140304 moorlands resource upgrade final - asx · this schedule has a planned 1 ... * a...

ASX Announcement

92% Resource Increase in Cuesta’s Flagship Moorlands Thermal Coal Project to 281Mt

Measured JORC Resource of 118.9Mt represents an increase of 103.5Mt

Particularly encouraging is consistent coal quality throughout the Moorlands deposit

Proposed South Pit average stripping ratio of 3.2:1 maintained and majority of resource now in Measured and Indicated Category

Additional coal resources identified in Proposed South Pit enhancing mine design layout

Average 23m cumulative coal thickness of primary seams throughout the deposit

Maiden Reserve assessment underway, geological model to be used for Definitive Feasibility Study

4th March 2014: Cuesta Coal Limited (ASX: CQC) (“Cuesta” or “the Company”) is pleased to announce a substantial 92% resource increase at its flagship Moorlands Project with the total JORC resource increasing to 281Mt. Significantly, the Measured JORC Resource category has increased by 103.5Mt to 118.9Mt, and further supports the initial open cut mine plan at the proposed Moorlands South Pit.

The Moorlands Project is located 30kms NW of the township of Clermont in the Western Bowen Basin of Queensland and to the immediate west of the Blair Athol and Clermont coal mines.

Resource Upgrade Following completion of the 2013 exploration programme at Moorlands announced on 22 January 2014, the geological data obtained has been compiled and loaded into the Company’s robust 3D geological model to ascertain the upgraded resource estimate (see Table 1 below). The substantial increase in Measured and Indicated Resources is a marked improvement in the geological confidence of the Moorlands Project. Cuesta anticipates improvement in the proposed south pit mine design due to westerly extensions of the coal resource, resulting in increased coal quantities and a widening of the proposed mining area (Figures 1 – 6). Table 1: Moorlands Project Resource Classification in Accordance with JORC Code (2012)

Moorlands Project (EPC 775, 776, 1738) Coal Resource Summary (Mtonnes)

Deposit Measured Indicated Inferred Total

Moorlands 118.5 52.7 109.9 281.1

Coal Quality

Particularly encouraging is the consistent nature of coal quality throughout the deposit. Raw Coal Quality was in line with expectations and it is expected the final product specification will remain largely unchanged maintaining a yield of 89% while producing a 10.4% ash product with an acceptable energy content of 6,077 k/cal adb (Table 2). It is likely the average sulphur levels will decrease as evidenced by a reduction in average raw coal sulphur levels.

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Table 2: Moorlands Washed Coal Quality

YIELD (%) INHERENT MOISTURE % (ad)

ASH % (ad) VOLATILE

MATTER % (ad)

FIXED CARBON % (ad)

CALORIFIC VALUE MJ/kg

(ad)

CALORIFIC VALUE

Kcal/kg (ad)

TOTAL SULPHUR %

(ad) HGI

89.9 9.5 10.4 30.7 49.4 25.44 6077 0.72 59

Reserve Assessment, Definitive Feasibility Study and Infrastructure arrangement A maiden reserve assessment is underway by Cuesta’s consultants Xenith Consulting and it is anticipated to be completed in 4 to 6 weeks. The geological data and the upcoming reserve calculation are key components to the Moorlands Definitive Feasibility Study (DFS). Activities in relation to the DFS have focussed on detailing the scope, key deliverables and critical path activities. Concurrently with the DFS, Cuesta is continuing to make progress to secure secondary market port and rail capacity for the Moorlands Project. Cuesta has been negotiating with a third party user for a number of months now and is targeting to finalise these negotiations and execute port and rail access agreements in H1 2014. Cuesta’s Managing Director, Mr Matthew Crawford commented: “This is a significant development for Cuesta and is further evidence that Moorlands is developing into a substantial thermal coal project with significant value. Within the space of 12 months, Cuesta, has taken Moorlands from a circa 54Mt deposit to completing the bolt on acquisition of EPCs 775 and 776, completing cost effective and safe exploration activities to enable the announcement of today’s resource increase.” “Our immediate focus is to assess the reserve estimate which we expect to report in the next four to six weeks as a major input item into the DFS.” Mr Crawford added that most encouraging for the Moorlands Project is the quantity of measured and indicated resources, and maintaining the low 3.2:1 stripping ratios in the Proposed South Pit area. Furthermore, the delineation of additional coal on the western side of the Proposed South Pit should enable significant optimisation of the mine plan during the DFS. “The Board of Cuesta is very happy with the progress made with the development of Moorlands and looks forward to updating shareholders in the near future regarding the progress of the DFS, securing port and rail infrastructure and the assessment of Maiden Reserves at Moorlands.” Moorlands Project Overview

The Moorlands Project is a significant new open‐cut export thermal coal mine development, located in a historically low‐cost mining region (Figure 2). The project resource has a coal bearing strike length of approximately 12km. Shallow coal is present in thick seams amenable to simple truck and shovel mining. The Moorlands Project has a JORC Resource of 281.1Mt; including 118Mt in the Measured category.

