Combined Star - Orion South Feasibility Study NPV of $2.1 billion and IRR of 16 percent 34.4 million carat mineral reserve at US$242 per carat
SASKATOON, July 14, 2011 /CNW/ --
Stock Symbol: SGF: TSX
SASKATOON, July 14, 2011 /CNW/ - George H. Read, P. Geo., Senior Vice
President Exploration and Development of Shore Gold Inc. ('Shore'), is
very pleased to announce the positive results of the combined
Feasibility Study ('FS') on the Star - Orion South Kimberlites, which
include the 100 percent Shore owned Star Diamond Project, as well as
Star West and the Orion South Kimberlite, which fall within the
adjacent Fort à la Corne Joint Venture (FALC-JV: 66 percent Shore and
34 percent Newmont Mining Corporation of Canada Limited ('Newmont')).
The FS was led by Shore with significant contributions from independent
mining, processing and design consultants which include: P&E Mining
Consultants Inc. ('P&E'); Metso Minerals Industries Inc. ('Metso') and
AECOM Canada Ltd. ('AECOM'). A number of other independent consulting
firms and potential vendors also provided their study results to Shore
and P&E for use in developing the FS. All currency amounts are quoted
in Canadian Dollars, unless otherwise stated. The FS aims to present an
economic model which is within /-15 percent accuracy. Since work
commenced on the FS, the price of rough diamonds has continued to
increase and our diamond consultants, WWW International Diamond
Consultants Ltd. ('WWW'), inform us that current rough diamond prices
are on average approximately 30 to 35 percent higher than the February
2011 pricebook used in this FS and as such, are in agreement that the
FS is presented as a Base Case using the more conservative February
2011 pricebook Model diamond prices plus 15 percent, and Case 1, which
is calculated using the February 2011 pricebook High Model diamond
prices. Case 1 is presented for comparative purposes only.
President and CEO, Kenneth MacNeill, states: 'Shore is very pleased with
the positive results of the FS. The robust economics confirm that a
world class diamond mine is feasible in central Saskatchewan. The FS
takes a conservative approach to the economic model, which still
produces strong positive values. Shore Management and Directors
acknowledge the extensive and diligent work that has been performed by
Shore's technical team and associated consultants to reach this most
important milestone in the successful evaluation of the Star and Orion
South Kimberlites.'
The Combined Star - Orion South FS Highlights Include:
-- Probable Mineral Reserves of 279 million diluted tonnes at a
weighted average grade of 12.3 carats per hundred tonnes
('cpht') containing 34.4 million carats at a weighted average
price of US$242 per carat over the Life of Mine ('LOM');
-- Total diamond production of 34.4 million carats over a 20 year
LOM;
-- Robust project economics over a 20 year LOM due to proximity to
infrastructure (electric power, paved highways, railroads,
water and labour) in Saskatchewan;
-- The Base Case FS has a Net Present Value ('NPV') of $2.1
billion (using a 7 percent discount rate) for an Internal Rate
of Return ('IRR') of 16 percent before taxes and royalties and
an after-taxes and royalties NPV of $1.3 billion with an IRR of
14 percent;
-- The Case 1 FS has an NPV of $3.0 billion (using a 7 percent
discount rate) for an IRR of 19 percent before taxes and
royalties and an after-taxes and royalties NPV of $1.9 billion
with an IRR of 16 percent;
-- Pre-production capital cost of $1.9 billion with a total
capital cost of $2.5 billion (including direct, indirect costs
and contingency) over the LOM and an initial capital cost
payback period of 5.3 years.
Senior Vice President Exploration and Development, George Read, states:
'The combined FS shows that the Star and Orion South Kimberlites can be
economically developed as a world class diamond mine. This positive FS
includes a number of conservative parameters including highly
conservative geotechnical parameters resulting in shallow pit slopes
and very cautious trafficability constraints. The cautious
trafficability constraints require the use of lower efficiency 150
tonne haul trucks. Collectively, the shallow pit slopes and cautious
trafficability constraints result in some 70 to 100 million tonnes of
potentially economic kimberlite falling outside the final FS pit
designs. It is estimated that this kimberlite that remains in the
ground at the completion of the proposed pits will contain between 5.9
and 10.4 million carats of diamonds. The potential value of this
remaining kimberlite makes it a target for future investigations which
will commence immediately to aid with the detailed design scheduled to
start during the later part of this year. In addition, NI 43-101
regulations do not permit the reporting of potential revenue from the
mining of Inferred Resources: an estimated total of 80 million tonnes
of Inferred Resources containing an estimated 9.1 million carats are
excavated by the FS pit designs for the Star and Orion South
Kimberlites. However, the FS economic model only includes the cost of
excavation but does not include the processing costs of, or the
potential revenue derived from, these Inferred Resources. The NI 43-101
compliant Technical Report that summarizes the FS and mineral reserve
estimate will be posted on the Shore website www.shoregold.com and SEDAR www.sedar.com as soon as it is available.'
