Zephyr Minerals announces positive preliminary economic assessment for the Dawson Gold Proect
HALIFAX, Feb. 7, 2017 - Zephyr Minerals Ltd. ("Zephyr" or the "Company") (TSX-V: ZFR) (OTC: ZPHYF), is pleased to announce positive results of a Preliminary Economic Assessment ("PEA") on its 100%-owned Dawson Gold Project ("Dawson") in Colorado, USA. The PEA provides a base case assessment of developing the Dawson Segment mineral resource and does not include the Windy Gulch Segment or the Windy Point Segment. PEA HIGHLIGHTS
Base case parameters assume a gold price of US$1,250/oz and an exchange rate (US$ to C$) of 0.76.
- Pre-Tax IRR and NPV5% of 66% and $46.7 million (US$35.5 million) and a 2.4 year payback of initial capital;
- After-Tax IRR and NPV5% of 46% and $29.1 million (US$22.1 million) and a payback of 2.7 years;
- Low initial capital of $43.6 million (US$33.2 million) including contingency;
- Life of mine ("LOM") cash cost of US$563/oz(1);
- LOM all in sustaining cost, including cash cost, of US$692/oz(2);
- LOM diluted head grade 9.2 grams per tonne ("g/t") (0.27 ounces per short ton ("oz/st"));
- LOM gold combined gravity and float recovery of 92%.
| (1) | Cash cost includes mining cost, mine-level G&A, mill and refining costs. |
| (2) | Sustaining capital cost includes underground equipment and waste development costs after the mill has been commissioned. |
Loren Komperdo, President and CEO of Zephyr stated "Management is pleased with the results of this initial independent economic assessment of our 100% owned Dawson gold project. This PEA supports that the gold resources at the Dawson Segment have potential for an economic near-term, low capital and high grade underground gold mine. We are confident that we can further enhance the already robust economics by identifying additional resources at the Dawson segment which is open down-plunge and up-plunge; and also by incorporating potential resources from the Windy Gulch segment which is open to the east and at depth, and the Windy Point segment which is open along strike and at depth."
The PEA was prepared by independent engineering firm, Golder Associates Ltd., with input from a number of other specialized and experienced consulting firms. A technical report prepared in compliance with National Instrument 43-101 of the Canadian Securities Administrators will be filed on SEDAR and the company's website within 45 days.
This PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There has been insufficient drilling to define the inferred resources as indicted or measured mineral resource; however, it is reasonable to expect that the inferred mineral resources could be upgraded to indicated and possibly measured resources with continued drilling. There is no guarantee that any part of the mineral resources discussed herein will be converted into a mineral reserve in the future.
The Dawson project is characterized by granite hosted high grade gold mineralization in discrete bodies in a 3km long, east- west trending shear zone. The gold mineralized bodies typically dip steeply to the north and range between 1m to 15m in width, averaging approx. 3.5m. The gold occurs as free gold in hairline cracks and along mineral grain boundaries.
The PEA envisages an owner-operated, five-year underground mine project encompassing the Dawson Segment of the Dawson project. The Dawson Segment provides 450,000 tons (409,000 tonnes) of mill feed at an average diluted grade of 0.27 oz/tn (9.2 g/t) gold with combined gravity and float recovery of 92%.
Key Aspects and Assumptions of the PEA
| Gold Price | US$1,250/oz | |
| Exchange Rate (US$ to C$) | 0.76 | |
| Mine Life | 5 years | |
| Total Resource Mined/Milled | 450,000 tons (409,000 tonnes) | |
| Processing Rate | 330 tn(2) /day (300 tonnes/day) | |
| Diluted Head Grade | 0.27 oz/tn (9.2 g/t) gold | |
| Total Gold Ounces Recovered | 111,300 oz | |
| Average Annual Gold Production | 22,260 oz | |
| Peak Annual Gold Production | 26,680 oz | |
| Gold Recovery Rate | 92% | |
| Capital Cost(1) | $33.2 US million ($43.7 million) | |
| Operating Cost (LOM) | $58.3 US million ($76.7 million) | |
| Unit Site Operating Costs (US$ per tn processed) | ||
| Mining Costs | $91/tn | |
| Processing Costs | $31/tn | |
| G&A | $7/tn | |
| Smelting and Refining Cost | $22/tn | |
| LOM Average Cash Cost | $151/tn | |
| LOM Cash Cost Including Sustaining Cost | $186/tn | |
| Royalties | 1.5% | |
| Corporate Income Tax / Colorado Mining Tax | 35% / 4.6% | |
| 1.) | Includes contingency of 10% to 40% | |
| 2.) | tn = short tons |
Metal Price Sensitivity
| Gold Price (US$/oz) | Pretax NPV5% (US$M) | Pretx IRR | Pretax Payback (years) | After-tax NPV5% (US$M) | After-tax IRR | After-tax Payback |
| $1,150 | $25.92 | 47% | 2.8 | $15.52 | 33% | 3.1 |
| $1,250 | $35.52 | 66% | 2.4 | $22.10 | 46% | 2.7 |
| $1,350 | $45.12 | 86% | 2.2 | $28.39 | 59% | 2.5 |
| $1,450 | $54.72 | 110% | 2.0 | $34.49 | 72% | 2.3 |
Discount Rate Sensitivity
| Discount Rate | Pretax NPV (US$M) | After-tax NPV (US$M) |
| 0% | $43.0 | $28.2 |
| 5% | $35.5 | $22.1 |
| 8% | $31.7 | $19.2 |
| 10% | $29.4 | $17.4 |
Opportunities to Enhance Value
In addition to the favorable economics outlined in the PEA, there are numerous opportunities to further enhance project value though additional resource expansion and optimization work at Dawson.