A margin ranking exercise completed as part of the scoping study indicates that strip ratios were lowest, between 2 and 4 bcm/tonne, in the southernmost 4km of the project containing approximately 60Mt of insitu coal (“Proposed South Pit”). The larger northern area of the deposit contains strip ratios of between 4 and 8 bcm/tonne. Due to the favourable strip ratio, the South Pit was chosen as the focus for the mine plan to run a target schedule based on run‐of‐mine (“ROM”) coal using trucks and excavators. This schedule has a planned 1.9Mtpa of ROM coal being mined for 30 years with an average insitu strip ratio of 3.2:1.

Product coal is planned to be trucked by an internal haul road (11km) to a new train load out (“TLO”) facility, rail loop and spur, for transport to Dalrymple Bay Coal Terminal (“DBCT”) for export.

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While the project economics are robust, the Company believes there is scope to reduce costs by using existing infrastructure located in close proximity to the Moorlands Project. Discussions with the owners of this infrastructure are ongoing.

About Cuesta Coal Cuesta Coal Limited (“Cuesta”) is an ASX listed coal exploration company with a pipeline of coal projects ranging from development to greenfield exploration. The Company is strongly supported by its major cornerstone investor and is targeting coal production from its priority Moorlands Project in a 3 year timeframe. Cuesta has a diverse portfolio of thermal and coking coal exploration prospects within the Bowen, Surat and Galilee basins, the Company’s core projects are well situated geographically. For further information: Matthew Crawford Keith McKnight Managing Director Chief Operating Officer Cuesta Coal Limited Cuesta Coal Limited+612 9284 5900 +617 3327 8100

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Table 3: Moorlands Project (EPC 1738, 775 and 776) – Coal Resources – Resource Classification in Accordance with JORC Code (2012)

Resource Category

Value Moorlands & Bendemeer Basins

Total Tonnes

(Mt)

B4 B5 B7 B8 B9 B11 B12 B13

Measured

Volume (Mm3) 13.4 5.9 4.5 40.4 16.5 ‐ ‐ ‐

Thickness (m) 6.98 2.44 1.45 9.54 3.50 ‐ ‐ ‐

Relative Density

(t/m3) 1.50 1.48 1.54 1.47 1.41 ‐ ‐ ‐

Sub‐total Tonnes

(Mt) 20.1 8.7 7.1 59.3 23.3 ‐ ‐ ‐ 118.5

Indicated

Volume (Mm3) 12.6 3.7 3.3 13.2 3.4 ‐ ‐ ‐

Thickness (m) 6.77 2.52 1.52 8.85 3.19 ‐ ‐ ‐

Relative Density

(t/m3) 1.47 1.46 1.50 1.47 1.40 ‐ ‐ ‐

Sub‐total Tonnes

(Mt) 18.4 5.4 4.8 19.4 4.7 ‐ ‐ ‐ 52.7

Inferred

Volume (Mm3) 15.8 3.8 1.1 17.1 6.2 9.9 5.2 17.7

Thickness (m) 6.83 1.54 1.38 9.45 2.95 2.74 0.66 2.27

Relative Density

(t/m3) 1.48 1.39 1.62 1.47 1.41 1.44 1.44 1.44

Sub‐total Tonnes

(Mt) 23.3 4.7 1.7 25.2 8.8 13.2 7.5 25.5 109.9

Grand Total Tonnes (Mt) 61.8 18.8 13.6 103.9 36.8 13.2 7.5 25.5 281.1

Notes: * Volumes and tonnages have been rounded. * Coal tonnes stated are on an in situ basis using estimated default in situ moisture of 16% and the Preston Sanders

equation. * The project area is within EPC 1738, EPC 775 & EPC 776. * The target mineralisation is the Late Permian coal measures within the Moorlands & Bendemeer Basins. * The coal is found in ten seam groups – Bendemeer Seams (B2, B3, B4, B5, B6, B7, B8, B9, B10, B11, B12, B13).

Resources have been estimated only for the B4, B5, B7, B8, B9, B11, B12 & B13 seam groups. * A minimum seam thickness of 0.3 metres and maximum raw ash cut‐off of 45% (adb) has been used. * A depth cut off of 250 metres has been used to limit resources. * A stratigraphic model generated in Minescape has been used. Gridded seam surfaces, base of tertiary and

weathering surfaces have been created on a 25 m by 25 m grid cell size. All seams are clipped to the base of weathering.

* As of the 27th February 2014, the Moorlands Project is estimated to contain a total Resource of 281.1 Mt, being

composed of 118.5 Mt of Measured, 52.7 Mt Indicated and 109.9 Mt Inferred resource. * The coal present is a sub‐bituminous coal with low‐moderate ash (adb), moderate specific energy (adb) and low to

moderate sulphur (adb). * Resource classification was developed from the confidence levels of key criteria including drilling methods,

geological understanding and interpretation, sampling, data density and location, grade estimation and quality. This classification was completed in accordance with the guidelines as set out in the JORC Code (2012).

