ANNOUNCEMENT    

 

10th of October 2011. Bulolo  Gold  Project  -­‐  Update      Highlights:    

Ø Pacific  Niugini  (“PNR”)  advises  that  it  has  resolved  competing  land  matters  associated  with  its  Bulolo  Gold  Project.    

 Ø PNR  to  form  a  Joint  Venture  with  the  major  industrial  group  in  Bulolo,  PNG  Forrest  

Products    (“PNGFP”)  to  consolidate  both  parties  gold  interests  in  the  district,  and  intends  to  immediately  progress  both  areas  toward  mining.  

 Ø Under  the  agreement,  PNGFP  has  agreed  to  transfer  50%  of  granted  mining  

tenement  ML457  (“Widobosh”)  to  PNR,  and  PNR  to  transfer  25%  of  exploration  tenement  EL1616  (“Bulolo”)  to  PNGFP.  

 Ø The  agreement  has  paved  the  way  for  bulk  testing,  and  subsequent  mining  within  

PNGFP’s  pastoral  leases  and  current  legal  challenges  between  the  parties  relating  to  gold  exploration  and  future  mining  activities  are  to  be  discontinued    

Ø Trial  mining  and  gold  recovery  works  at  Widobosh    (ML457)  will  commence  with  a  view  to  progressing  to  full  scale  production  in  the  ensuing  year.  

 Ø Churn-­‐drill  testing  of  the  major  Bulolo  Gravels  field  is  underway  along  with  pilot  

scale  gravity  plant  testing.    Significant  visible  gold  is  noted  in  both  drill  and  bulk  test  samples  from  previously  dredged  rejects  and  undredged  gravels.    

 Ø Detailed  engineering  of  the  proposed  production  plant  is  underway  and  will  be  

completed  in  parallel  with  the  testing  program  in  order  to  minimise  time  to  production.  

   Enquiries:    Mr  Paul  Cmrlec  Managing  Director      

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Bulolo  Gold  Project  –  Update    Pacific  Niugini   Limited   (PNR)   through   its  wholly   owned   subsidiary   Pacific  Niugini  Minerals  (PNG)   Ltd,   is   pleased   to   advise   that   it   has   reached   agreement  with   PNG   Forest   Products  (PNGFP)  to  form  a   joint  venture  that  consolidates  both  parties  gold   interests   in  the  Bulolo  area  and  resolves  all  matters  of  competing   land  use  and  legal  actions  between  the  groups  over  the  same.    The  Bulolo  gravels  were  previously  dredged  between  1932  and  1965  to  a  maximum  depth  of  approximately  36m.  Historic  production  records  estimate  gold  production  of  over  2.1  million  ounces  from  the  dredge  mining  of  approximately  210  million  cubic  metres  with  an  average  recovered  grade  of  0.31  g/m3.      PNGFP,   the  major   industry   in   the   Bulolo   district,   and   a   competing   land-­‐user  with   grazing  rights  over  part  of   the  gravel  beds  had  previously  sought  to  halt  exploration  activities  and  the   re-­‐commencement   of   gold   mining   by   seeking   leave   through   the   courts   for   a   judicial  review  of  the  granting  and  extensions  of  EL1616.      Both  parties  have  worked  in  good  faith  to  resolve  issues  without  further  third  party  intervention  and  reached  an  agreement  that  paves  the  way  for  gold  production  through  a  Joint  Venture  in  the  Bulolo  district.    PNGFP  is  currently  the  key  economic  and  operational  entity  in  Bulolo  with  substantial  agriculture,  timber  processing,  and  retail  operations  in  the  area  with  approximately  1200  people  employed.  PNGFP  also  bring  substantial  access  to  services  to  the  mining  projects  through  supply  of  hydro-­‐electricity  from  the  nearby  Baiune  Power  Station  (owned  by  PNGFP),  expertise  and  ability  in  construction  and  operation  of  mine  camps  and  facilities,  and  extensive  industrial  workshop  facilities  and  personnel  in  operation  at  Bulolo.    The  agreement  sets  out  key  terms  under  which  both  parties  will  continue  working  in  good  faith  and  complete  a  formal  Joint  Venture  Agreement,  which  will  then  become  binding  upon  the  Parties.    Upon  completion  of  joint  venture  documentation,  PNGFP  will  transfer  a  50%  interest  in  their  100%  owned  mining  Lease  ML457    “Widobosh”  to  PNR.      At  the  same  time,  PNR  will  transfer  a  25%  registered  interest  in  EL1616  “Bulolo”  to  PNGFP.  PNGFP  will  have  participating  interests  of  30%  over  areas  south  of  the  Bulolo  town  area  (primarily  covered  by  pastoral  licenses  owned  by  PNGFP),  and  a  25%  participating  interest  in  other  areas  of  EL1616.    PNGFP  has  agreed  that  it  will  not  be  entitled  to  any  additional  compensation  as  a  result  of  interruption  to  agricultural  activities  in  the  pastoral  leases  in  exploration  or  mining  phases.    F