- Additional metallurgical testing to further optimize gold recoveries;
- The Dawson Segment resource is open to expansion down plunge to the south-west as well as up plunge to the north-west;
- The Windy Gulch Segment resource is open to expansion at depth and to the south-west;
- Exploration program at Windy Point - historic drilling at Windy Point; has demonstrated high grade gold;
- Exploration potential exists at Sentinel and Copper King;
- Assess lower gold recoveries in area of poor diamond drill core recovery;
- Marketing studies to establish economically optimum smelting options for gold concentrates;
- Optimize the mine design and production schedule.
Capital and Operating Cost Summary
The preproduction capital cost estimate includes mine, mill and tailings capital expenditures, environmental and permitting costs, owners and indirect costs and contingency.
Sustaining capital cost includes mine equipment replacement, infrastructure upgrades including stope development and tailings maintenance.
| Capital Costs (US$ million) | Total | |
| Surface Infrastructure | 2.5 | |
| Mining | 9.4 | |
| Electrical | 1.5 | |
| Mill and Tailings Management | 10.8 | |
| Miscellaneous | 9.0 | |
| Total Capital Costs | 33.2 | |
| 1.) | Numbers may not add due to rounding | |
| 2.) | Total includes contingency |
Operating Costs Summary
| Operating Costs (US$) | US$/tn(2) processed | US$/oz |
| Mining Costs | 91 | 339 |
| Processing Costs | 31 | 116 |
| G&A Costs | 7 | 27 |
| Smelting & Refining Cost | 22 | 82 |
| LOM Total Cash Cost(1) | 151 | 563 |
| Sustaining Capital | 35 | 129 |
| LOM Cash Cost plus Sustaining Capital | 186 | 692 |
| (1) | Cash cost includes mining cost, mine-level G&A, mill and refining cost; numbers may not add due to rounding | |
| (2) | tn = short tons |
Dawson Segment Mineral Resource Estimate Effective July 19, 2013
| Resource | Au Cut-Off | Tonnes | Tons | Au Grade | **Ounces |
| Inferred | 0.12 oz/tn | 371,000 | 409,000 | 0.29 oz/tn | 120,400 |
| Inferred | *0.15 oz/tn | 343,000 | 378,000 | 0.31 oz/tn | 116,300 |
| Inferred | 0.18 oz/tn | 310,000 | 342,000 | 0.32 oz/tn | 110,400 |
| *Resource statement cut-off value of 0.15 oz/tn (5 g/t) Au is highlighted by bolding | ||
| **Ounces may not sum due to rounding | ||
| Notes: | ||
| (1) | Tonnes and tons have been rounded to the nearest 1,000. | |
| (2) | Ounces have been calculated from reported tonnes and g/t Au grade and are rounded to the nearest 100 ounces | |
| (3) | Contributing 5 ft. (1.5 m) assay composites were capped at 1.17 oz/tn (40 g/t) Au | |
| (4) | The resource statement cut-off grade of 0.15 oz/tn (5.00 g/t) Au is highlighted above through bolding and reflects underground development potential based on a Au price of $US1,200/ounce. | |
| (5) | A density value of 0.082 tn/ft3 (2.63 g/cm3) was used for the Dawson Segment | |
| (6) | Mineral resources were estimated in conformance with the Canadian Institute of Mining, Metallurgy and Petroleum – Standards on Mineral Resources and Reserves – Definitions and Guidelines, as referenced in NI 43-101. | |
Windy Gulch Resource Estimate
Following a successful 2016 drill campaign at Windy Gulch, Golder has prepared an updated resource estimate. The resource estimate is based on assay data from drill and surface channel sample programs completed by Zephyr and its predecessors between 1983 and 2016. The deposit consists of pit-constrained resource and an underground resource. Combined, the Windy Gulch Segment consists of 78,000 tons of 0.12 oz/tn of Indicated Resource and 20,000 tons of 0.16 oz/tn at the Inferred Resource level. Windy Gulch is open to the east and at depth.