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Table 4: Moorlands Project Resources by Depth of Cover (Mtonnes) (JORC 2012)

Seam Resource Categories 0‐50

metres

50‐100

metres

100‐150

metres

150‐200

metres

200‐250

metres Total

B4 Measured + Indicated 0.9 11.8 17.8 8.0 ‐ 38.5

Inferred ‐ 2.7 7.7 8.0 4.9 23.3

B5 Measured + Indicated 1.0 4.7 5.7 2.2 0.5 14.1

Inferred ‐ 0.3 1.4 1.7 1.3 4.7


Inferred ‐ 0.1 0.2 0.5 0.9 1.7


Inferred ‐ 0.6 4.5 9.8 10.3 25.2


Inferred ‐ 0.1 1.3 3.0 4.4 8.8

B11 Measured + Indicated ‐ ‐ ‐ ‐ ‐ ‐

Inferred 0.6 2.4 2.1 3.4 4.4 13.2


Inferred ‐ 1.0 4.4 1.4 0.7 7.5


Inferred ‐ 1.4 12.6 9.1 2.4 25.5

Total Measured + Indicated 6.9 46.7 53.8 43.7 20.1 171.2

Inferred 0.6 8.6 34.2 36.9 29.6 109.9

Note: Values have been rounded and may not total

Table 5: Moorlands Project – Average Raw Quality by Seam from Core Holes

Seam

Name

Moisture

%

(ad)

Ash

%

(ad)

Volatile

Matter

%

(ad)

Fixed

Carbon

%

(ad)

Specific

Energy

MJ/kg

(ad)

Specific

Energy

Kcal/kg

(ad)

Total

Sulphur

%

(ad)

Relative

Density

gm/cc

(ad)

B4 10.4 20.3 29.2 40.1 21.76 5196 0.64 1.52

B5 10.4 15.6 31.8 42.2 23.71 5662 1.20 1.46

B7 9.7 24.3 26.3 39.7 20.66 4933 0.53 1.56

B8 8.5 19.6 27.2 44.7 22.63 5405 0.49 1.52

B9 9.6 16.4 31.1 42.8 23.37 5580 0.68 1.47

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Figure 1: Map showing drill holes completed during Moorlands 2013 Exploration Programme

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Figure 2: Map showing Moorlands Project in proximity to the operation Clermont and historic Blair Athol mines and associated rail infrastructure

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Figure 3: Map showing Moorlands Project and location of the B4 Seam Resource

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Figure 4: Map showing Moorlands Project and location of the B8 Seam Resource

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Figure 5: Map showing Moorlands Project and location of the B9 Seam Resource For

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Figure 6: Moorlands Project – Long Section showing Moorlands Coal Seams

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Compliance Statement

The information in this report/statement relating to the resource of EPCs 1738, 775 & 776 is based on information reviewed by Lyndon Pass, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Pass is a full time employee of the consultancy Encompass Mining Pty Ltd. Lyndon Pass has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a ‘Competent Person’ as defined in the 2012 edition of the “Australasian Code for the Reporting of Mineral Resources and Ore Reserves”. Lyndon Pass consents to the inclusion in this report of matters based on this information in the form and context in which it appears. Sections of information contained in this report that relate to Exploration Results for EPCs 1738, 775 & 776 were compiled or supervised by Blair Richardson, who is a Member of the Australasian Institute of Mining and Metallurgy and is General Manager of Exploration and Development for Cuesta Coal Limited. Mr Richardson has sufficient experience which is relevant to the style of mineral deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Mr Richardson consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

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Appendix 1 - JORC Code, 2012 Edition – Table 1

This appendix details sections 1, 2 and 3 of the JORC Code 2012 Edition Table 1. Section 4 ‘Estimation and Reporting of Ore Reserves’ and Section 5 ‘Estimation and

Reporting of Diamonds and Other Gemstones’ have been excluded as they are not applicable to this deposit and estimation.

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

Criteria JORC Code explanation Commentary

Sampling techniques

Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.

Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.

Aspects of the determination of mineralisation that are Material to the Public Report. In cases where ‘industry standard’ work has been done this would be relatively simple

(eg ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information.

Coal testing undertaken by Cuesta Coal was on 4C Core (100mm diameter).Core testing by Hannigan & Associates was undertaken on 4C Core (100mm diameter). Some limited historical testing by CRA Exploration Pty Ltd was undertaken on washed chip samples covering 1 metre intervals.

All seams intersected in core holes greater than 20cm in thickness were sampled. Stone bands greater than 20cm thickness were sampled separately to the coal or were not sampled at all if the interval represented a split in the seam.

All core sample depths were recorded according to depths maintained by the rig geologist. These depths were determined by a combination of driller depths and the geologists own recorded depths according to core loss and gain.

All sampled core was double bagged and labelled on site. Samples were given unique sample numbers and documented in a sample summary sheet.

Coal quality core samples were prepared and analysed using Australian Standard testing procedures (AS4264.1).

Coal quality analysis was undertaken by Preplab Testing Services Pty Ltd, Bureau Veritas Pty Ltd and CCI Holdings Ltd.

Drilling techniques

Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).

All quality holes were partially cored using a 4C core barrel (100 mm diameter). All structural holes were fully chipped open holes using blade, hammer or PCD bits. A complete list of drill holes and drilling methods is contained in Appendix 2.

Drill sample recovery

Method of recording and assessing core and chip sample recoveries and results assessed.

Measures taken to maximise sample recovery and ensure representative nature of the samples.

Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

Each core hole was reviewed for core recovery based on measured recovered thicknesses and geophysical log thicknesses. The majority of holes contained a recovery of greater than 95%.