Star - Orion South Feasibility Study Results
The Star - Orion South FS cash flow model is based on developing two
open pits, initially on Star and subsequently on Orion South. The cash
flow model assumes one processing plant and infrastructure that will
serve both open pits and assumes the project has a five-year
pre-production development period followed by a 20 year production
period. The model assumes on-site construction would start in Q3-2012
with full-scale ore production commencing in early 2017 and ceasing in
2036. The financial evaluation in the FS is done on a 100 percent basis
and does not separate the cash flows of the joint venture partners. The
economic criteria used in the cash flow model are listed in Table 1.
Table 1. Economic criteria used in FS cash flow model
_____________________________________________________________________
|Area |Criterion |Base Case |Case 1 |
| | |(Model Price 15|(High Model |
| | |percent) |Price) |
|________________|________________|_________________|_________________|
|Project Start |Assumed date of |Q4, 2011 |Q4, 2011 |
|Date |corporate | | |
| |approval to | | |
| |proceed with | | |
| |project | | |
|________________|________________|_________________|_________________|
|Production |Process plant |Q4, 2016 |Q4, 2016 |
|Parameters |functional | | |
| |________________|_________________|_________________|
| |Projected start |Q4, 2016 |Q4, 2016 |
| |of ore | | |
| |production | | |
| |________________|_________________|_________________|
| |No. of operating|350 days per year|350 days per year|
| |days per year | | |
| |________________|_________________|_________________|
| |Process plant |87 percent |87 percent |
| |availability | | |
| |________________|_________________|_________________|
| |Processing rate |45,000 tpd ore |45,000 tpd ore |
| |________________|_________________|_________________|
| |Estimated LOM |279 Mt ore at a |279 Mt ore at a |
| |total plant feed|weighted average |weighted average |
| | |12.3 cpht grade |12.3 cpht grade |
| |________________|_________________|_________________|
| |Diamond recovery|100 percent |100 percent |
|________________|________________|_________________|_________________|
|Revenue |Source of |Rough diamond |Rough diamond |
| |revenue |sales |sales |
| |________________|_________________|_________________|
| |Revenue per |$54.24 |$63.12 |
| |tonne of ore | | |
| |processed | | |
| |(includes | | |
| |escalation) | | |
| |________________|_________________|_________________|
| |Net revenue per |$19.92 |$25.60 |
| |tonne of ore | | |
| |processed after | | |
| |capital cost | | |
| |recovery | | |
| |________________|_________________|_________________|
| |Weighted average|US$210 plus 15% =|US$281 |
| |diamond price |US$242 | |
| |per carat | | |
| |(February 2011 | | |
| |valuation) | | |
|________________|________________|_________________|_________________|
|Escalation |Projected |3.5 percent |3.5 percent |
| |diamond price | | |
| |escalation | | |
|________________|________________|_________________|_________________|
|Cost Assumptions|Cost escalation |0 percent |0 percent |
| |________________|_________________|_________________|
| |Exchange rate |$1.00=US$0.945 |$1.00=US$0.945 |
| |________________|_________________|_________________|
| |Marketing costs |2 percent of |2 percent of |
| | |gross revenue |gross revenue |
| |________________|_________________|_________________|
| |Royalties |Based on |Based on |
| | |Saskatchewan |Saskatchewan |
| | |royalty regime |royalty regime |
|________________|________________|_________________|_________________|
|Operating Costs |Mining (includes|$8.58 / tonne |$8.58 / tonne |
| |waste removal |processed |processed |
| |cost) | | |
| |________________|_________________|_________________|
| |Ore processing |$3.01 / tonne |$3.01 / tonne |
| | |processed |processed |
| |________________|_________________|_________________|
| |General and |$2.48 / tonne |$2.48 / tonne |
| |Administration |processed |processed |
|________________|________________|_________________|_________________|
|Capital Costs |Capital over LOM|$8.99 / tonne |$8.99 / tonne |
| | |processed |processed |
|________________|________________|_________________|_________________|
|Marketing |Marketing cost |$1.08 / tonne |$1.26 / tonne |
| | |processed |processed |
|________________|________________|_________________|_________________|
|Royalties |Royalties cost |$2.87 / tonne |$3.81 / tonne |
| | |processed |processed |
|________________|________________|_________________|_________________|
|Closure |Mine closure |$0.31 / tonne |$0.31 / tonne |
| |cost |processed |processed |
|________________|________________|_________________|_________________|
|Taxes |Tax cost |$6.98 / tonne |$9.08 / tonne |
| | |processed |processed |
|________________|________________|_________________|_________________|
|Contingency |Applied to |$253 million |$253 million |
| |pre-production | | |
| |and mining | | |
| |operating | | |
| |expenditures; | | |
| |mine, plant and | | |
| |facilities | | |
| |capital costs | | |
|________________|________________|_________________|_________________|
|Level of | | /- 15 percent | /- 15 percent |
|Accuracy | | | |
|________________|________________|_________________|_________________|
Abbreviations: Mt - Million tonnes; tpd - tonnes per day.
Pre-production Capital Expenditure
The pre-production capital of $1.9 billion is detailed in Table 2.
