Goldrock Mines Corp Announces Robust Lindero Feasibility Study with 109,000 Oz Annual Production
17.04.2013 | Marketwire
Cash Operating Cost of US$647, After-tax NPV and IRR of $215 Million and 33.4% at US$1,400/Oz Gold VANCOUVER, 04/17/13 - Goldrock Mines Corp. (TSX VENTURE: GRM) ("Goldrock" or the "Company") is pleased to announce the results of a positive Feasibility Study by Kappes, Cassiday & Associates ("KCA"), Mine Development Associates ("MDA") and AMEC Americas Limited ("AMEC") to develop its 100% owned and permitted Lindero gold deposit in the Salta province, Argentina the "Lindero Project"). The economic assessment for the Feasibility Study estimates the project will produce an average of 109,000 ounces of gold per annum for the first 9 years of the mine life with a total life of mine production of 1.037 million ounces.
Highlights of the Feasibility Study include: (1), (2), (3)
- An average of 128,000 ounces gold production in the first three years;
- Developmental capital costs of US$155.4 million (3), inclusive of 3 months of working capital, and First Fills (including lime, cyanide and carbon);
- Pre-tax Internal Rate of Return of 40.9%;
- After-tax Internal Rate of Return of 33.4%;
- After-tax NPV of US$215 million;
- Payback period of 24 months;
- Cash operating costs of US$647/oz gold (4);
- All-in sustaining cash costs of US$703/oz gold (5);
- After-tax Internal Rate of Return @ US$1200 and US$1300 /oz Gold are 21.7% and 27.6%.
The Feasibility Study demonstrates a straightforward mining project including a shallow open pit mine, three stage ore crushing, conventional heap leaching, and a carbon adsorption-desorption-recovery ("ADR") processing plant for precious metal recovery.
Although the mineral resources currently outlined on the Lindero Project could support a significantly higher mining rate and production profile, it is the Company's preference to build a low capital cost and smaller footprint operation. This initial lower risk mining and processing scenario will act as a foundation for future production growth and will also provide the Company with the opportunity to fund possible future expansions including the evaluation and possible development of the adjacent Arizaro deposit from internally generated cash flow.
Paul Matysek, President and CEO, commented "The completion of the Lindero Feasibility Study marks an important milestone towards our goal of becoming a gold producer. We are pleased to be able to deliver a technically and financially robust project with modest capital requirements, a shorter construction schedule and an accelerated time-line to positive cash flow generation. It is also noted that the project's after-tax NPV of US$215M (using a $1,400 gold price) is over 5 times our current market capital ($42.6M @ $0.65 per share). The project is already permitted for development and has strong Salta provincial government and community support. Salta is a mining friendly jurisdiction that wants Lindero to be the first gold mine to be put into production in the province (Argentina is the 12th largest producer of gold in the world). With the completion of the Feasibility Study and project permitting, the Company is now focused on funding alternatives for the project."
Table 1: Base Case Operating Highlights and Project Performance
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Financial Analysis (All funds in US$)
Internal Rate of Return (IRR), Pre-tax 40.9%
Internal Rate of Return (IRR), After-tax 33.4%
Average Annual Cash Flow, Pre-tax(7) $ 78,430,000
Net Present Value @ 5%, Pre-tax $ 313,473,000
Average Annual Cash Flow, After-tax(7) $ 54,468,000
Net Present Value @ 5%, After-tax $ 215,044,000
Gold Price Assumption ($/Ounce) $ 1,400
After-tax Pay Back Period 24 months
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Capital Costs
Pre-Production Capital $ 139,802,000
Working Capital and initial fills $ 15,578,000
Sustaining Capital (life of mine) $ 2,666,000
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Operating Costs (average life of mine)
Mining $ 4.77/tonne
Processing $ 4.18/tonne
General and Administration $ 1.12/tonne
Total Operating Cost per /Tonne Ore $ 10.07
Cash Operating Costs (per oz of gold)(4) $ 647
All-in Sustaining Cash Costs(5) $ 703
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Production Data
Life of Mine 1,037,000 ozs
Mine Throughput (ore) 65,546,000 tonnes
Metallurgical Recovery Au 68.3%
Average Annual Gold Production(6) 109,000 ozs
Average LOM Strip Ratio (waste: ore) 1.79:1
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Financial Analysis
The three-year trailing average gold price at December 31, 2012 was $US1487. The Company used a base case gold price of US$1,400 per ounce of gold for this Feasibility Study. The base case financial analysis indicates an after-tax IRR of 33.4% generating $57.4 million average annual after-tax cash flow(7) (first 9 years) and a payback period of 2 years.