Cored holes with seam recoveries of 90 - 95% were still used as points of observation (with less weighting) providing the geophysics suggested it was reasonable to do so.

Cored seams with recoveries of less than 90% were not used a coal quality points of observation.

Logging Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.

Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc)

All core holes were geologically logged, marked up and photographed before sampling. All geological and geotechnical observations were documented.

All open holes were geologically logged and photographed. Historical holes drilled by CRA Pty Ltd were geologically logged but not photographed.

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photography. The total length and percentage of the relevant intersections logged.

The majority of holes were geophysical logged with at least the following tools; caliper, density gamma, temperature and verticality. A few of the historical holes (prior to 1980) were not logged along with a number of recent holes that had operational difficulties. A complete list of the geophysical tools run in each hole can be found in Appendix 2.

The geophysical logging company (Geolog Pty Ltd) maintained and correlated all tools as per their internal calibration procedures.

Sub-sampling techniques and sample preparation

If core, whether cut or sawn and whether quarter, half or all core taken. If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or

dry. For all sample types, the nature, quality and appropriateness of the sample preparation

technique. Quality control procedures adopted for all sub-sampling stages to maximise

representivity of samples. Measures taken to ensure that the sampling is representative of the in situ material

collected, including for instance results for field duplicate/second-half sampling. Whether sample sizes are appropriate to the grain size of the material being sampled.

All core samples were taken as whole core samples (not halfed). Core samples were sampled dry, double bagged on site and transported to the

laboratory for testing. All the laboratories (Preplab Testing Services Pty Ltd, Bureau Veritas Pty Ltd and CCI

Holdings Ltd) used for coal quality analysis comply with Australian Standards for sample preparation and sub-sampling AS4264.1).

All core samples were crushed to a top size of 11.2 mm before analysis, which is common industry practice (AS4264.1) for 4 inch core (100mm diameter).

No duplicate or second half samples were taken.

Quality of assay data and laboratory tests

The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.

For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.

Nature of quality control procedures adopted (eg standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established.

All laboratories Preplab Testing Services Pty Ltd, Bureau Veritas Pty Ltd and CCI Holdings Ltd) used for the coal quality analysis comply with Australian Standards for all coal quality tests and are certified by the National Association of Testing Authorities, Australia (NATA).

The geophysical logging company (Geolog Pty Ltd) calibrated all geophysical tools using their standard internal calibration procedures.

Verification of sampling and assaying

The verification of significant intersections by either independent or alternative company personnel.

The use of twinned holes. Documentation of primary data, data entry procedures, data verification, data storage

(physical and electronic) protocols. Discuss any adjustment to assay data.

The coal quality results were verified in the coal quality database using minimum and maximum limits, standard quality tests and chart analysis. Anomalous values were reviewed and queried to the laboratory and either corrected or excluded from quality results.

Coal quality verification is also undertaken by the laboratory prior to providing the final results – standard industry checks are performed on the results to ensure they comply with known correlations and minimum and maximum values.

Coal quality data is supplied from the laboratory as a PDF and an Microsoft Excel file. The Microsoft Excel file is loaded directly into Minescape’s GDB database which undertakes a set of validation checks (minimum and maximum values, proximate and ultimate analysis total checks) prior to allowing the data to be loaded.

Cuesta Coal have also reviewed and verified coal quality results internally using their own checking procedures.

No twinned holes have been used to date for the purpose of coal quality verification.

Location of data points

Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.

Professional survey was undertaken on all drill holes included in the geological model and resource estimate by Cottrell Cameron & Steen (prior to July 2013) and by Wilsons Survey Group (since July 2013).

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Specification of the grid system used. Quality and adequacy of topographic control.

The grid datum used is GDA 94 and projection MGA 94 Zone 55. Two topographic data sets have been used for the geological model;

i) The primary LIDAR data set is sourced from Cottrell Cameron & Steen and covers the main resource area. The data set is 5m, 1m 0.5m and 0.25m detail.

ii) The second data source is from SRTM (Shuttle Radar Topography Mission) survey. The DEM data is sampled at 3 arc-seconds, which is 1/1200th of a degree of latitude and longitude, or about 90 metres (295 feet). The SRTM data is only used around the fringe of the project area to ensure the model area is completely covered by topography DEM data.

Data spacing and distribution

Data spacing for reporting of Exploration Results. Whether the data spacing and distribution is sufficient to establish the degree of

geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.

Whether sample compositing has been applied.

Drill hole spacing is largely determined by the characteristics and consistency of the following seams (B4, B5, B7, B8, B9). The maximum drill hole spacing within the Measured resource area does not exceed 750 metres and generally ranges between 250-650 metres. The Indicated resource area has a maximum drill spacing of 1,200 metres and the Inferred resource area up to 3000 metres.

Orientation of data in relation to geological structure

Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.

If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

The orientation and spacing of the drilling grid is deemed to be suitable to detect geological structures and coal seam continuity within the resource area.

Sample security The measures taken to ensure sample security. The sample security was ensured under a chain of custody between Cuesta Coal personnel and the coal laboratories (Preplab Testing Services Pty Ltd, Bureau Veritas Pty Ltd and CCI Holdings Ltd).

Audits or reviews The results of any audits or reviews of sampling techniques and data. Cuesta Coal were responsible for implementing and maintaining the sampling techniques and data.