Table 2. Pre-production Capital
______________________________________________________
|Area | Amount|
|_______________________________________|______________|
|Processing Plant | $553 million|
|_______________________________________|______________|
|Site Facilities | $329 million|
|_______________________________________|______________|
|Pre-strip of sand and clay | $368 million|
|_______________________________________|______________|
|In Pit Crush and Convey System ('IPCC')| $478 million|
|_______________________________________|______________|
|Mobile Equipment | $191 million|
|_______________________________________|______________|
|Total |$1,919 million|
|_______________________________________|______________|
Economic Analysis
The Base Case assumes a conservative 15 percent increase above the
February 2011 Model diamond price due to the current 30 to 35 percent
increase in price of rough. The cash flows utilize a 3.5 percent
diamond price escalation that is applied from 2011 to 2036. The
Canadian-US dollar exchange rate is based on a five year historical
average (Cdn$1.00 = US$0.945). The economic model includes a $253
million contingency over the LOM. Pre-tax and after-tax results of the
economic analysis are shown in Table 3 for comparison. The economic
analysis assumes that diamond prices will increase at a rate faster
than costs due to long-term diamond supply / demand fundamentals.
Table 3. Economic analysis results of discounted cash flow model for
Base Case.
_________________________________________________________________
|Item |Pre-Tax & Royalty Basis|After-Tax & Royalty|
| | | Basis |
|_____________________|_______________________|___________________|
|Undiscounted Net Cash| $8,307M | $5,558M |
|Flow | | |
|_____________________|_______________________|___________________|
|NPV (4%) | $3,887M | $2,494M |
|_____________________|_______________________|___________________|
|NPV (5%) | $3,199M | $2,014M |
|_____________________|_______________________|___________________|
|NPV (6%) | $2,622M | $1,612M |
|_____________________|_______________________|___________________|
|NPV (7%) | $2,136M | $1,272M |
|_____________________|_______________________|___________________|
|NPV (8%) | $1,725M | $985M |
|_____________________|_______________________|___________________|
|NPV (9%) | $1,378M | $742M |
|_____________________|_______________________|___________________|
|NPV (10%) | $1,084M | $535M |
|_____________________|_______________________|___________________|
|IRR | 16.4% | 13.7% |
|_____________________|_______________________|___________________|
|Payback (years) | 5.3 | 5.3 |
|_____________________|_______________________|___________________|
Sensitivity Analysis
Economic risks were assessed using base case cash flow sensitivities to
recovered grade, diamond prices, CDN$/US$ exchange rate, capital costs
and operating costs. Each of the sensitivity items were independently
adjusted up and down by 10 percent, 20 percent and 25 percent to
project the impact on the NPV at a 7 percent discount rate. The NPV
after each sensitivity item was adjusted by 75 percent, 80 percent, 90
percent, 110 percent, 120 percent and 125 percent of the base and are
presented in Table 4. The sensitivity analysis shows that a combined
Star - Orion South FS is most sensitive to CDN$/$US exchange rate
fluctuations on the positive side while Recovered Grade and Diamond
Price have the most significant negative effect. The FS economic model
uses conservative values for both Recovered Grade and Diamond Price.
Table 4. Base Case Sensitivity Analysis Results (pre-tax & royalty
basis, NPV at a 7 percent discount rate)
__________________________________________________________________
| | 75% | 80% | 90% | 100% | 110% | 120% | 125% |
|_________________|______|______|______|______|______|______|______|
|Recovered Grade | $730 |$1,011|$1,573|$2,136|$2,698|$3,260|$3,541|
|(cpht) | | | | | | | |
|_________________|______|______|______|______|______|______|______|
|Diamond Price | $730 |$1,011|$1,573|$2,136|$2,698|$3,260|$3,541|
|_________________|______|______|______|______|______|______|______|
|CDN$/US$ Exchange|$3,984|$3,522|$2,752|$2,136|$1,632|$1,211|$1,027|
|Rate | | | | | | | |
|_________________|______|______|______|______|______|______|______|
|Capital Costs |$2,596|$2,504|$2,320|$2,136|$1,952|$1,768|$1,676|
|_________________|______|______|______|______|______|______|______|
|Operating Costs |$2,576|$2,488|$2,312|$2,136|$1,960|$1,783|$1,695|
|_________________|______|______|______|______|______|______|______|
Mineral Reserve Estimate
The Star - Orion South FS Mineral Reserve Estimate (Table 5) was derived
from the Mineral Resource $/tonne block models for both Star and Orion
South. Utilizing operating costs for mining, processing, G&A and
engineered pit slopes, pit optimizations were undertaken to derive pit
shells to be used as guides for final pit design purposes. This
sequential pit design includes vehicle access ramps, conveyor ramps and
berms. Pit design surfaces were created to determine which
mineralization from the Resource models were to be converted to
reserves by $/tonne value cut-off with the inclusion of ore losses and
dilution. All reserves estimated for the Star and Orion South
Kimberlites are in the Probable category and no additional evaluation
is required prior to commencement of mining operations. These Probable
reserves are estimated from the Indicated resource category only.