Downside and upside sensitivity cases indicate that the project generates a 21.7% after-tax IRR at US$1,200-per-ounce gold price, 27.6% at US$1,300 per ounce, 39.0% at US$1,500 and 44.5% at US$1,600 per ounce of gold, indicating that project returns are both robust at historical gold prices and positively leveraged to higher gold prices. Leverage to various prices of gold is detailed in Table 2 below.
Table 2 - Financial Sensitivities (Gold Price, Capital and Operating Cost)
for the Lindero Project
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After Tax NPV (US$M)(i) After Tax IRR (%)(i)
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Gold
Pri- Base Gold Base
ce $1,200 $1,300 Case $1,500 $1,600 Price $1,200 $1,300 Case $1,500 $1,600
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Perce-
US$M 121.1 168.1 215.0 262.0 308.9 ntage 21.7% 27.6% 33.4% 39.0% 44.5%
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(i) Note: Financials @ 5% Discount Rate
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After Tax NPV (US$M)(i) After Tax IRR (%)(i)
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Gold Base Gold Base
Price 80% 90% Case 110% 120% Price 80% 90% Case 110% 120%
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Capex 242.6 228.8 215.0 201.3 187.5 Capex 44.2% 38.2% 33.4% 29.4% 26.0%
Opex 278.1 246.6 215.0 183.5 152.0 Opex 40.9% 37.1% 33.4% 29.5% 25.7%
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(i) Note: Financials @ 5% Discount Rate
Project Location and Infrastructure
The Lindero Project is located 250 km due west of the city of Salta, northwestern Argentina. Access is by all-weather road either from the City of Salta or alternatively from Chile. The project is in the sparsely populated Puna district, however the area is well serviced with infrastructure including, an airstrip, national and provincial roads, gas pipelines and an international railway line. The railway joins the city of Salta with the village of Tolar Grande (approximately 75 km from the project) and the deep-sea port of Puerto Angamos (Antofagasta) on the Chilean coast. The line is currently operational with a weekly service.
A review of power sourcing options during the Feasibility Study indicated that natural gas-fueled generation is the most technically viable and efficient option for the Lindero Project. Power will be generated utilizing natural gas supplied by a connection to the regional Gasoducto de la Puna gas pipeline built by the Salta government to encourage mining and other economic development in the Puna region. Natural gas is available at a point in the village of Pocitos, approximately 160 km by road from the mine site. A "Virtual Gas Pipeline" is proposed for Lindero which consists of a mother station installed in Pocitos (at the source), comprising two compressor/refrigeration units, a receiving station installed at the mine site, four trailer trucks to transport the natural gas.
Water for the Lindero Project will be supplied from four wells; two located on site near the accommodation camp and two located about 13 km to the east of the site in the Chachas area. Production available from the two on-site wells is estimated at approximately 50 m3/hr, with an additional 140 m3/hr available from the two off-site wells. It is assumed that only one of the two off-site wells will be operating at any given time (with the other on standby) to meet anticipated project needs with the total water supply capacity approximately double (190 m3/hr) the projects requirements of approximately 95 m3/hr.
Mining
The mine development has been planned as an open-pit mine with conventional haul trucks, hydraulic shovels, and front-end loading equipment. The mine starter Phase 1 and 2 pits, which have low material movement requirements (stripping ratio of just 0.48:1) will be mined by a contractor, while owner mining equipment will be used for pit Phases 3 and 4. The changeover to owner mining equipment is planned for year 3. Drilling and blasting will be undertaken by the owner through the life of mine to minimize risks to ore quality and mining contractor performance. The life of mine stripping ratio is 1.79:1. Ore will be trucked to a three stage crushing facility near the mine where it will be crushed to 80% minus 9mm and then conveyed to the heap leach pad. Waste rock from the mine will be sent to a single dump located adjacent to the pit. The current production schedule uses a 0.35 g Au/t cut-off grade to define ore, which is higher than the economic break-even cut-off grade. Mineralized waste is defined as Measured and Indicated resources above the economic cut-off and the reserve 0.35 g Au/t cut-off. The mineralized waste is to be stockpiled on top of the waste dump with easy access for re-handle to the crusher. This material includes about 16.7 million tonnes at 0.30 g Au/t or 162,000 contained ounces of gold and this material could potentially be processed at a profit at the end of the mine life.