Preplab Testing Services Pty Ltd, Bureau Veritas Pty Ltd and CCI Holdings Ltd undertake internal audits to ensure analytical results are reporting precisely and accurately.

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Section 2 Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.)


Mineral tenement and land tenure status

Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

Cuesta Coal hold three Exploration Permits for Coal (EPC) that cover the Moorlands Project area.

Tenure Type

Tenure No. Data

Lodged Area

(Hectares) No. of Sub-

Blocks

Holder Name

EPC 775 24-Jan-

2002 2,845 9

Hannigan & Associates

Pty Ltd

EPC 776 07-Feb-

2002 2,529 8

Hannigan & Associates

Pty Ltd

EPC 1738 22-Apr-

2009 13,266 42

BlackwoodCoal Pty

Ltd

The Blair Athol State Forest zone exists in the central area of the Moorlands Project. A land swap agreement will be in place between the Queensland government and Cuesta Coal.

There are no other known impediments to mining in the area.

Exploration done by other parties

Acknowledgment and appraisal of exploration by other parties. Deposit first discovered in the 1960’s when the Queensland Geological Survey observed Permian sediments during field mapping.

The Moorlands Basin and immediate surrounding areas were also previously explored by Utah under licence AP885M during part of their mineral exploration program in the early 1970s.

Pacific Coal Pty Ltd (now Rio Tinto) drilled a series of holes at two sites near the northern extremity of the basin in early 1979, both containing reasonable coal intersections.

Ladnote Pty Ltd also conducted exploration in the area under licence AP3409M from 1983 – 1985. A gravity survey consisting of several widely spaced traverse lines was conducted and successfully detected the initial boundaries of the Moorlands Basin.

The Queensland Department of mines further delineated the basin in during 1985 – 1986 when it drilled 15 fully-cored holes (2,208 metres in total). All holes were terminated in the pre-Permian basement and were geophysically logged (not all holes in coal bearing zone).

In 1995, a number of holes were drilled by CRA Exploration Pty Ltd (now Rio Tinto

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Exploration Pty Ltd) in the north of the basin under EPC 524, although the principal focus of the exploration was the Bendemeer Basin to the north.

The Bendemeer Basin which lies north of the Moorlands Basin was discovered by Pacific Coal via drilling programs between 1994 and 1995. Pacific Coal completed 15 rotary open holes and one part-cored hole in the Bendemeer Basin for an aggregate of 3,211 metres (EPC 524).

A subsequent exploration program in 1996 by CRA/Rio Tinto Exploration saw the completion of 37 holes including three cored holes for an aggregate 5123.9 metres on EPC 524.

Hannigan & Associates drilled 31 open holes and two partially cored 100mm quality holes in the Bendemeer Basin (EPCs 775 and 776) during 2012. Coal quality analysis was performed on the two partial cored quality holes.

All exploration programs have greatly aided the exploration activities of Cuesta Coal providing solid background data to base their exploration planning upon.

Geology Deposit type, geological setting and style of mineralisation. The Moorlands Project is contained within the Bendemeer/Moorlands basin located to the west of the Bowen Basin.

Cuesta Coal have linked the Bendemeer and Moorlands Basins as one basin structurally bound in a half graben. The linked basins are now referred to as the Moorlands project by the company.

These basins are described as outliers of coal bearing Permian sediments to the Bowen Basin. They host a thermal low to moderate ash thermal coal containing low to moderate sulphur.

The basins are a typical synclinal structure containing coal bearing strata down from 40 – 400 metres.

The stratigraphy within the project area is characterised by a Tertiary cover composed of alluvial sediments and silcrete, underlain by claystones and lithic sandstones. The Mid to Late Permian aged Birimgan Formation unconformably underlies the Tertiary sediments. The Birimgan Formation consists of mostly fine to medium grained, labile to sub-labile sandstone with interbeds of mudstone, siltstone and up to 13 main coal seams. The Birimgan Formation unconformably overlies the Anakie Metamorphics which are comprised of phyllite, schist, quartzite and metabasic volcanics which form the basement of the Moorlands and Bendemeer basins.

The coal seams occur in 13 main groups in the Moorlands Project area, B1, B2, B3, B4, B5, B6, B7, B8, B9, B10, B11, B12 & B13.

Only the B4, B5, B7, B8, B9, B11, B12 & B13 seam groups have been considered in the Resource Estimate. These seam groups have an average cumulative thickness of 23 metres.

Drill hole Information

A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes: o easting and northing of the drill hole collar o elevation or RL (Reduced Level – elevation above sea level in metres) of the drill

hole collar

A listing of all drill holes used in the Resource Estimate is detailed in Appendix 2. All drillholes have been modelled with verticality data where available. Those drill holes

with no available verticality data have been modelled as vertical.

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o dip and azimuth of the hole o down hole length and interception depth o hole length.

If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.

Data aggregation methods

In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated.

Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.

The assumptions used for any reporting of metal equivalent values should be clearly stated.

All coal quality information (raw and product) has been composited into a single quality value where originally multiple samples existed. The compositing was performed in Ventyx’s Minescape software (version 5.7) where each coal quality value was weighted by both in situ relative density and thickness (except in situ relative density which was only weighted by thickness).