Table 5. Mineral Reserve Estimate in the Probable Category for the Star
- Orion South Kimberlites
____________________________________________________________________
|Kimberlite |Kimberlite |Tonnes (000's)|Carats (000's)|Grade (cpht)|
| |Unit | | | |
|_____________|___________|______________|______________|____________|
|Star |Cantuar | 9,460 | 1,440 | 15.2 |
|_____________|___________|______________|______________|____________|
| |EJF-Inner | 88,364 | 13,554 | 15.3 |
|_____________|___________|______________|______________|____________|
| |EJF-Outer | 33,783 | 3,039 | 9.0 |
|_____________|___________|______________|______________|____________|
| |Pense | 7,802 | 1,203 | 15.4 |
|_____________|___________|______________|______________|____________|
| |MJF | 22,403 | 1,057 | 4.7 |
|_____________|___________|______________|______________|____________|
| |LJF | 4,078 | 93 | 2.3 |
|_____________|___________|______________|______________|____________|
|Star Total | | 165,890 | 20,386 | 12.3 |
|_____________|___________|______________|______________|____________|
|Orion South |EJF Inner | 62,040 | 9,986 | 16.1 |
|_____________|___________|______________|______________|____________|
| |EJF Outer | 17,362 | 1,680 | 9.7 |
|_____________|___________|______________|______________|____________|
| |Pense Inner| 33,688 | 2,328 | 6.9 |
|_____________|___________|______________|______________|____________|
|Orion South | | 113,090 | 13,994 | 12.4 |
|Total | | | | |
|_____________|___________|______________|______________|____________|
|Combined Star| | 278,980 | 34,380 | 12.3 |
|- Orion South| | | | |
|Total | | | | |
|_____________|___________|______________|______________|____________|
Table Notes
1. The Mineral Reserves have a 1 millimetre bottom screen size
cut-off.
Inferred Resources
In addition to the entire Mineral Reserve, an estimated total of 80
million tonnes of Inferred Resources containing a total of
approximately 9.1 million carats are excavated by the FS pit designs
for the Star and Orion South Kimberlites (Table 6). The cost of
excavation of these Inferred Resources is included in the FS but
processing costs and resultant revenue cannot be included, as NI 43-101
only permits revenue derived from Indicated Resources to be reported.
Table 6. Inferred Mineral Resource Estimate for the Star - Orion South
Kimberlites
____________________________________________________________________
|Kimberlite |Kimberlite |Tonnes (000's)|Carats (000's)|Grade (cpht)|
| |Unit | | | |
|_____________|___________|______________|______________|____________|
|Star |Cantuar | 3 | 0.4 | 13.4 |
|_____________|___________|______________|______________|____________|
| |EJF-Inner | 1,821 | 294 | 16.1 |
|_____________|___________|______________|______________|____________|
| |EJF-Outer | 9,210 | 790 | 8.6 |
|_____________|___________|______________|______________|____________|
| |Pense | 534 | 76 | 14.2 |
|_____________|___________|______________|______________|____________|
| |MJF | - | - | - |
|_____________|___________|______________|______________|____________|
| |LJF | 53 | 1 | 1.8 |
|_____________|___________|______________|______________|____________|
|Star Total | | 11,621 | 1,161 | 10.0 |
|_____________|___________|______________|______________|____________|
|Orion South |EJF Inner | 21,790 | 4,231 | 19.4 |
|_____________|___________|______________|______________|____________|
| |EJF Outer | 24,977 | 2,095 | 8.4 |
|_____________|___________|______________|______________|____________|
| |Pense Inner| 10,963 | 1,021 | 9.3 |
|_____________|___________|______________|______________|____________|
| |Pense Outer| 584 | 34 | 5.8 |
|_____________|___________|______________|______________|____________|
| |Cantuar | 52 | 2 | 3.7 |
|_____________|___________|______________|______________|____________|
| |LJF | 9,928 | 523 | 5.3 |
|_____________|___________|______________|______________|____________|
| |Viking | 277 | 26 | 9.5 |
|_____________|___________|______________|______________|____________|
| |SAK | 108 | 7 | 6.3 |
|_____________|___________|______________|______________|____________|
|Orion South | | 68,679 | 7,939 | 11.5 |
|Total | | | | |
|_____________|___________|______________|______________|____________|
|Combined Star| | 80,300 | 9,100 | 11.3 |
|- Orion South| | | | |
|Total | | | | |
|_____________|___________|______________|______________|____________|
Table Notes
1. The Inferred Mineral Resources have a 1 millimetre bottom screen
size cut-off.
Potential Mineral Deposits
Highly conservative geotechnical estimates result in considerable
volumes of potentially economic kimberlite remaining in the ground at
the completion of the final phases of the FS pits on both Star and
Orion South. These potential mineral deposits are estimated to include
between 70 and 100 million tonnes of kimberlite containing between 5.9
and 10.4 million carats. These potential mineral deposits are
conceptual in nature, are not part of the resource estimate and it is
uncertain if additional exploration work would lead to the kimberlite
presently included as potential mineralization being upgraded to any
resource category. These potential kimberlite mineral deposits cannot
be relied upon when considering any project economics. However, the
potential future value of the diamonds contained in these potential
mineral deposits make them targets for future re-evaluation of the
geotechnical parameters.
