Queenston Announces Positive Preliminary Economic Assessment and Approves Shaft Sinking Program at Upper Beaver
TORONTO, ONTARIO -- (Marketwire) -- 02/16/12 -- QUEENSTON MINING INC. (TSX: QMI)(OTCQX: QNMNF)(FRANKFURT: QMI) ('Queenston' or the 'Company') is pleased to announce the positive results of an independent National Instrument ('NI') 43-101 Preliminary Economic Assessment ('PEA') on its 100% owned Upper Beaver Gold-Copper Project located in Kirkland Lake, Ontario. The PEA was prepared by P&E Mining Consultants Inc. ('P&E') of Brampton, Ontario and will be filed on SEDAR at www.sedar.com within 45 days. The results of the PEA demonstrate the potential technical and economic viability of establishing a new gold-copper mine and mill complex on the property.
As a result of the positive PEA, the Company is advancing the project to feasibility and has approved the development of an exploration shaft to provide access for bulk sampling and confirm the mineability/continuity of the deposit.
The PEA incorporates the mineral resource at Upper Beaver that was announced in May 2011 containing 3,074,000 tonnes ('t') grading 6.98 grams per tonne ('g/t') gold ('Au') (690,000 ounces ('oz')) with 0.54% Copper ('Cu') (36.6 million pounds ('M lbs')) (Indicated) and 3,093,000 t grading 6.19 g/t Au (616,000 oz) with 0.42% Cu (28.0 M lbs) (Inferred). The mineral resource does not include drill results after December 31, 2010. During 2011 an additional 84 drill holes and wedge holes (41,019 m) were drilled on the project both upgrading and extending the footprint of the deposit. A resource update is planned for the third quarter of 2012 and will include the drilling conducted in calendar 2011 as well as the early part of 2012.
Highlights of the PEA
Base Case Scenario: (gold price of US$1,275/oz (approximate 3 years trailing average), copper price of US$3.00/lb and an exchange rate of US$0.96 = CDN$1.00; all other dollar amounts are expressed in Canadian dollars):
-- Underground mining operation with a 10 year mine life
-- Processing throughput averaging 2,000 tonnes per day ('tpd')
-- Life-of-mine average annual production 120,000 oz gold and 5.3 M lbs
copper
-- Life-of-mine metal production of 1.1 M oz of gold and 50.5 M lbs of
copper
-- Average life of mine cash cost of US$386/oz (net of copper credits)
-- Pre-tax Net Present Value ('NPV') (at a 5% discount rate) of CDN$345 M,
Internal Rate of Return ('IRR') of 26.5% and a payback in approximately
2.5 years from start of production. After-tax NPV (at a 5% discount
rate) of CDN$233 Million, IRR of 22.1%
-- Using current metal prices (US$1,700/oz for Au and US$3.80/lb for Cu)
pre-tax NPV of CDN$688 M, IRR of 41.6% and a payback of approximately
1.5 years from start of commercial production. After-tax, NPV of CDN$475
M and IRR of 35.0%
-- Pre-production capital costs of CDN$240 M (includes 15% contingency)
-- Average operating costs of CDN$73/t (includes 20% contingency)
Charles Page, President and CEO states, 'The recently completed PEA displays very robust economics at the Upper Beaver Gold and Copper Project which continues to prove to be the Company's primary asset. The PEA has outlined an attractive operating profile of 120,000 ounces of gold and 5.3 million pounds of copper per annum at very attractive cash costs through the use of low cost, bulk underground mining methods.'
'The deposit remains open down to depth and along strike with recent new discoveries reported in the hanging wall towards surface that show strong potential to materially improve the economics of the project by reducing initial capital requirements, increasing the resource size and reducing the payback period. To continue to upgrade and expand the deposit, Queenston has increased the number of surface diamond drills on the project from four to six rigs for the 2012 drilling season.'
Table 1: Summary of Economic Parameters
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Item Value
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Gold Price (US$ per ounce) 1,275
Copper Price (US$ per pound) 3.00
Foreign Exchange Rate 0.96
Tax Rate (%) 30%
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Pre-Production Capital (CDN$ millions)
Infrastructure 31M
Process Plant 69M
Mining 105M
Indirect costs 4M
Contingency (15%) 31M
Total Pre-Production Capital (CDN$ millions) $ 240M
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Sustaining Capital & Mine Closure (CDN$ millions) $ 178M
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Average stope mining cost ($ per t milled) 37
Milling costs ($ per t milled) 18
General and administration ($ per t milled) 6
Contingency (20%) 12
Total Operating Cost (CDN$ per t milled) $ 73
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Processing recovery:
Gold 98%
Copper 90%
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Smelter payables:
Gold 95%
Copper 90%
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To view Figure 1, 'Upper Beaver Isometric', please visit the following link: http://media3.marketwire.com/docs/QMIF1.pdf.