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Both  of  the  tenement  areas  will  be  operated  under  separate  Joint  Venture  agreements,  with  both  parties  contributing  to  costs  according  to  their  participating  interest.  Pacific  Niugini’s  wholly  owned  PNG  subsidiary,  Pacific  Niugini  Minerals  (PNG)  Ltd  (“PNM”)  will  be  appointed  as  the  manager  for  the  joint  venture  projects  acting  for  and  on  behalf  of  the  JV.    ML457  -­‐  Widobosh    PNGFP  currently  holds  100%  of  the  interest  in  ML  457  “Widobosh”.  Widobosh  lies  approximately  10  km  north  of  Pacific  Niugini’s  EL1616  and  is  of  similar  size  to  the  undredged  areas  in  EL1616,  covering  some  177  hectares.    

 Plan  showing  EL1616,  and  ML  457  to  the  North  

 Importantly,  ML457  is  held  in  a  granted  mining  lease,  which  will  allow  the  rapid  progression  to  operations  in  the  area.  While  historical  records  are  poor,  there  have  been  several  past  periods  of  mining  at  Widobosh,  with  evidence  of  significant  previous  gold  production.  Areas  close  to  the  tenement  continue  to  be  worked  by  small-­‐scale  miners.    The  majority  of  the  gravels  exist  in  raised  terraces,  and  as  such  the  area  was  not  dredged  during  the  extensive  mining  campaigns  in  the  area  between  1934  and  1965.  The  lease  is  immediately  down  stream  of  the  confluence  of  the  Bulolo  and  Watut  Rivers,  and  is  likely  to  be  endowed  with  

PNR  Director  David  Osikore  inspecting  gold-­‐bearing  gravel  at  Widobosh  

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gold  from  both  systems.    The  lease  has  not  been  worked  for  a  number  of  years,  and  as  such  further  due  diligence  in  relation  to  the  tenement  is  to  be  undertaken.  Initial  enquiries  indicate  that  the  tenement  is  in  good  standing.  

 Under  the  terms  of  the  agreement,  Widobosh  will  be  evaluated  by  bulk  sampling  and  gravity  separation  testing  and  if  deemed  commercial  will  be  brought  into  production  ahead  of  areas  on  EL1616.    Ultimately  the  objective  will  be  to  operate  concurrently  in  both  areas.    EL1616  –  Bulolo    Pacific  Niugini  currently  holds  100%  of  EL1616.  The  tenement  is  prospective  for  gold  in  valley  gravel  deposits  as  well  as  from  primary  gold  sources.  Until  now,  PNR’s  efforts  to  test  the  gravel  deposits  in  the  Bulolo  valley  have  been  hindered  due  to  competing  land  uses  with  PNGFP.  The  agreement  with  PNGFP  addresses  those  issues,  and  will  enable  both  parties  to  move  forward  in  a  mutually  beneficial  relationship  both  within  and  outside  of  pastoral  lease  areas  held  by  PNGFP.    

