Overview

The Group’s strategy is to grow and maintain its resources and reserves through exploration and/or small-scale acquisition of low-cost reserves and resources. Given the lack of refractory processing capacity in Russia, many quality refractory orebodies remain underexplored and licences are more readily available. Given many of these orebodies are already known, discovery costs are lower which makes them potentially interesting targets for non-organic growth. In implementing this strategy, the Group acquired two licences in February 2020 covering the promising early-stage Mariinskiy project located c.30km east from Malomir. The Group’s internal exploration programme also focuses on good quality refractory gold ores since this has the potential to unlock significant value. The Group’s short-term exploration strategy aims to replace depleted reserve and resources, and includes:

• Near mine exploration, targeting further non-refractory reserves, including underground, to maximise plant utilisation and extend the useful life of the remaining non-refractory processing facilities;
• Exploration in the vicinity of Malomir and Pioneer, targeting high quality refractory reserves to maximise returns from the POX Hub; and
• Early stage exploration at the Group’s various development and greenfield projects, including: Tokur, Mariinskiy and two located in Khabarovsk.

The Group’s longer-term reserves and resources replacement strategy is focused on:

• A programme of active exploration prioritising the most attractive refractory targets within the Group’s own development projects;
• Exploration aimed at defining underground reserve and resources at Albyn and its satellites, and to identify further underground targets in the Pioneer and Malomir areas; and
• Potential further licence acquisitions close to existing Group infrastructure.

Malomir

Overview

Malomir is an orogenic type, mainly refractory, gold deposit associated with a regional thrust zone. The principal orebody contains disseminated mineralisation which is double refractory due to presence of organic carbon in addition to sulphides. Satellite orebodies such as Quartzitovoye and Magnetitovoye contain steeply dipping high grade non-refractory payshoots of vein–like morphology. Quartzitovoye also has a significant low grade stockwork mineralisation which is refractory.

In February 2020, the Group acquired exploration assets at Mariinskiy  comprising two adjacent exploration licences with a total area of c.155km² located c.30km north-east of Malomir and c.50km west from Tokur. These licences cover an area where extensive historical alluvial mining has taken place over a strike length of c.18km. Historical exploration work has identified at least 30 quartz veins with gold grades of up to 10g/t, as well as disseminated gold mineralisation with grades of up to 2.5g/t. The Company’s in-house exploration team believe this asset has the potential to contain substantial gold resources, of a similar scale and nature to known orebodies at Malomir including its satellites. Exploration at Mariinskiy is being undertaken in H2 2020.

Currently exploration at Malomir (230km² Malomir and Mariinskiy plus 29km² Tokur and Osipkan) is focused around the Quartzitovoye underground mine and at potential Malomir satellite projects: Tokur and Mariinskiy.

Recent Exploration Results

In-fill drilling at Quartzitovoye confirmed the presence of a bulk stockwork to the west of the Orebody 55. This was previously considered to be a target for underground mining linked to the Quartzitovoye underground mine. However, the stockwork increasingly appears to be an attractive target for an open pit mine that would replace the Quartzitovoye underground mine once depleted.

In 2019 drilling at Osipkan, a Tokur satellite located 130km away from Malomir, has identified two zones equivalent to Inferred under JORC gold resources, including 97koz (2.5Mt @ 1.23g/t) and 22koz (458kt @ 1.50g/t).

Further exploration completed at Osipkan in Q1 2020 yielded promising results. The best trench intersections included 7.0m @ 1.32g/t, 5.8m @ 0.88g/t and 1.0m @ 3.78g/t. Selected drill hole intersections included 7.1m @ 2.53g/t, 3.0m@1.40g/t, 6.3m @ 2.17g/t and 4.8m @ 1.00g/t

Albyn

Overview

The remaining Albyn exploration potential is primarily associated with the down dip extensions of the Albyn orebody and satellite deposits: Elginskoye, Unglichikanskoye and Kera. The significant Albyn licence area (1,053km²) also offers excellent greenfield exploration and the potential to discover new orebodies, although Group is presently not perusing these opportunities and is focusing its exploration efforts at, and around, known orebodies.

Currently exploration at Albyn is focused on Elginskoye, Unglichkanskoye, Kera and deep extensions of Albyn orebody.

Recent Exploration Results

During 2019, resource expansion drilling on the periphery of Elginskoye has extended known gold mineralisation in the south-west, south-east and north, resulting in a 23% increase in Reserves compared to the previous year. Drilling at Sukholozhskiy, 500m west of the Albyn open pit, intersected high-grade mineralisation, with the best intersection being 2.5m @ 12.26g/t.