Diamond Prices
Diamond prices used in this combined FS are based on valuations by WWW
using their February 2011 price book. While High Model prices were used
in the August 2009 reserve estimate for the Star Kimberlite, the
September 2009 resource estimate for Orion South and the February 2010
combined Star and Orion South reserve estimate, the Base Case FS uses
the more conservative Model prices plus 15 percent for each kimberlite
unit within Star and Orion South. WWW are in agreement with the use of
the Model Prices plus 15 percent for the FS. The Case 1 FS uses High
Model prices for comparative purposes. The details of the February 2011
valuation of the Star and Orion South diamond parcels were published in
Shore News Release dated March 2, 2011 and the parcel and model prices
for the Star and Orion South diamonds used in this FS are listed in
Tables 7 and 8. According to WWW, current rough diamond prices are on
average some 30 to 35 percent higher than the February 2011 pricebook.
Table 7. The Parcel and Model Price Details for the Star Kimberlite
_______________________________________________________________________________
| Star | Carats | Parcel | Model |Model Price| Minimum | High |
|Kimberlite| | Price | Price | plus 15% |Model Price|Model Price|
| Unit | |(US$/carat)|(US$/carat)|(US$/carat)|(US$/carat)|(US$/carat)|
|__________|________|___________|___________|___________|___________|___________|
|Cantuar |1,667.96| 287 | 355 | 408 | 281 | 499 |
|__________|________|___________|___________|___________|___________|___________|
|Pense |1,410.47| 133 | 175 | 201 | 131 | 224 |
|__________|________|___________|___________|___________|___________|___________|
|EJF |7,124.74| 162 | 225 | 259 | 176 | 296 |
|__________|________|___________|___________|___________|___________|___________|
|MJF-LJF | 91.28| 193 | 198 | 228 | 106 | 290 |
|__________|________|___________|___________|___________|___________|___________|
Table 8. The Parcel and Model Price Details for the Orion South
Kimberlite
_______________________________________________________________________________
| Orion | Carats | Parcel | Model |Model Price| Minimum | High |
| South | | Price | Price | plus 15% |Model Price|Model Price|
|Kimberlite| |(US$/carat)|(US$/carat)|(US$/carat)|(US$/carat)|(US$/carat)|
| Unit | | | | | | |
|__________|________|___________|___________|___________|___________|___________|
|EJF |1,400.01| 149 | 192 | 221 | 149 | 258 |
|__________|________|___________|___________|___________|___________|___________|
|Pense | 581.47| 73 | 129 | 148 | 94 | 177 |
|__________|________|___________|___________|___________|___________|___________|
Weighted average diamond prices calculated using the carat proportions
of the Star and Orion South Mineral Reserve estimates (See Tables 7 &
8) result in the values listed in Table 9.
Table 9. Weighted Average Model and High Diamond Prices for the Star and
Orion South Kimberlites
___________________________________________________________________
|Kimberlite |Weighted Average|Weighted Average|Weighted Average |
| | Model Price |Model Price plus|High Model Price |
| | (US$/carat) |15% (US$/carat) | (US$/carat) |
|_______________|________________|________________|_________________|
|Star | $230 | $264 | $306 |
|_______________|________________|________________|_________________|
|Orion South | $182 | $209 | $245 |
|_______________|________________|________________|_________________|
|Combined Star -| $210 | $242 | $281 |
|Orion South | | | |
|_______________|________________|________________|_________________|
Mining
Comprehensive mining optimization simulations completed by P&E
determined that the optimal economic approach to the mining of the
combined Star - Orion South reserves is to commence with four phases
over twelve years of mining on Star, followed by two phases over eight
years of mining on Orion South for a total LOM of 20 years. The pit
plans incorporate the geotechnical and hydrogeological design criteria
developed through extensive site investigations and modeling.
Conventional hydraulic excavators and haul trucks will be used to strip
the upper sand and clay layers of the overburden, followed by an In-Pit
Crush and Convey ('IPCC') system to excavate the remaining till layers
and waste rock materials thus exposing the kimberlite ore in Star and
Orion South. The excavator and truck fleet will be used to mine the
ore and to remove associated overburden and waste rock to another,
smaller IPCC system. The ore and waste rock will be separately sized
in the pit and subsequently conveyed to the processing plant ore
stockpile and to the overburden pile, respectively.
Processing Plant and Infrastructure
The Star - Orion South FS assumes that the processing facility will be
optimally located near the Star and Orion South pit edges. The facility
is designed to treat 45,000 tonnes of kimberlite per day employing
autogenous milling as the primary diamond liberation method, followed
by spiral classifiers and dense media separation. The recovery section
employs magnetic separation and x-ray technology with grease as the
scavenging technology to recover the low luminescence diamonds. Single
particle sorters using both x-ray technology and laser Raman are used
to further concentrate the material before hand-sorting. Extensive ore
dressing investigations on drill core samples and pilot scale testing
on underground bulk samples, coupled with detailed computer
simulations, show that autogenous milling of the Star and Orion South
Kimberlites offers the most efficient and cost effective method of
diamond liberation. Furthermore, when the autogenous mills are operated
within the simulated design specifications, diamond breakage and
diamond damage is minimal.