Metallurgy and Processing
The conventional heap leach facility for the Lindero Project is designed for a nominal production rate of 6,750,000 metric tones (Mt) per year (18,750 Mt per day) with a total heap capacity of approximately 68 Mt at a nominal crush size of 80% passing -9 mm. The ore will be fine-crushed using three-stage crushing with a circuit consisting of a primary jaw crusher, secondary cone crushers and an HPGR crusher. It will then be conveyor-stacked on the leach pad in 10 m lifts. 250 ppm sodium cyanide solution will be irrigated over the stacked material, via buried drip emitters at 10 L/m2/h during a 150 day leach cycle. - 75 days open circuit, 75 days recycled leach solution (during the first three years of the operation). The recycled solution enables the optimal design of solution ponds and downstream plant volumes. After three years of this configuration, there is a planned change over to all open circuit with no recycled solution.
Gold is recovered from a heap leach pregnant solution via carbon adsorption-desorption facility (ADR plant). Lime will be used for pH control of the cyanide solution, and has been calculated at 2.5 kg/t, a conservative value for the ore which demonstrates a neutral to alkaline pH. Cyanide consumptions are estimated to be 0.45 kg/t NaCN.
Gold recoveries used in the Feasibility Study were developed using results from five stages of laboratory column test work (over 50, 1.5 to 5 metres columns) that were adjusted downwards to compensate for actual heap performance. Overall life of mine gold recovery is projected at 68.3%.
The deposit has minor copper mineralization dominantly hosted in chalcopyrite, a mineral with a low copper dissolution to cyanide solutions. Testwork did not show a significant effect on gold leaching kinetics as a function of copper present and pregnant solution testwork showed minimal copper accumulation. However, the Lindero circuit has included the design of a SART (sulphidisation-acidification-recycle-thickening) plant if required because of a gradual build-up of copper in the pregnant leach solution. Whilst not included in the project initial capital estimation, a SART plant would produce copper as a byproduct and reduce the projects cyanide cost and potentially be utilized for the treatment of the Arizaro deposit ore which has a higher copper content than Lindero (if a mineral resource and a mineral reserve is delineated at this adjacent deposit).
Capital Costs
The following table identifies key capital expenditures before Commercial production.
Table 3: Initial Project Capital(3)
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Process Plant Direct Costs(All funds in US$)
General $ 7,930,000
Camp $ 2,961,000
Mobile Equipment $ 3,593,000
Crushing $ 21,242,000
Ore Reclaim & Stacking $ 10,172,000
Heap Leach & Solution Handling $ 13,823,000
ADR $ 5,739,000
Electrowinning & Refining $ 2,069,000
Reagents $ 705,000
Power $ 15,961,000
Water Supply & Distribution $ 4,148,000
Facilities $ 3,758,000
Fuel $ 167,000
Laboratory $ 1,870,000
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$ 94,138,000
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Mining Direct Costs - Total $ 2,490,000
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Other Direct Costs
Contingency $ 11,667,000
Spare Parts 3,868,000
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$ 15,535,000
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Freight $ 2,150,000
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Import tax $ 125,000
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Indirect Costs $ 3,610,000
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Initial Fills $ 2,437,000
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EPCM $ 13,151,000
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Owner's Costs $ 8,603,000
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Sub-total Before Working Capital & VAT $ 142,239,000
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Working Capital $ 13,141,000
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TOTAL Pre-production Capital (Excluding VAT) $ 155,380,000
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Table 4: Expansion & Sustaining Capital (Year 1 to 9)(3)
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Process Plant(All funds in US$)
Heap Leach & Solution Handling Expansion $ 9,661,000
ADR Plant Expansion $ 912,000
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$ 10,573,000
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Mining - Total(i) $ 41,309,000
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Other Direct Costs
Contingency $ 3,453,000
Spare Parts $ 56,000
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$ 3,509,000
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Freight $ 4,604,000
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Import tax $ 406,000
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Indirect Costs $ 725,000
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EPCM $ 1,447,000
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Exploration Costs $ 1,500,000
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TOTAL Future Capital (Excluding VAT) $ 64,073,000
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(i) Primary mining equipment, support equipment, other mining capital.
Mineral Resources and Reserves
For the Feasibility Study, Goldrock retained AMEC to complete a re-tabulation of the Mineral Resources for the Lindero heap leach gold project, previously estimated by AMEC in 2009. The Mineral Resource estimation is based on a block model that includes 17,753 samples from 121 core holes (34,656 m) and 32 trenches (1,268 m). The block grade estimates and Mineral Resource classification have not changed from the previous AMEC study (please refer to the Company's press release dated May 6, 2010, Filing of NI 43-101 Technical Report for Lindero Pre-Feasibility Study for more details).