Subsequently in Q1 2020, exploration was carried out at the Kera prospect (previously named Ulgen). Trenching, pre-strip and drilling intersected further potentially economic mineralisation. In the pre-strip, where 12 lines of channel samples were completed, a mineralised zone with an average apparent thickness of 3m at an average grade of 3.28g/t was identified, with the best assay grading 32g/t. Five holes were drilled with a total length of 687m which intersected gold mineralisation 40 to 80m below surface. The best drill intersections included 7.4m @ 4.06g/t and 0.6m @ 16.2g/t. Based on drilling and trenching completed to date, a maiden resource estimate was prepared for the Kera prospect in accordance with the Russian resource classification system. The P1 category resource, which is a broad equivalent of JORC Inferred category, is estimated as c.170koz of gold with an average grade of 2.98g/t. This estimate only covers a small section of known Kera mineralisation. The Group’s geologists believe that Kera has the potential to become a 1 – 2Moz open pit reserve, capable of supporting future Albyn production.

Q1 2020 drilling at Elginskoye focused on in-filling drilling in the central part of the orebody and on extending resources towards the south-east.

Pioneer

Overview

Pioneer is classified as low sulphidisation epithermal gold deposit with multiple orebodies containing high grade vein-like payshoots as well as extensive low grade mineralisation  Despite more than a decade of extensive exploration and mining, the Pioneer project area (1,337km²) is considered to have significant potential, particularly for refractory gold which has historically been under-explored. Many of the known high grade payshoots are open down dip offering the potential to discover further gold resources for potential underground extraction.

Current exploration at Pioneer is focused on production needs and localised at the known open pit and underground orebodies at North East Bakhmut (NE Bakhmut), Andreevskaya and Alexandra in particular. The Group is also evaluating the feasibility of re-processing RIP tailings, using either flotation or RIP processing technology.

Recent Exploration Results

In 2019 exploration at NE Bakhmut focused on payshoots 1 and 2 to investigate the possibility of higher-grade underground mineralisation as well as supporting ongoing mining activities. Highlights for the year included:

• Two drill holes that intersected mineralisation 30 to 70m below the pit floor at NE Bakhmut 1, confirming mineralisation extends well below the current open pit, with significant intersections including: 14.2m @ 1.17g/t (C-6334), 7.2m @ 3.77g/t (C-1083) and 5.3m @ 1.36g/t (C-1083);
• The technical team is currently evaluating the possibility of deepening the NE Bakhmut 1 pit; and
• Stope definition drilling and production grade control sampling at NE Bakhmut 2 which resulted in underground resources increasing from c.127 to c.142koz.

Deep drilling at the Nikolaevskaya zone resulted in the discovery of further downdip extensions of the orebody and an increase in the mineral resource potential for underground mining.

Deep in-fill drilling at the central section of the Andreevskaya zone hit a payshoot with the best intersection grading 58.23g/t over a thickness of 11.2m. Since this is an in-fill drill hole, it does not extend the Andreevskaya orebody, but demonstrates the existence of extremely high-grade pockets of mineralisation which would not have been detected by the 40x40m drill grid used. Historically, the Andreevskaya open pit has produced approximately 25% more gold than expected due to this effect. As a result, the existing Andreevskaya underground resource and reserve estimates are likely to be conservative.

Exploration Projects in Khabarovsk Region

Overview

In H2 2018, the Group acquired two early stage exploration assets in the Khabarovsk region with the combined area of 485km²: Verkhne Udskaya and Chogarskaya.

Both properties are in proximity to known alluvial gold deposits and have geology deemed to be favourable for hosting orogenic type hard rock gold deposits. Both areas were subject to a systematic hard rock early stage exploration/prospecting in the 1960’s when the Government funded 1:200 000 scale mapping and a prospecting programme was completed. Later in 2005-2006, smaller scale prospecting focussed on targets identified by the 1960’s work.

Historical work only involved trenching and geological traverses. No drilling was completed at these properties to date, and therefore Verkhne Udskaya and Chogarskaya are considered underexplored and offering potential for significant discoveries. Verkhne Udskaya and Chogarskaya are located 120km and 160km north-north west and north from Malomir respectively.

Recent Exploration Results

In 2019 Group started early stage exploration at the Chogarskaya and Verkhne Udskaya licences which yielded some promising results, with grab samples from the Chogarskaya licence returning grades of up to 22.1g/t. At the Verkhne-Udskaya licence, the average grade for mineralised trench samples is c.1g/t, whilst grab samples taken from the areas not yet trenched have shown grades of up to 10g/t. Preliminary metallurgical tests suggest gold mineralisation at Verkhne-Udskaya is non-refractory.

• Technical reports