?

Dr Paul Kitto:

The grind size, you actually would be dabbling with a process called the IsaMill. Now
the IsaMill has been around for a hell of a long time, it was developed at Mt Isa; they grind now to six microns regularly, that's just what they do. So the technique has been around for a long time, it's proven, everyone knows about it and it does a good job. We'll probably be grinding, in our report we had 10 microns for Konkera North and eight microns for Main and East. They were the minimum grind sizes. We actually have had some interesting results come back. We've done some laser sizing on the particle grind size and we're actually finding that those grind sizes are up around about 14 microns. So when we say eight microns that's what the test told it was done at but when we've done the laser sizing it's much higher than that. So we've got no problem with using an IsaMill to grind down to 10 microns, it's a common technique.

Dan - Patersons:

And the power costs on an IsaMill over a ball mill, about the same?

Dr Paul Kitto:

The power costs for a ball mill grinding down to about 40 microns is equivalent to an
IsaMill grinding down to about eight microns, so the power costs are comparable. And you've got to remember that you're only grinding five percent of the total ore so we're just grinding the concentrate which is five percent of the total ore. So we're not trying to grind 100 percent of the ore down to eight microns or 10 microns or whatever it's only five percent of the ore. So comparable power costs for that grind.

Dan - Patersons:

Thank you.

Steven - Merrill Lynch Bank of America:

Just a quick one on the comparisons to Mana, correct me if I'm wrong but isn't their grade
a bit higher than yours like three to four grams and their strip ratio is lower. So I suppose my question is given the similarities in the ore and the fact that you guys have spoken about costs of core $500 to $600 an ounce when we bring together the difference in grades and strip ratios how achievable are those cash cost numbers that you've suggested in the past?

Dr Paul Kitto:

If we look at Mana first of all with their grade they've got two deposits, one is a low-
grade deposit like one and a half grams and the other one is a higher-grade deposit, I
think it's almost three grams. So they're blending the two [overtalking] *0:24:01.7

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Dr Paul Kitto:

Sorry I didn't hear what you said.

Steven - Merrill Lynch:

I said it's a bit lower than I had thought it was, sorry about that. Yeah go on.

Dr Paul Kitto:

What we have at Konkera as you are aware, Konkera Main East and Konkera North the
grades are sitting around that 1.6 on average right through there but it's got higher grade components within that particularly at Konkera North. But at Kouglaga the grade is higher it's up around two grams or two plus grams so we've got higher grade materials that we can blend in there so we can do that similar blending.
Now in terms of the cash cost we don't have our cash costs yet. We're looking around West Africa what everyone else's cash costs are. Certainly Semafo's Mana is one of the lowest cash cost producers in West Africa, their sub 600 numbers seem extremely low to me I don't know how they achieve that. Certainly we'd expect our cash cost to be above that in reality.

Steven - Merrill Lynch:

Excellent, thanks for that.

Michael - Credit Suisse:

I'd just like you to help me understand the broad economics of Albion, if you do choose
to use that process what that might add to capital later on when you implement it, if you implement it, and what it might add to operating costs please?

Dr Paul Kitto:

The capital for an Albion is we think somewhere around $30 million to put an Albion
circuit in. But it really depends on what you actually put in. Of course the Albion circuit does involve the ultra-fine grind but that's already going to be there so that drops the cost down. It seems to me what Albion is is just an oxygen circuit put in there with a bit of lime added as well. So the process itself is just oxygenation of the sulphide rich concentrate to break the sulphide down and release the gold. And the way it does that is it's a low pressure so it's just an atmospheric pressure and neutral acid conditions so it's a really simple process. All you're doing is essentially bubbling fine oxygen through the concentrate and adding a bit of lime. Now the amount of lime we need to add to ours will also be quite low because we've got a very carbonate rich ore so the limestone addition will be minimal.
So in answer to your question the capital cost if it was just the straight Albion process and we didn't have the UFG which we're going to put on it anyway it would be up to $30 million, so it will be less than that. And it will probably add 10 percent to the additional operating costs. But until we actually go through the whole process now as part of the BFS stage to see what's optional for us then I can't really answer your question in greater detail.

Michael - Credit Suisse:

That's fine, thank you very much.

Trevor - PCF Securities:

Just a clarification on the lime statement, is that lime as in limestone calcium carbonate or
are you talking quicklime?

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Dr Paul Kitto:

No that's limestone calcium carbonate. As I just said in answer to the last question our
ores have got a lot of carbonate in them anyway so the amount of limestone that we need to add will be minimal.

Trevor - PCF Securities:

Thanks for that.

Operator:

Dr Kitto and Warrick there are no further questions in the queue at this time.

Dr Paul Kitto:

Thank you very much.

Warrick Hazeldine:

Thanks very much and we'll see you all Indaba next week, Paul Kitto will be in Indaba if
anyone wants one on one as a follow up to those calls. So happy to leave it there moderator. Thank you everyone for your time.
END OF TRANSCRIPT

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