Composited samples weight averaged overlapping samples for seams. No minimum sample thickness cut-offs were applied as all seams contained samples of greater than 95% recovery.

Relationship between mineralisation widths and intercept lengths

These relationships are particularly important in the reporting of Exploration Results. If the geometry of the mineralisation with respect to the drill hole angle is known, its

nature should be reported. If it is not known and only the down hole lengths are reported, there should be a clear

statement to this effect (eg ‘down hole length, true width not known’).

The Moorlands Project drill hole data demonstrates strong lateral continuity with holes being spaced generally 200 – 1000 metres apart.

The major seams used in the resource estimate contained consistent geophysical signatures and seam thickness tended to show limited variation.

The drill hole data can confidently be extrapolated to a maximum of 1,500 metres. Extrapolation has been limited to 150 metres on the western and eastern margins of the deposit where faulting has obviously displaced the coal sequence.

Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.

All relevant diagrams are contained within the body of the Moorlands Project – Geology & Resource Report – January 2014.

Balanced reporting

Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.

All exploration results within the Moorlands Project area have been fully collated and reported.

Other substantive exploration data

Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.

Environmental monitoring studies as part of the Moorlands Environmental Management Plan were completed simultaneously to the 2013 exploration activities.

Further work The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large-scale step-out drilling).

Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.

Cuesta Coal plan on further delineating the Moorlands Project resource in 2014. A detailed infill drilling program is planned to increase the geological knowledge and confidence both structure and coal quality.

A 2D seismic survey is also planned to assist in the accurate determination of the basin structure, especially the western and eastern margin limits as defined by faulting.

A Feasibility Study is planned to commence during the first half of 2014.

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Section 3 Estimation and Reporting of Mineral Resources (Criteria listed in section 1, and where relevant in section 2, also apply to this section.)


Database integrity

Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.

Data validation procedures used.

Cuesta Coal uses LogCheck version 6.072 in the field for data storage. Drill hole data is also validated by Encompass Mining during and after loading data into

Ventyx’s Minescape software, version 5.7. The Minescape Geological Database (GDB) is used for further validation using SQL

queries and in built validation checks.

Site visits Comment on any site visits undertaken by the Competent Person and the outcome of those visits.

If no site visits have been undertaken indicate why this is the case.

No site visits have been undertaken by Encompass Mining as the timing of drilling activities conflicted with other commitments.

Encompass Mining have regular meetings with Cuesta Coal to discuss and review sampling results and field procedures to enhance data collection quality.

A site visit is planned early this year to review field procedures and sampling practices.

Geological interpretation

Confidence in (or conversely, the uncertainty of ) the geological interpretation of the mineral deposit.

Nature of the data used and of any assumptions made. The effect, if any, of alternative interpretations on Mineral Resource estimation. The use of geology in guiding and controlling Mineral Resource estimation. The factors affecting continuity both of grade and geology.

The drill hole density in the Moorlands Project area allows a moderate to high level of confidence in the nature of the seam thickness and quality consistency and interpreted location of faults.

It is recommended that future exploration involve 2D seismic to assist in delineating the precise location and nature of the faults identified.

Dimensions The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.

The main target Bendemeer Seams (B4, B5, B7, B8, B9) extend approximately 11 kilometres along strike and 350 metres - 1 km perpendicular to strike with an approximate average combined thickness of 23 metres.

The depth of cover to the B4 seam ranges from 60 metres in the north and south to 240 metres in the centre of the syncline.

The depth of cover to the B9 seam ranges from 40 metres in the north and south to 330 metres in the centre of the syncline.

The current resource extent covers 2.2 – 2.6 km2 in the Measured resource area, 2.0 – 3.0 km2 in the Indicated resource area and 0.9 – 1.4 km2 in the Inferred resource area.

Estimation and modelling techniques

The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.

The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.

The assumptions made regarding recovery of by-products. Estimation of deleterious elements or other non-grade variables of economic

The geological model and resource estimate were constructed using Ventyx Minescape software (version 5.7) using the Finite Element Method (FEM) interpolator with 1, 1, 0 parameters for the thickness, surface and trend, respectively.

A minimum seam thickness of 0.3 metres was applied to the resource estimate. No minimum split separation has been applied to the geological model. A grid cell size of 25 metres was used for the geological model with no grid rotation

applied. A maximum extrapolation distance of 1,500 metres from a data point was used. A lidar topography model was used to limit the upper sequence in the geological model.

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significance (eg sulphur for acid mine drainage characterisation). In the case of block model interpolation, the block size in relation to the average

sample spacing and the search employed. Any assumptions behind modelling of selective mining units. Any assumptions about correlation between variables. Description of how the geological interpretation was used to control the resource

estimates. Discussion of basis for using or not using grade cutting or capping. The process of validation, the checking process used, the comparison of model data to

drill hole data, and use of reconciliation data if available.

The seams were limited in the weathered zone in geological model by the base of weathering as logged in drill holes by the field geologists.

Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.

Tonnages are estimated as in situ using the Preston Sanders in situ density estimation method using air dried moisture and air dried relative density laboratory values.

Based on results from coal quality testing an in situ moisture of 16% has been estimated.