Windy Gulch Pit-constrained and Underground Mineral Resource Estimate Effective January 17, 2017
| Resource | Tons (Short Tons) | Gold | Gold |
| Pit-constrained Resource (0.035 oz/tn cut-off) | |||
| Indicated | 67,000 | 0.11 | 7,300 |
| Inferred | 6,000 | 0.09 | 500 |
| Underground Resource (0.093 oz/tn cut-off) | |||
| Indicated | 11,000 | 0.18 | 2,000 |
| Inferred | 14,000 | 0.19 | 2,700 |
| Total Indicated | 78,000 | 0.12 | 9,300 |
| Total Inferred | 20,000 | 0.16 | 3,200 |
| Notes: | |||
| 1) | All pit-constrained resources constrained to a pit shell and reported at a 0.035 oz/t Au cut-off. | ||
| 2) | All underground resources reported outside and below the pit shell at a 0.093 oz/t Au cut-off. | ||
| 3) | Resource tonnages have been rounded to the nearest 1,000 tons. | ||
| 4) | Grade estimates have been rounded to the nearest one hundredth of an ounce of gold. | ||
| 5) | Calculated Au ounces are rounded to the nearest 100 ounces. | ||
| 6) | Resource estimates do not include mining recovery or dilution factors. | ||
| 7) | Resource estimates have accounted for metallurgical recovery. | ||
| 8) | Calculated Au ounces may not add up correctly due to rounding. | ||
The Mineral Resource Estimate for the Windy Gulch Segment has been prepared by Brian Thomas (P.Geo.), an Independent QP as defined by NI 43-101 and is compliant with CIM standards and guidelines for reporting Mineral Resources. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of this Mineral Resource will be converted into Mineral Reserve. Inferred Mineral Resources are too geologically speculative to have economic considerations applied to them to be categorized as Mineral Reserves.
The mineral resource estimate represents an pit-constrained mining scenario and is derived from a Datamine constructed block model (block size = 10 ft long by 5 ft wide by 5 ft high) consisting of five mineral domains (Zones 1 to 5). Pit-constrained resources are reported within an economic pit shell outline at a 0.035 oz/tn Au cut-off, and underground resources are reported outside and below the pit shell at a 0.093 oz/t Au cut-off. Zones 1 and 2 were "unfolded" to reduce the impact of minor changes in strike and dip orientations and had top cuts of 1.167 oz/tn (40 g/t) applied to raw assay values in order to restrict the influence of outlier values. Raw samples were composited to an average length of 3 ft. The five domains were estimated using the Inverse Distance Cubed (ID3) interpolation method. Density values were estimated from gas pycnometer measurements taken from half core samples and, where absent, were assigned average default values of 2.75 t/m3 (Zone 1) and 2.73 t/m3 (Zones 2 to 5). The resources reported are based on a "blocks above cut-off" basis and were then examined visually by Golder to confirm reasonable continuity.
Qualified Persons and Quality Assurance/Quality Control
The "Qualified Person" (QP), as such term is defined in NI 43-101, who has classified the Dawson Mineral Resource Estimate as being current at the effective date of the PEA is Mr. Michael Cullen, P.Geo., Chief Geologist at Mercator Geological Services Limited. Mr. Cullen is an independent Qualified Person in accordance with NI 43-101 and has reviewed and approved the information regarding the Resource estimate in this News Release.
Mark Graves (P.Geo.), who is a geologist independent of Zephyr, has reviewed and approved the geological technical information in this news release, including sampling, analytical and test data underlying such information and has visited, reviewed and verified the QA/QC procedures used by Zephyr at the Dawson Project and found them to be consistent with industry standards.