Electrical service will be provided to the site by a 16 kilometre
transmission line at 230 kilovolts, connecting to the existing
provincial grid to the southeast of the site and crossing the
Saskatchewan River. Shore has executed a Construction Agreement with
the Saskatchewan Power Corporation to fund the design and construction
of the appropriate power line for the Star - Orion South Diamond
Project. This agreement also ensures that SaskPower will have the
generation capacity required for the Project's anticipated power
requirements. Site road access will be accomplished by utilizing the
provincial grid road to the northern boundary of the Fort à la Corne
forest, and then follows the optimal construction route through the
forest to the plant site. Other support facilities include an
administration/change house building, warehouse, maintenance shops,
fuel storage, water treatment facilities, overburden pile and processed
kimberlite containment areas.
Environment, Permitting and Closure
The Environmental Impact Assessment ('EIA') process for the Star-Orion
South Diamond Project ('Project') has been on-going since the Project
Proposal was filed in November 2008. The Environmental Impact Statement
('EIS'), which describes the potential environmental and socio-economic
effects of the Project, was submitted to provincial and federal
regulators in December 2010. Provincial, federal, and other reviewers
have provided technical comments on the EIS, and Shore is currently
working to address the questions and comments received. Once the
regulators are satisfied with the responses, the EIS will be released
for public comment. Anticipated provincial and federal EIA process
timelines are accounted for in the FS.
Shore currently has all necessary licences and permits for present
on-site activities. The permits that will be required for the
construction and operation of the proposed mine will be applied for
following provincial and/or federal Ministerial approval upon
conclusion of the EIA. While the majority of permits will be required
from provincial authorities, permits required from the federal
government include authorization from the Department of Fisheries and
Oceans to allow anticipated changes to fish and fish habitat, permits
from Natural Resources Canada for the explosives storage site and
authorizations from Environment Canada and Transport Canada. This
permitting phase is also accounted for in the FS schedule.
Progressive reclamation of the overburden will proceed throughout the
LOM and is accounted for in the G&A cost. Final site reclamation and
closure, including the removal of site facilities, will be performed at
the end of the LOM in accordance with Saskatchewan's Reclaimed Industrial Sites Act. The conceptual closure plan is based on a target end land use of
self-sustaining forest.
Community Relations
Since January 2007, Shore has listened to community concerns and ideas
and provided information updates on development plans at regular
meetings of the Diamond Development Advisory Committee ('DDAC'). The
DDAC is a community-based committee comprised of approximately two
dozen representatives of cities, towns, villages, rural municipalities
and Aboriginal parties in the vicinity of the Fort à la Corne forest.
As well, the general public has been widely consulted. Community Open
House meetings conducted by Shore in furtherance of the Star-Orion
South Diamond Project were successfully conducted in February 2009, and
in June 2010, with local communities showing overwhelming support for
the Project at both rounds of Open Houses. The meetings, held both
years in six communities throughout the region of the proposed site,
attracted hundreds of citizens and were part of the Environmental
Impact Assessment process underway as a result of the filing of the
Project Proposal. In addition, Shore hosted an Environmental Interests
Workshop in Prince Albert in October 2010 at which potential
environmental impacts arising from the project were presented, possible
mitigation measures explored and input sought from a wide variety of
community, environmental and government representatives. A description
of extensive community engagement activities forms part of the
Environmental Impact Statement submitted to the Saskatchewan Ministry
of Environment and federal agencies in December 2010. Development of a
mine will bring substantial economic development to the cities of
Prince Albert and Melfort, as well as other communities in the
surrounding district. The mine is expected to provide direct employment
for hundreds of people throughout the construction phase and in excess
of 500 people continuously over its 20 year operating life.
Project Timeline
The FS assumes the following Project timelines:
-- Detailed design planned to commence in second half of 2011;
-- Permitting activities to support a Q3, 2012 construction start;
-- SaskPower supply to site Q4, 2013;
-- Processing plant commissioning approximately 4 years after
acquiring the necessary permits to proceed with construction.
Qualified People
Mr. George Read, P.Geo (B.Sc. (Hons.) University of Cape Town) is the
Senior Vice President of Exploration and Development at Shore Gold Inc.
and is the lead in-house Qualified Person responsible for the
preparation and reporting of the FS on the Star - Orion South Diamond
Project, including mine geotechnical, dewatering and hydrology aspects,
as well as project economic evaluation. Mr. Read is a registered
Professional Geoscientist in the provinces of Saskatchewan (APEGS
#12665) and British Columbia (APEGBC #24070), a Fellow of the
Geological Association of Canada and a member of the American
Geophysical Union. Mr. Read has worked as a diamond exploration
geologist for over 27 years, the first 12 years of which were spent
with De Beers on projects in both southern Africa and Canada. Since
early 1997 Mr. Read has worked as a diamond exploration consultant on
projects across Canada and in Greenland and Brazil.
Mr. Shawn Harvey, P.Geo. (M.Sc. University of Regina), Geology Manager
with Shore Gold Inc, is a registered Professional Geoscientist in the
province of Saskatchewan (#11778), and was responsible for the
geological exploration and evaluation of the Star and Orion South
kimberlite deposits. Mr. Harvey has over 10 years experience in diamond
exploration, evaluation and research with emphasis on kimberlite
emplacement, resource evaluation and preparation of NI 43-101 compliant
reports. Prior to joining Shore Gold Inc. in 2005, Mr. Harvey was an
industrial minerals geologist with the Saskatchewan Geological Survey.