Cut-off parameters

The basis of the adopted cut-off grade(s) or quality parameters applied. A raw ash cut off of 45% (air dried) has been applied to the deposit. In general the majority of the seams contain an air dried raw ash of less than 25%. The B4 Upper seam (B4U) has been exclude from the resource estimation as it

contains numerous stone bands and poorer quality coal. It generally exhibits raw ash values of greater than 45% (ad).

Mining factors or assumptions

Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.

Encompass Mining has applied a minimum seam thickness cut-off of 0.3 metres after consultation with Cuesta Coal. It is deemed that this thickness cut-off is in line with current open cut mining minimum seam thickness limits.

Metallurgical factors or assumptions

The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.

Cuesta Coal has determined in conjunction with the testing laboratory Preplab Pty Ltd that an average raw ash thermal product of 13% is the target product. The majority of samples washed to date have easily achieved the 13% ash product (on average 10.4% ash product).

Coal quality analysis completed indicates that likely product is to be export thermal quality coal with an ash of 13% or less.

Environmen-tal factors or assumptions

Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

It is Encompass Mining’s opinion that there are no limiting environmental factors at this stage of the project development except the Blair Athol State Forest which should be able to managed through land swap agreements. F

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Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.

The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit.

Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.

In situ relative density estimation – the in situ relative density of the coal has been estimated using the Preston Sanders in situ relative density estimation equation.

Samples with raw ash (air dried basis) were assigned an in situ moisture of 16% based on knowledge of other deposits and the inherent and total moistures reported in the Moorlands Project.

Classification The basis for the classification of the Mineral Resources into varying confidence categories.

Whether appropriate account has been taken of all relevant factors (ie relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).

Whether the result appropriately reflects the Competent Person’s view of the deposit.

In total three resource categories have been identified in the Moorlands Project area dependent on the level of confidence in the seam structure and continuity plus the level of variability in the coal quality data.

The maximum distance between valid points of observation (PoB) for each resource category are: Measured – 750 m Indicated – 1500 m Inferred – 3000 m.

Audits or reviews The results of any audits or reviews of Mineral Resource estimates. There have been no audits to date undertaken on the January 2014 Resource Estimate.

Discussion of relative accuracy/ confidence

Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.

The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.

These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

Encompass Mining have assigned three levels of confidence to the coal Resource Estimate depending on the seam and drill hole spacing as detailed in the previous section ‘ Resource Classification’.

To date no geostatistical studies have been undertaken to ascertain a feel for the confidence in drill hole spacing for the purposes of resource estimation.

Factors that could affect the accuracy of the resource estimate include unknown structures between completed drill holes, seam wash outs in roof or inseam stone bands thickening. No evidence currently exists at this point in time for these to occur.

A 2D seismic study is planned in 2014 by Cuesta Coal which should assist in providing further confidence in the structure of the deposit.

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Appendix 2: Drill Hole Data Summary for the Moorlands Project

Hole Name Hole Type Datum Projection Easting (m) Northing (m) Elevation (m) Total

Depth (m) Lease ‐ EPC

Geological Model

JORC POB

Core Diameter (mm)

Geophysical Tools Used on Drill Hole

BB=Bendemeer Basin Hole (CRA Exploration, HB=Hannigan & Associates Borehole, ML=Moorlands Borehole (Cuesta), P=Pacific Coal, RU=Queensland Govermnent Borehole; 775=EPC 775, 776=EPC 776, 1738=EPC 1738; C=Caliper, D=Density, G=Gamma, P=Neutron, R=Resistivity, S=Sonic, T=Temperature

BB001R Chip GDA 94 Zone 55 544,836.010 7,504,084.970 319.03 80.00 776 Yes No



BB004R Chip GDA 94 Zone 55 544,467.000 7,500,277.000 344.37 367.00 1738 Yes Yes CDG



BB007R Chip GDA 94 Zone 55 543,816.000 7,502,664.000 329.00 234.00 1738 No No CDG







BB014C Core GDA 94 Zone 55 544,717.761 7,510,085.481 308.39 157.00 775 Yes Yes 100 CDG


BB016L Core GDA 94 Zone 55 544,519.500 7,508,402.030 315.15 108.00 775 Yes Yes 200 CDG






BB023R Chip GDA 94 Zone 55 546,772.000 7,506,379.000 304.90 60.00 Outside Yes No



BB026L Core GDA 94 Zone 55 543,819.000 7,502,664.000 329.00 100.00 776 Yes Yes 200 CDG



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Geological Model

JORC POB

Core Diameter (mm)













BB096C Core GDA 94 Zone 55 543,896.000 7,501,614.000 342.00 186.92 776 Yes Yes 100 CDG











CL026 Chip GDA 94 Zone 55 543,856.000 7,493,286.000 409.38 188.00 1738 Yes No

HB001 Chip GDA 94 Zone 55 544,668.000 7,511,254.000 305.00 75.00 775 Yes No

HB002 Chip GDA 94 Zone 55 544,720.440 7,508,386.960 318.34 138.00 775 Yes Yes CDG








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Geological Model

JORC POB

Core Diameter (mm)








HB017C Core GDA 94 Zone 55 544,649.170 7,509,018.350 313.37 84.00 775 Yes Yes 100 CDG







HB023RC Core GDA 94 Zone 55 543,264.000 7,508,551.000 311.00 72.00 776 Yes Yes 100 CDGT