Drilling  at  Bulolo  

Raised  gravel  terraces  at  Widobosh  

 

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Pacific  Niugini  recently  commenced  drilling  of  the  Bulolo  Gravel  deposits,  and  has  commissioned  its  10tph  test  plant.  All  works  to  date  have  been  in  areas  that  have  been  previously  dredged.    Initial  results  have  been  encouraging,  with  visible  gold  being  recovered  from  every  1m  interval  of  the  initial  drill  hole.  Drilling  progressed  to  approximately  55m  depth,  with  gravel  compaction  or  a  large  boulder  causing  rejection  of  the  churn  drill  string  beyond  that  depth.  Seismic  interpretation  and  historical  drilling  show  valley  depths  in  excess  of  100m.    Significantly,  gold  has  been  recovered  from  drill  samples  throughout  the  previous  dredged  tailings  indicating  relatively  poor  recovery  in  historical  operations.  Approximately  210,000,000  cubic  metres  of  gravel  were  previously  dredged  in  the  valley,  and  the  presence  of  gold  in  that  material  provides  significant  upside  potential  to  the  project.    

 Example  of  gold  recovered  from  a  one  metre  drill  sample  in  the  first  drilled  hole  at  Bulolo  

 Bulk  sampling  using  the  10tph  test  plant  has  also  recovered  visible  gold  in  the  historical  dredge  tailings.  Once  the  test  plant  is  fully  commissioned  and  operating  at  optimum  levels,  samples  will  be  subject  of  various  assay  techniques  to  better  establish  gold  content  in  the  dredge  tailings.  It  is  envisaged  that  the  test  plant  will  be  fully  operational  and  ready  for  immediate  deployment  to  Widobosh  by  the  time  joint  venture  documentation  is  completed.    

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Progression  to  Production    Pacific  Niugini  has  retained  in  house  engineering  capacity  in  order  to  progress  to  production  in  the  most  efficient  manner  possible.  In  parallel  with  the  testing  programs  at  Widobosh  and  Bulolo,  the  company  is  undertaking  detailed  design  and  construction  of  the  first  production  scale  gravity  plant  for  the  area.      The  initial  plant  will  utilise  process  equipment  recovered  from  the  PNR  owned  gravity  plant,  which  was  purchased  from  a  Tasmanian  project  during  2010.  The  plant  is  expected  to  operate  at  a  rate  of  approximately  1,000  tonnes  per  hour,  and  is  being  designed  to  minimise  power  consumption,  and  to  maximise  operability  in  PNG.      

Construction  costs  for  the  initial  plant  are  expected  to  be  in  the  order  of  $5  million,  and  as  such  capital  risk  for  the  projects  will  be  very  low.    The  historical  recovered  grade  (in-­‐situ  grade  was  not  measured)  at  Bulolo  was  0.31  g/m3.    

Assuming  the  historical  recovered  grades  can  be  achieved,  the  initial  production  capacity  is  expected  to  be  in  the  order  of  40,000  ounces  per  annum.    

10  TPH  test  plant  in  operation  at  Bulolo  

3  Dimensional  Model  of  the  Initial  Production  Plant  being  designed  and  constructed  by  PNM  

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   Given  the  technology  developments  in  gravity  processing  since  the  last  commercial  production  in  the  area,  recovery  of  gold  is  expected  to  be  higher  than  historical  performances.  PNR  has  not  calculated  JORC  compliant  resources  in  the  area  due  to  difficulties  in  dealing  with  alluvial  deposits  under  the  code.  The  company  plans  to  commence  production  on  the  basis  of  results  received  from  the  planned  testing  program,  and  will  also  rely  on  the  previous  210  million  cubic  metre  bulk  sample  and  historic  2.1  million  ounces  of  recovered  gold  production  from  the  area  as  part  of  its  decision  processes  for  development  in  the  absence  of  a  JORC  compliant  resource  estimate.      Ends.    

The information in this report that relates to exploration, mineral resources or ore reserves is based on information compiled by Mr. David Osikore (B.Sc. Geol) ) MAusIMM who is a full time employee of Pacific Niugini Limited. Mr. Osikore has sufficient experience which is 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 described by the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Osikore 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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