Mr. Ethan Richardson, P.Eng. (M.Sc. University of Saskatchewan), Manager
of Environment with Shore Gold Inc., is a registered Professional
Engineer in the province of Saskatchewan (#09541), and supervised the
preparation of the environmental, social, water management and tailings
design components. Mr. Richardson has over 14 years experience with
environmental impact assessments, permitting and mine development. He
has contributed to many environment impact assessments for large scale
mining projects and supervised the preparation of the Star-Orion South
Diamond Project Environmental Impact Statement submitted in December
2010. Prior to joining Shore Gold Inc. in 2007, Mr. Richardson was a
consultant with Golder Associates Ltd.
Mr. Fred Brown CPG, PrSciNat, Senior Geological Associate of P&E Mining
Consultants Inc., is the independent Qualified Person who was
responsible for the Star and Orion South Kimberlite resource estimates
upon which the reserves were developed. Mr. Brown, a Certified
Professional Geologist (#11015) with the American Institute of
Professional Geologists and a registered Professional Natural Scientist
with the South African Council for Natural Scientific Professions
(#400008/04), has over 21 years of worldwide experience in mining
resource and reserve assessments and related work and has worked on
diamond mines in southern Africa for De Beers. His specialties include
resource estimation, ore deposit modeling, due diligence reviews,
project evaluation, mining geology, geostatistical studies and
preparation of NI 43-101 compliant reports. He is regarded as one of
the leading authorities in diamond resource evaluation and diamond
geostatistics.
Mr. David Orava, P.Eng. (McGill University), a Senior Associate of P&E
Mining Consultants Inc., was responsible for the mine optimization,
design, production plans, mine capital and mine operating costs for the
Star and Orion South pits. Mr. Orava has over 30 years experience in
mine evaluation, planning, development and operation. His specialties
include open pit and underground planning and design, mine equipment
selection and mine infrastructure. While a Senior Associate of P&E for
the past three years, he has also been the president of Orava Mine
Projects. Mr. Orava was previously employed by SENES Consultants,
Dennis Netherton Engineering, UMA Engineering, Eagle Mine Contractors,
Dynatec Mining and JS Redpath.
Mr. Eugene Puritch, P.Eng. (Haileybury School of Mines, Queen's
University), President of P&E Mining Consultants Inc., who supervised
the preparation of the Mineral Reserve estimates for the Star and Orion
South Kimberlites, has more than 30 years of experience in mine
evaluation and resource estimating for some of Canada's largest mining
companies. He has undertaken more than 120 resource estimates and mine
designs in his career, many of which formed the basis for feasibility
studies and subsequent production decisions. Prior to co-founding P&E,
Mr. Puritch was regularly under contract to provide his services to
Micon International Ltd., Aker Solutions Canada Inc., A.C.A. Howe
International Ltd. and Strathcona Mineral Services.
Dr. Wayne Ewert, P.Geo. (PhD, Geology, Carleton University, Ottawa,
Canada and B.Sc. University of Waterloo, Canada) a principal of P&E,
has over 40 years of worldwide experience in diversified exploration,
project evaluation and resource based geological modeling. He has over
18 years of international consulting experience in support of project
acquisitions and related financing activities. His experience includes
involvement with the evaluation and assessment of diamond projects in
Lesotho and South Africa on behalf of A.C.A. Howe International.
Mr. A. S. (Al) Hayden, P.Eng. is a metallurgical engineer with a B.A.Sc.
from the University of British Columbia and is a licensed Professional
Engineer and Designated Consulting Engineer in the Province of Ontario,
Canada was responsible for reviewing and approving the process design,
plant capital and operating costs. He has over forty years of
hydrometallurgical and mineral processing experience, including ten
years of operating experience with Eldorado Nuclear and the balance
consulting with A. H. Ross & Associates of Toronto, EH Associates and
EHA Engineering Ltd. He is President of EHA and a Senior Associate of
P&E.
Mr. Hugh Rudolf, P. Eng. (University of Saskatchewan), is a Senior
Project Manager with AECOM and was responsible for the feasibility
engineering and cost estimating input for the building and site
infrastructure facilities components of the Star - Orion South Diamond
Project. Mr. Rudolf has forty years experience in the engineering and
management of mining and industrial projects. His experience includes
ten years working in mine plant and mine mechanical engineering and
maintenance for mining companies and thirty years with consulting
engineering firms. He has assumed senior lead roles on major mining
projects for base metals, industrial minerals, uranium, coal and
potash.
P&E Mining Consultants Inc. is an established and internationally
recognized geological and mine engineering consulting firm specializing
in resource estimates, scoping, prefeasibility studies and
participation with other consulting firms on feasibility studies, with
over 125 projects undertaken in the last 7 years. P&E has Certificates
of Authorization from the Association of Professional Geoscientists of
Ontario and Professional Engineers Ontario, the Association of
Professional Engineers and Geoscientists of Saskatchewan and
Professional Engineers and Geologists of Newfoundland and Labrador. P&E
consents to the statement of Probable mineral reserves contained
herein.