HB023R Chip GDA 94 Zone 55 543,254.777 7,508,546.318 300.72 187.00 775 Yes Yes CDGTRSP




HB027 Chip GDA 94 Zone 55 543,613.310 7,507,672.660 302.31 210.00 775 No No

HB028 Chip GDA 94 Zone 55 544,110.320 7,507,583.240 314.29 132.00 775 No No

HB028R Chip GDA 94 Zone 55 544,104.298 7,507,573.216 314.29 210.00 775 Yes No

HB029C Core GDA 94 Zone 55 544,112.600 7,507,570.540 314.29 188.84 775 Yes Yes 100 CDGT

HB030 Chip GDA 94 Zone 55 544,527.470 7,507,481.300 322.13 162.00 775 Yes Yes CDGT




ML0001 Chip GDA 94 Zone 55 544,549.188 7,500,224.072 340.47 260.00 1738 Yes Yes CDGT

ML0002 Chip GDA 94 Zone 55 544,051.640 7,500,314.975 339.00 164.00 1738 No No CDGT

ML0003 Chip GDA 94 Zone 55 543,567.139 7,500,400.727 342.01 30.00 1738 Yes No

ML0003WB Chip GDA 94 Zone 55 543,580.000 7,500,391.000 350.00 36.00 1738 No No

ML0003WBR Chip GDA 94 Zone 55 543,581.274 7,500,389.414 341.48 120.00 1738 Yes Yes CDG


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Geological Model

JORC POB

Core Diameter (mm)




ML0007 Chip GDA 94 Zone 55 543,481.160 7,494,324.964 434.90 80.00 1738 No No






ML0013 Chip GDA 94 Zone 55 543,717.159 7,500,378.721 336.31 43.00 1738 Yes No










ML0022C Core GDA 94 Zone 55 544,394.601 7,500,053.176 346.94 91.41 1738 Yes Yes 100 CDG










ML0030WB Chip GDA 94 Zone 55 543,820.215 7,499,089.751 356.98 150.00 1738 Yes Yes CDGTR




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Geological Model

JORC POB

Core Diameter (mm)


ML0034C Core GDA 94 Zone 55 544,289.460 7,500,276.855 343.26 108.00 1738 Yes Yes 100 CDGT











ML0045 Chip GDA 94 Zone 55 544,068.389 7,500,638.508 334.52 126.00 1738 Yes Yes CDG

ML0045C Core GDA 94 Zone 55 544,075.510 7,500,633.212 334.37 126.00 1738 Yes Yes 100 CDGTR

ML0046 Chip GDA 94 Zone 55 544,238.989 7,500,632.699 332.01 114.00 1738 Yes Yes CDGTRSP


ML0047 Chip GDA 94 Zone 55 544,027.119 7,501,064.918 342.30 162.00 776 Yes Yes CDGTR



ML0048R Chip GDA 94 Zone 55 544,209.758 7,501,069.939 343.84 174.00 776 Yes Yes CDG





ML0052WB Chip GDA 94 Zone 55 544,011.327 7,502,030.876 336.96 156.00 776 Yes Yes CDG



ML0053R Chip GDA 94 Zone 55 543,729.213 7,502,946.281 331.85 216.00 776 Yes Yes CDGTR






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Geological Model

JORC POB

Core Diameter (mm)















ML0072 Chip GDA 94 Zone 55 543,199.315 7,508,060.567 297.82 235.00 775 Yes Yes CDGTRP


ML0073R Chip GDA 94 Zone 55 543,446.072 7,508,043.034 300.26 118.00 775 No No

ML0073RR Chip GDA 94 Zone 55 543,466.000 7,508,013.000 274.00 24.00 775 No No

ML0073RRR Chip GDA 94 Zone 55 543,449.305 7,508,043.320 300.35 245.00 775 Yes Yes CDGTRSP






ML0076C Core GDA 94 Zone 55 543,674.805 7,508,509.834 307.61 221.66 775 Yes Yes 100 CDGTRS








P1R Chip GDA 94 Zone 55 543,895.000 7,498,806.000 363.00 300.00 1738 No No

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Geological Model

JORC POB

Core Diameter (mm)


P2C Core GDA 94 Zone 55 543,906.000 7,498,804.000 363.00 98.21 1738 No Yes 100

P3R Chip GDA 94 Zone 55 543,582.000 7,498,958.000 356.45 135.00 1738 Yes No

P4C Core GDA 94 Zone 55 543,903.000 7,498,795.000 363.00 100.20 1738 Yes Yes 100

RU1 Chip GDA 94 Zone 55 544,204.000 7,498,697.000 354.12 322.20 1738 Yes No



RU12 Chip GDA 94 Zone 55 544,618.000 7,498,863.000 353.00 158.91 1738 No No

RU13R Chip GDA 94 Zone 55 544,618.000 7,498,863.000 352.66 234.45 1738 Yes No




RU4 Chip GDA 94 Zone 55 542,965.000 7,499,285.000 351.00 35.49 1738 No No


RU6R Chip GDA 94 Zone 55 543,415.000 7,498,353.000 368.00 65.84 1738 No No




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140304 moorlands resource upgrade final - asx · this schedule has a planned 1 ... * a...

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