AMEC used updated gold prices, mining, and processing costs provided by Goldrock (using data from MDA and KCA) to calculate a marginal cut-off grade and to generate an updated optimized pit shell. The updated gold prices, and mining and processing costs, were reviewed by AMEC and are comparable with other similar AMEC projects.
Mineral Resources were constrained within a pit shell established using Whittle® mine optimization software. For the resources estimation (see Table 5 below), AMEC used gold prices, mining process and refining costs, metallurgical recoveries and updated pit design parameters provided by Goldrock and its consultants.
Table 5: Mineral Resource Summary (0.15 g/t Au cut-off grade)
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Gold Gold Copper
Contained Grade Grade Tonnage
(ounces) (g/t) (%) (t)
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Total Measured &
Indicated Mineral
Resource 2,190,000 0.53 0.10 128,700,000
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Measured Mineral
Resource 700,000 0.76 0.11 28,500,000
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Indicated Mineral
Resource 1,510,000 0.47 0.10 100,200,000
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Inferred Mineral
Resource 710,000 0.37 0.09 59,700,000
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Notes related to Mineral Resource Summary Table:
1. Mineral Resources are reported above using a 0.15 g/t Au cut-off grade.
2. Mineral Resources are reported with internal dilution appropriate for a 10 x 10 x 8 m selective mining unit and assuming cut-off grades between 0.1 g/t and 0.5 g/t Au. No external dilution is included.
3. Mineral Resources are reported using a long-term gold price of US$1,450/oz, mining costs at US$2.10 per tonne of material (including G&A), with total processing and process G&A costs of US$5.20 per tonne of ore and an average process recovery of 70%. The refinery costs net of pay factor were estimated to be US$6.19 per ounce gold.
4. Mineral Resources are reported within a conceptual pit shell using a slope angle (52 degrees) consistent with the geotechnical consultant's recommendations (Seegmiller, August 2012).
5. Note that Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
6. Rounding of numbers in the Mineral Resources listed above may cause apparent inconsistencies.
Mineral Reserves
Mineral Reserves for the Lindero project were developed by applying relevant economic criteria to define the economically extractable portions of the resource. MDA developed the reserves to meet NI 43-101 standards. The NI 43-101 standards rely on the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the CIM council.
Table 6: Mineral Reserve Summary
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Gold Gold
Contained Grade Tonnage
(ounces) (g/t) (t)
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Total Proven & Probable
Mineral Reserve 1,519,000 0.72 65,546,000
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Proven Mineral Reserve 641,000 0.82 24,305,000
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Probable Mineral Reserve 878,000 0.66 41,240,000
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Notes related to the Mineral Reserve Summary Table:
1. Mineral reserves are reported based on open pit mining within designed pits based on gold 0.35 g/t cut-off grade.
2. The cut-off grade and pit designs are considered appropriate for long term gold prices of US$1,400/oz gold.
3. Rounding of numbers in the mineral reserves listed above may cause apparent inconsistencies.
Environmental, Permitting, and Community Relations
In October 2011, the Company received notice from the Salta Provincial Government that it had granted the environmental permit (Declaracion de Impacto Ambiental) allowing the Company to develop the Lindero open pit, heap leach gold mine. This is the primary permit required for project development. The project has received strong local and provincial community and government support. Lindero is the first bulk tonnage open pit gold deposit to be permitted in Salta Province.
Financing and Cash Resources
Discussions are advancing with a number of project debt, equity, equipment and other finance providers to finance Lindero to full production. With the Feasibility Study now completed, the Company will move aggressively to finalize project financing and commence project development.
Opportunities
The current project tax consideration includes a 4.76% export tax charge and this full amount has been included in the Feasibility Study financial analysis. For mineral products produced in the isolated (undeveloped) Puna region of Argentina a reimbursement of part of the export tax is possible. Presently, the reimbursement is 2.5% and, set forth by Resolution No. 762/93 of the Ministry of Economy, the overall export tax would thus be reduced to 2.26%. Reimbursements of the export tax is allowed in two circumstances; a) for certain exported minerals or product extracted from the Puna region, or b) for materials elaborated from mineral substances extracted from the Puna region. Currently gold-silver dore is not included in the list of mineral products to which this reimbursement applies however, the Company has started a process to have gold-silver dore recognized as an approved Puna mineral product. If successful, this tax rebate (2.5%) would be US$24 million over the current life of mine plan.
