Georgian Mining Corporation “potential to host large scale epithermal gold-copper mineralisation”

Georgian Mining Corporation has given DirectorsTalk its interim results for the six-month period ended 30 June 2017.

Highlights

— Results of ongoing work programme continue to support the Board’s view that the Kvemo Bolnisi (‘KB’) copper and gold project on the Tethyan Belt in Georgia has the potential to host large scale epithermal gold-copper mineralisation

   --     Three-phase strategy underway to deliver on >50Mt copper-gold resource target

— Phase 1 target achieved and exceeded with initial JORC resource of of 3.154 Mt @ 0.82% Cu and 2.29 Mt @ 0.85 g/t Au identified, positioning GEO to achieve proof-of-concept production in the near term

   --     Phase 2 targeting a JORC Resource of 3Mt-5Mt of combined copper-gold sulphide and gold oxide mineralisation at KB has been successfully achieved

— GBP5.5m raised in May 2017 via an oversubscribed, nil-discount placing which fully funds longer term exploration and development as well as wider exploration of tenure in Georgia

— Satisfied obligation to contribute an initial commitment of US$6 million thereby earning 50% in JSC Georgian Copper & Gold

Managing Director’s Statement

At the time of our last half yearly report in September 2016, GEO set itself an exploration target of 50Mt-70Mt @ grades of between 0.30% Cu and 1.00% Cu and 0.1 to 1 g/t Au for copper sulphide mineralisation and 0.5 to 5 g/t Au for gold oxide resources at our KB East copper and gold project in Georgia (‘KBE’ or the ‘Project’). This target was based on the results of the initial drilling undertaken; the Project’s similar geology to our partner’s nearby Madneuli Deposit, which has produced circa 80Mt of copper ore with a reported average grade of 1.0% Cu and 1g/t Au; and finally, KBE’s highly prospective address on the Tethyan Belt, which is home to many world class mineral deposits. I am pleased to report that work carried out during the latest half year has served to strengthen our belief that the 860 sq km licence area has the potential to host large scale epithermal gold-copper mineralisation and that KBE could become the next large-scale mining operation in this prolific region.

Underpinning our confidence are the results of resource drilling which have identified an expanse of mineralisation styles that are consistent with a gold/copper-endowed epithermal systems: beginning at surface with i) outcropping heap leachable gold oxide mineralisation overlying ii) an enriched (supergene) high-grade chalcocite copper blanket; extending into iii) copper-gold sulphide mineralisation hosted in breccia pipes that are surrounded by iv) lower grade bulk tonnage potential copper-gold sulphides and v) high-grade sheeted pyrite-gold epithermal vein-type mineralisation. The work at KBE has shown that breccia-type sulphide mineralisation now extends down to a drill-indicated 200 metres and remains open at depth. All the above points to a large epithermal system and the focus during the period has been (and continues to be) to prove up this geological model towards developing significant additional resource tonnages. To achieve this, and at the same time meet our exploration targets, we have put in place a three-phase strategy, the implementation of which is already well advanced:

Phase 1 involved delineating a minimum of 1 to 2Mt of copper-gold ore feedstock to deliver ‘proof of concept’ copper and gold production using our partner’s existing nearby processing facilities, as well as de-risking the Project in terms of confirming the processing route for the ore and further strengthening our relationship with our partner. Initial production will also provide a source of non-dilutive cash flow which can be used to fund additional exploration.

Phase 2’s objective was to delineate 3-5Mt of combined copper-gold sulphide and gold oxide mineralisation and in tandem prove up the large scale, high grade epithermal geological model we have for KBE.

Phase 3 will target a 50Mt+ resource at KBE that can sustain a standalone mining operation with its own plant and associated infrastructure. In addition to KBE, there remains significant scope for further gold and copper discoveries to be made across the licence area and work has already commenced on a number of identified targets as part of a wider exploration strategy.

We have already hit our Phase 1 and 2 exploration objectives. In April 2017, we announced an initial JORC resource of 2.22 Mt @ 0.8% Cu and 0.1 g/t Au at 0.3% Cu cut-off which served as the trigger to commence negotiations with our partner’s production company, JSC RMG Gold and JSC RMG Copper (together ‘RMG’) to secure a processing agreement covering the future production of precious and base metal ores mined from the licence area. As well as significantly lowering capital expenditure requirements, gaining access to RMG’s processing facilities would fast track production and provide known and agreed contract mining and processing costs.

Phase 2 was achieved in July 2017 when we announced an upgraded global mineral resource estimated in accordance with the guidelines of the JORC Code (2012) of 3.154Mt @ 0.82% Cu & 0.14g/t Au. In conjunction with the gold oxide resource of 2.29Mt @ 0.85g/t Au announced earlier that month, this achieved and exceeded our 3-5 Mt Phase 2 target. To reach the benchmark of 3-5Mt, resource development drilling has taken place across three zones: Gold Zone 1 (‘GZ1’); Gold Zone 2 (‘GZ2’); and Copper Zone 1 (‘CZ1′). It is our belief that these three zones may coalesce at depth to form a large epithermal copper-gold system which provides the basis for both our KBE geological model and our Phase 3 exploration target of a 50Mt+ copper-gold deposit.