AECOM is a global provider of professional, technical and management
support services to a broad range of markets, including mining,
transportation, facilities, environmental, energy, water and
government. With approximately 45,000 employees around the world, AECOM
is a leader in all of the key markets that it serves. AECOM provides a
blend of global reach, local knowledge, innovation and technical
excellence in delivering solutions that create, enhance and sustain the
world's built, natural, and social environments. A Fortune 500 company, AECOM serves clients in approximately 125 countries and had
revenue of $7.3 billion during the 12 months ended March 31, 2011.
Shore commissioned the combined NI 43-101 compliant Mineral Reserve
estimate, FS and related Technical Report for the Star and Orion South
Kimberlites and, as such, the FS and Technical Report are the sole
responsibility of Shore. Newmont did not participate in the
preparation, supervision or review of the work associated with this
exercise and takes no responsibility for the content or information
included in this press release.
Shore is a Canadian based corporation engaged in the acquisition,
exploration and development of mineral properties. Shares of the
Company trade on the TSX Exchange under the trading symbol 'SGF'.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements as defined by
certain securities laws, including the 'safe harbour' provisions of
Canadian securities legislation and the United States Private
Securities Litigation Reform Act of 1995. Forward-looking information
is often, but not always, identified by the use of words such as
'anticipate', 'believe', 'expect', 'plan', 'intend', 'forecast',
'target', 'project', 'guidance', 'may', 'will', 'should', 'could',
'estimate', 'predict' or similar words suggesting future outcomes or
language suggesting an outlook. In particular, statements regarding
Shore's future operations, future exploration and development
activities or other development plans constitute forward-looking
statements.
Forward-looking statements in this press release include, but are not
limited to, anticipated diamond price adjustments, the anticipated
Project schedule and attendant timelines, assumptions made in the cash
flow model, assumptions made respecting capital and operating costs,
anticipated diamond production, anticipated revenue from rough diamond
sales, assumptions made respecting diamond price increases resulting
from long-term supply/demand fundamentals, the anticipated economic
impact of the Project on surrounding communities and anticipated
employment opportunities which may result from the Project.
The Project schedule includes an estimated 5 year long pre-production
period and a 20 year long mine production phase followed by mine
closure. These durations were developed based on currently projected
timelines for power distribution line design and construction;
equipment and material procurement, deliveries, assembly and
commissioning; environmental assessment and review; permitting and
other factors. The assumed dates and timing of milestone events such as
the 2017 commencement of full-scale ore production, and the 2036
cessation of operations were based on available information and the
time lines between the assumed dates are reasonable based on the
envisaged Project. There is a possibility the assumed dates such as the
date for corporate approval to proceed with the Project will shift
forward into the future for a multitude of reasons including, but not
limited to, longer than projected time lines for environmental
assessment and public consultation, engineering, procurement,
construction and commissioning, availability of project financing.
The cash flow model includes estimates of future federal, provincial and
local government taxes. Federal and provincial (Saskatchewan) corporate
income taxes payable on pre-tax cash flows were estimated based on
future tax rates. The values of future property and school taxes were
calculated based on estimates provided by the Saskatchewan Assessment
Management Agency ('SAMA'). Diamond royalty payments were estimated
based on the royalty regime announced by the Government of Saskatchewan
in 2010. Additionally, the cash flow model utilizes selected estimated
deductions available to the Project from unclaimed costs carried
forward for tax purposes (e.g. tax pools) including Canadian
exploration expenses and Canadian development expenses.
The estimated capital and operating costs (± 15 percent estimation) were
derived from first principles and supported by budget quotations and/or
cost information derived from relevant cost databases and/or contractor
quotations, and assumptions. The cash flow model includes capital
contingencies.
These forward-looking statements are based on Shore's current beliefs as
well as assumptions made by and information currently available to it
and involve inherent risks and uncertainties, both general and
specific. In making the forward-looking statements contained in this
news release, Shore has utilized diamond valuations completed in
February 2011. Consultant WWW estimates current diamond prices to be 30
to 35 percent higher than the February 2011 prices.
Risks exist that forward-looking statements will not be achieved due to
a number of factors including, but not limited to, developments in
world diamond markets, changes in diamond prices, risks relating to
fluctuations in the Canadian dollar and other currencies relative to
the US dollar, changes in exploration, development or mining plans due
to exploration results and changing budget priorities of Shore or its
joint venture partners, the effects of competition in the markets in
which Shore operates, the impact of changes in the laws and regulations
regulating mining exploration, development, closure, judicial or
regulatory judgments and legal proceedings, operational and
infrastructure risks and the additional risks described in Shore's most
recently filed Annual Information Form, annual and interim MD&A.
Shore's anticipation of and success in managing the foregoing risks
could cause actual results to differ materially from what is
anticipated in such forward-looking statements.
Although management considers the assumptions contained in
forward-looking statements to be reasonable based on information
currently available to it, those assumptions may prove to be incorrect.
When making decisions with respect to Shore, investors and others
should not place undue reliance on these statements and should
carefully consider the foregoing factors and other uncertainties and
potential events. Unless required by applicable securities law, Shore
does not undertake to update any forward-looking statement that is made
herein.
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Joseph Dickson, Investor Relations Manager at (306) 667-3505 and www.shoregold.com