Unity Mining : Questions & Answers with Andrew McIlwain

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Questions & Answers with Andrew McIlwain

24 June 2015

Andrew McIlwain - Managing Director & CEO Unity Mining Limited Questions & Answers

 Question: Unity announced that forecast cash for 30 June 2015 will be approximately $28 million. This is

significantly above previous forecasts. How has this been achieved?

 We have executed the plan we announced last year - and also a few things fell in our favour. Firstly, Henty gold production has been above budget and forecast for the last 4 quarters, with the grade upwards of 8 grams per tonne. The Henty Team have also been able to manage the ground conditions that had been a problem for us in the past and for most of the year the Australian dollar gold price has been over $1,500 per ounce. The mine will produce over

50,000 ounces this financial year. As we've seen in the past, Henty this year has produced some spectacular ore
grades which we refer to as high and super high grade ores. These "super ores" are blended with other ores which
have resulted in high gold production at lower costs.

 Question: Is this the only thing that has generated Unity's current cash balance?

 As well as the mine result, part of our plan was to implement an unwavering focus on cost reduction. When the gold price dipped in 2014 and margins diminished, we introduced Unity's own austerity plan. We eliminated roles, renegotiated supply contracts, reduced headcount across the organisation, we eliminated any and all unnecessary overhead costs from the business and instigated management and board pay cuts. These moves in conjunction with the rising gold price resulted in the increased cash levels in the Company.

 Question: What are you going to do with the cash?

 Our first priority is to ensure that we can pay our employee obligations that crystallise as we wind down Henty's production and then make sure we use the majority of the cash to deliver value for our shareholders. As Henty transitions to care and maintenance later this year we will satisfy all of our employee obligations as we go through this difficult time.

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Questions & Answers

Secondly, we will look to return some capital to shareholders to the value of around $6 million, which is around half a cent per share. Exactly how we do that is being worked out now and we expect to announce a shareholder meeting soon to seek their approval. We simply feel that our shareholders need to see some return other than a rising share price and we are in the fortunate position to be able to deliver this at this point in time.

 Question: What will happen at Henty over the rest of the year?

 Henty will still produce around another 10,000 ounces before the mining and processing operations enter a period of "care and maintenance" in November 2015. Our recently announced agreement with PYBAR has seen an extensive underground drilling program commence a couple of weeks ago with the first priority being to define reserves for 2 years of production and a potential re-start of the mine. With positive outcomes there is the very real chance that Henty will have another life. For investors there will be plenty of drill results coming from this drill program over the next few months.

 Question: Many see Dargues as a tough asset because it hasn't been developed yet. Is Dargues a development project that's worth the effort and the capital, and why don't you just sell it, take the cash and go somewhere easier to develop new mines?

 Dargues is an extremely good asset with an initial reserve of 1.4 million tonnes at 5.2 grams per tonne containing around

240,000 ounces. It will be a 50,000 ounce per annum producer for 5 years at an estimated cash operating cost of $800 per ounce over its life. This asset is very valuable. Unity believes that the Dargues Gold Mine remains one of the more attractive Australian gold development opportunities. Over the next few months we will finalise plans for the development. We are looking at opportunities to pull the capital requirements down significantly from previous estimates and are considering a wide range of options to realise value from the asset. It is about finding the right counterparties including financiers and perhaps other resource companies who can assist on a variety of approaches.

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Questions & Answers

Over the last year, and certainly reflective of an improved $AUD gold price, we have fielded a variety of interest in Dargues. Our view is very simple. This asset should be developed for the benefit of the local and state communities of New South Wales and the benefit of the Unity shareholders. We are pursuing a modification to the existing approvals through the NSW regulators that will deliver an improved project risk profile and better economics and this will enable Unity to get on with this important development.

 Question: Why are you farming out 50% of Henty if you have so much confidence in its future?

 The Farm-In with PYBAR puts us in a position to utilise our capital for other initiatives while still ensuring value is pursued at Henty. PYBAR has now commenced the exploration drilling of a number of targets that include a mix of early stage conceptual targets - as well as those that have potential to quickly grow the Henty mineral resource and reserve base with the objective of bringing the Henty asset back into production.

Henty has been a significant contributor for us and we have the strong belief that it has the potential to generate further value in the foreseeable future. As well as the existing production and exploration activities, we see the existing infrastructure at Henty as having clear strategic value to the Group. The Henty plant is one of the few existing fully permitted and production ready facilities in the region which has other substantial exploration and mining assets.

 Question: What is Unity's policy on non-core assets?

 Bendigo remains a non-core asset and we are engaging with a number of parties interested in acquiring the project.

Our investment in Goldstone Resources also remains non-core.

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Questions & Answers

 Question: What further cost reductions is Unity making?

 We are pursuing further cost reductions in the form of reduced office space and rental costs, as well as ensuring Henty's operating costs are further reduced where possible as production reduces coming into November of this year. Services costs in the industry and also contracting and we are pursuing every one of these opportunities as well.

We have been very focused on cost management and cost control over the last couple of years, and will continue to
be as we move forward.

 Question: Finally, you have been buying some additional Unity stock on market in recent days?

 It is not often that an MD has clear air to buy shares and the corporate update that we released to the ASX on 12 June provided an opportunity. This window will close soon as the Henty drill results start coming through and our Dargues plans are progressed.

I bought them because I am confident in the future of the company and see value at the current price which is still only around cash backing.

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Thank you Unity Mining Limited

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