The QP, who prepared the Windy Gulch Mineral Resource Estimate presented in this news release is Mr. Brian Thomas (P.Geo.), who is a geologist independent of Zephyr and an employee of Golder Associates Ltd., has reviewed and approved the geological technical information in this news release, including sampling, analytical and test data underlying such information and has visited, reviewed and verified the QA/QC procedures used by Zephyr at the Windy Gulch Project and found them to be consistent with industry standards. In Golder's opinion, the Windy Gulch Mineral Resource Estimate disclosed herein is compliant with CIM Standards and Guidelines.
The QP who prepared metallurgical content is Mr. H.M. Matt Bolu, Principal Metallurgical Engineer of BOMENCO Inc., and the Company's metallurgical consultant, who is a P.Eng. registered with the Association of Professional Engineers and Geoscientists of BC (APEGBC).
Mr. Doug Roy, P.Eng., with MineTech International Limited, is a Qualified Person as defined under National Instrument 43-101 and has reviewed the scientific and technical information in this news release with respect to the mine plan.
The Preliminary Economic Assessment has been compiled by Danny Tolmer (P.Eng.), an employee of Golder Associates Ltd., and an independent QP as defined by NI 43-101 and is compliant with CIM standards.
Golder is currently preparing a NI 43-101 PEA technical report, which will be filed on SEDAR (www.sedar.com) not later than 45 days after the date of this news release.
ABOUT ZEPHYR MINERALS
Zephyr Minerals Ltd. is a gold exploration and development company focused on advancing its flagship Dawson Gold Project in Colorado, USA. After completing a positive PEA, Zephyr is continuing to advance the project though permitting, additional exploration as well as further engineering work with a plan to develop a high grade, low cost underground gold mine.
ON BEALF OF THE BOARD
"Loren Komperdo"
Loren Komperdo, President & CEO
To be included in the Zephyr email database for Company updates please contact sean@zephyrminerals.com, or visit our website www.zephyrminerals.com for more information.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Note: >Certain statements made and information contained in this news release constitute "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events and include, but are not limited to, statements with respect to: the amount of mineral resources, the amount of future production over any period, net present value and internal rates of return of the proposed mining operation, capital costs, including start-up, sustaining capital and reclamation/closure costs, operating and working capital costs, strip ratios and mining rates, the proposed implementation schedule, mine life, metal price assumptions, cash flow forecasts, projected capital and operating costs, metal or mineral recoveries, mine life and production rates. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "anticipates", "plans", "projects", "estimates", "envisages", "assumes", "intends", "strategy", "goals", "objectives" or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be 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 the forward-looking statements. Material risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements include unsuccessful exploration results, accidents or equipment breakdowns, the risk of undiscovered title defects or problems with surface access, labour disputes or inability to attract the necessary work force, the potential for delays in exploration activities, the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, political risk, unanticipated changes in key management personnel and general economic, market or business conditions, and those risks described in the Company's most recent annual information form and management discussion and analysis filed on SEDAR at www.sedar.com. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. Forward-looking statements are based on current beliefs as well as various assumptions including, without limitation, the expectations and beliefs of management regarding the assumed long-term price of gold, the presence of and continuity of metals at the Madsen project at modeled grades, the capacities of various machinery and equipment, the availability of personnel, machinery and equipment at estimated prices, exchange rates, metals sales prices, appropriate discount rates; tax rates, and royalty rates applicable to the proposed mining operation; financing structure and costs; anticipated mining losses and dilution; metal recovery rates, reasonable contingency requirements; the negotiation of satisfactory terms with impacted third parties including local communities, access to financing, appropriate equipment and sufficient labour.
Although management considers these assumptions to be reasonable based on information currently available, such assumptions may prove to be incorrect. Many forward-looking statements are made assuming the correctness of other forward-looking statements, such as statements of net present value and internal rate of return, which are based on most of the other forward-looking statements and assumptions herein. The cost information is also prepared using current values, but the time for incurring the costs will be in the future and it is assumed costs will remain stable over the relevant period.
This news release may use the terms "measured", "indicated" and "inferred" as these terms are defined under Canada's National Instrument 43-101. U.S. Investors are advised that, while such terms are recognized and required by Canadian regulations, they are not recognized by the United States Securities and Exchange Commission ("SEC") and may not be comparable to similar information for United States mining or exploration companies. As such, certain information contained on this news release concerning descriptions of mineralization and resources under Canadian standards is not comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC. U.S. investors are cautioned not to assume that any part or all of the mineral deposits described in these categories will ever be converted into proven or probable reserves, as defined in the SEC's Industry Guide No. 7.
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Contact
Zephyr Minerals Ltd.
Investor inquiries:
Sean Tufford, VP Corporate Development
Tel: 902-446-4189