Increases in Mineral Reserves and mine life may be achieved if additional resource definition drilling to investigate continuity of the mineralization classified in the resource model as Inferred is undertaken, and if this drilling is successful in moving this Inferred material into the Measured and Indicated category. Currently in the mine plan using a 0.25 g/t Au cut-off there is approximately 10.4 Million tonnes @ 0.45 g/t Au of Inferred resources (149,000) ounces which is classified as waste for scheduling and cash flow purposes. The majority of the material (93%) is located in pit phases III and IV. An allowance for exploration drilling has been provided for in the project capital expenditure.
The mine planning is based on the use of an elevated cut-off grade with the stockpiling of material below this cut off undertaken. In the current mine plan, a total of 16.7 M tonnes of mineralized waste @ 0.30 g/t Au (162,000 ounces) is stockpiled. Depending on the price of gold and the operating cost regime at the end of the mine life, this material maybe economical to treat, adding significant life of mine gold production.
Qualified Persons
The scientific and technical data contained in this news release pertaining to the Lindero Project has been reviewed and approved by the following Qualified Persons under NI 43-101, who consent to the inclusion of their names in this release. The Feasibility Study was prepared by Kappes, Cassiday & Associates under the supervision of Richard Taylor, P.E., the Mineral Reserve calculation was completed under the supervision of Thomas L. Dyer, P.E., from Mine Development Associates, the Mineral Resource estimation was completed under the supervision of David Thomas P.Geo from AMEC, who are independent Qualified Persons as defined under National Instrument 43-101. David Keough, F.AusIMM (CP), COO and a Director of Goldrock Mines Corp., is the Company's designated Qualified Person for the purposes of the Feasibility Study. Messrs. Taylor, Dyer, Thomas, and Keough have reviewed and approved the scientific and technical contents of this press release.
ON BEHALF OF THE BOARD OF DIRECTORS,
Paul Matysek, M.Sc., P.Geo
President and CEO
Notes to this press release
1. All currency figures are expressed in US dollars, unless noted otherwise.
2. Base case gold price for the Feasibility Study is US$1,400/oz. Please see caution regarding forward-looking information.
3. The pre-production and expansion capital costs do not include the refundable Value Added Tax (VAT) which is charged at 10.5% for machinery, equipment and fixed steel buildings, the remaining items are subject to 21%; and the sustaining capital does not include the salvage value of plant and equipment or the reclamation and closure costs. VAT is fully refundable.
4. Cash operating costs per ounce represent the mine site operating costs such as mining, processing, metal transport, refining and site general and administration expenses, and are exclusive of amortization, reclamation, capital, and exploration and development costs.
5. All-in sustaining cash costs include sustaining capital, corporate general and administration expenses, exploration and government imposed provincial royalties.
6. Average annual production refers to the first 9 years of mine life.
7. Indicates operating cash-flow and before capital.
Detailed Report
The NI 43-101 Technical Report - Lindero Feasibility Study will be filed within 45 days on SEDAR at www.sedar.com and will be also available at that time on Goldrock's corporate website at www.goldrockmines.com.
About Goldrock Mines Corp.
Goldrock Mines Corp. is an emerging gold producer focused on the development of its 100% owned Lindero gold deposit located in Salta province, northwestern Argentina. The Company has been granted the primary mining permit by the Salta provincial government allowing the Company to develop the Lindero open pit, heap leach gold mine. The Company anticipates commercial production in 2015 at an initial throughput rate of 15,000 TPD, increasing to 18,750 TPD during the first year. Average annual production will be 109,000 ounces during the first nine years. Goldrock's objective is to become a mid-tier gold producer with annual gold production of 250,000 ounces per year through organic growth and accretive acquisitions of near-term producing assets.
Caution Regarding Forward-Looking Statements
This press release includes certain statements that may be deemed "forward-looking statements". All statements in this discussion, other than statements of historical facts, that address future exploration drilling, exploration activities, anticipated metal production, internal rate of return, estimated ore grades, commencement of production estimates and projected exploration and capital expenditures (including costs and other estimates upon which such projections are based) and events or developments that the Company expects, are forward looking statements. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include metal prices, exploration success, continued availability of capital and financing, and general economic, market or business conditions. Accordingly, readers should not place undue reliance on forward-looking statements.
Neither the TSX Venture Exchange, nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Goldrock Mines Corp.
(604) 681-4462
www.goldrockmines.com