Thanks to the excellent progress made, all three zones now have initial JORC compliant resources. Notably, both the base of the oxide and the extent of the gold mineralisation are yet to be fully established. Post period end we announced an initial JORC resource estimate for the gold oxide deposit in GZ2 (as noted above), containing an optimised in-pit mineral resource of 1.14Mt @ 1.10g/t Au. This initial GZ2 resource covered an area extending from surface to the base of the oxides at approximately 40 metres depth with a footprint of approximately 150 x 150 metres. As the resource occurs from surface, no significant stripping will be required on commencing production, which has positive cost implications going forward. Gold and copper mineralisation at KBE remains open in all directions.

Still at GZ2, continuous copper mineralisation was also intercepted from the base of the gold oxide zone to a depth of 200m and post period end we announced global in-pit optimised constrained copper-gold sulphide mineral resources of 1.7Mt @ 1.05% Cu from 1.2Mt @ 1.03% Cu. This was based on a recently discovered breccia pipe situated beneath the base of the gold oxide mineralisation at GZ2.

Finally, at CZ1 a JORC (2012) optimised in-pit resource of 1.2Mt @1.03% Cu @ a 0.4% Cu cut-off within the unconfined estimate of 2.22Mt @ 0.8% Cu and 0.1 g/t Au @ a 0.3% Cu cut-off is in place. These initial resources were important as they were sufficient to launch discussions with our partner for delivery of an initial 1Mt @ 1% Cu-Au sulphide ore for toll treatment at our partner’s float plant at the Madneuli mine.

As mentioned earlier much of the mineralisation we have identified remains open at depth. With this in mind it is our intention to test the depth extension of the two breccia pipes at GZ2 and CZ1, as the low to intermediate sulfidation epithermal environment that characterises KB has the potential to “blow-out” at depth and contribute to a more substantial bulk tonnage copper-gold resource in line with the 50Mt+ being targeted by the Company. Further gold oxide and copper-gold sulphide targets across the licence area are regularly being generated and, as previously announced, additional anomalies and drill targets have already been identified. These will be drilled during the current programme as we continue to expand the KB mineral resource development strategy.

Board and Management

As our understanding of the geology at KB has developed, we have taken steps to add the relevant expertise in terms of geology, metallurgy and capital markets experience that will allow us to fully exploit the opportunity in front of us. Complementing last year’s appointments of Non-Executive Directors Dr. Neil O’Brien, a leading authority on geology of the Tethyan Belt, and Mr. Peter Damouni, a highly experienced finance expert specifically in the mining sector, the period under review saw us appoint Anthony Frizelle as Non-Executive Chairman and Mr. Laurence Mutch as a Non-Executive Director. These appointments were made to replace Roderick McIllree, who stepped down from the Board to pursue his other business interests, and Non-Executive Chairman Michael Hutchinson, who retired in March 2017. We would like to thank them both for the excellent contribution they have made toward the advancement of the Company over the years and wish them the best for their future endeavours.

Post period end Mr Frizelle resigned as Non-Executive Director and Chairman for personal reasons. The Board would like to take this opportunity to once again thank Tony for his contribution and to wish him well. The process to appoint a new Chairman is underway and an announcement will be made at the appropriate time. In August 2017 we were pleased to announce the appointment of Mr. Mikhail Leskov, a process engineer and metallurgist with more than 35 years’ experience, as a senior adviser to assist the Company in the development and commencement of gold and copper production at KB. Mr Leskov will work closely with our partner, as we look to make use of processing facilities at the nearby producing gold and copper mines at Madneuli and Sakdrisi.

Corporate and Financial Review

As an exploration and development company which has no revenue we are reporting a loss for the six months ended 30 June 2017 of GBP1,083,711 (2016: GBP497,980). This loss for the period includes exceptional items totalling GBP384,136 (2016: GBP23,097) related to foreign exchange losses and share option expenses. The overall results are in line with our budget and the significant increase in activity at our base of operations in Georgia during the period.

During the period the Company successfully raised GBP5,463,942 million by way of a placing of 34,149,638 new ordinary shares of no par value in the capital of the Company. The funds raised will enable the Company to expand the resource development programme at the KB copper and gold project in Georgia.

Post period end we satisfied our obligation to contribute an initial commitment of US$6 million, thereby earning our 50% in JSC Georgian Copper & Gold (‘GCG’) in accordance with the Shareholders Agreement between GEO’s wholly owned subsidiary GMC Investments Limited (‘GMC’) and JSC Caucasian Mining Group (‘CMG’). CMG were pleased to confirm the initial commitment and gave their full support for the phased future development of KB.

Outlook

I would like to thank the Board and advisors for all their hard work during the period. I would also like to take this opportunity to thank our shareholders, both new and existing, for the support they have shown towards the Company. This is an exciting time for the Company. Our objective is to transform GEO into a major European copper and gold production and development company by proving up the epithermal geological model we have for the KB Project and at the same time achieve our 50Mt-70Mt exploration target. All results received to date have been consistent with our model and have therefore served to strengthen our belief that KB has the potential to become a large scale copper-gold operation on the Tethyan Belt. With this in mind I look forward to providing further updates on our progress in the months ahead.

Gregory Kuenzel

Managing Director

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