Economic Analysis
The Upper Beaver Project is projected to generate CDN$591 million pre-tax operating cash flow, a pre-tax NPV (at a 5% discount rate) of CDN$345 million and a pre-tax IRR of 26.5% at the base case gold price of US$1,275 per oz and copper price of US$3.00 per lb. The pre-tax and after tax estimates at various metal prices are presented in Table 2 below:
Table 2: Project Economics Estimates
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Net Cash Flow
(CDN$M) NPV (CDN$M) IRR %
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Copper
Gold Price Price Pre After Pre After Pre After Payback
(US$/oz) (US$/lb) -Tax Tax -Tax Tax -Tax Tax (years)
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1,200 2.75 497 348 281 188 23.2 19.2 2.5
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1,275
(Base Case) 3.00 591 414 345 233 26.5 22.1 2.2
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1,500 3.50 862 604 529 363 35.1 29.5 1.6
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1,700 3.80 1,096 767 688 475 41.6 35.0 1.3
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This PEA is preliminary in nature as it includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Mineral Resource
The PEA is based on an evaluation by P&E of the NI 43-101 compliant mineral resource estimate for the Upper Beaver of 3,074,000 t @ 6.98 g/t Au or 690,000 oz in the Indicated category and 3,093,000 tonnes @ 6.19 g/t Au or 616,000 oz in the Inferred category. Upper Beaver resource includes 36.6 M lbs Cu (0.54%) Indicated and 28 M lbs Cu (0.41%) Inferred. The mineral resource estimates were prepared by Kurt Breede, P.Eng. of Watts, Griffis and McOuat Limited ('WGM') an independent Qualified Person ('QP') as defined by NI 43-101 in a report dated June 15, 2011 and filed on SEDAR (Table 3).
Table 3: Summary of Upper Beaver Mineral Resource
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Cu Au (g/t) Ounces Au (g/t) Ounces
Category Tonnes (%) (Uncapped) (Uncapped) (Capped)(i) (Capped)(i)
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Indicated 3,074,000 0.54 8.84 874,000 6.98 690,000
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Inferred 3,093,000 0.41 7.15 711,000 6.19 616,000
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Notes:
1. The Mineral Resources in this press release were estimated using the
Canadian Institute of Mining, Metallurgy and Petroleum ('CIM'), CIM
Standards on Mineral Resources and Reserves, Definitions and Guidelines
prepared by the CIM Standing Committee on Reserve Definitions.
2. Mineral resources are estimated at a cut-off grade of 2.5 g/t Au and a
minimum true width of 2.0 m
3. Mineral resources are estimated using a three-year rolling average gold
price of US$1,050/oz, an exchange rate of US$0.95=CDN$1.00 and
metallurgical recoveries of 95%.
4. (i)Individual assays were capped at 50 g/t Au.
5. A bulk density of 2.9 t/m(3) was used.
6. Kurt Breede, P.Eng. of Watts, Griffis and McOuat Limited ('WGM') is the
independent Qualified Person ('QP') under NI 43-101 who completed the
Mineral Resource estimate.
7. Mineral resources that are not mineral reserves do not have demonstrated
economic viability. The estimate of Mineral Resources may be materially
affected by environmental, permitting, legal, title, socio-political,
marketing, or other relevant issues.
8. The quantity and grade of reported Inferred Mineral Resources in this
estimation are uncertain in nature and there has been insufficient
exploration to define these Inferred Resources as an Indicated or
Measured Mineral Resource and it is uncertain if further exploration
will result in upgrading them to an Indicated or Measured Mineral
Resource category.
Mine Plan
The PEA considers development of an underground mine at a steady state production rate of 2,000 tpd of mineralized material. The primary mining method is conventional long hole with paste backfill and 35 metre ('m') sub-level intervals. The average thickness of the orebody is 5.6 m. A 20% mining dilution at zero grade with 95% extraction rate is incorporated into the mine plan. Ore extraction and processing commences in the third year following the commencement of project development with commercial production during the fourth year. Net positive cash flow is projected at $76 M during the fourth year.
Underground access is via a 6.0 m - 6.5 m diameter concrete lined 1,300 m deep fresh air shaft with a planned hoisting capacity of 3,000 tpd at an ultimate depth of 1,800 m using a two hoist configuration.
Table 4: Summary of Upper Beaver Potentially Mineable Portion of the
Resource Estimate (diluted and extracted)(1,2)
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Au (g/t) Ounces
Category Tonnes Cu (%) (Capped) (Capped)
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Indicated 3,713,000 0.41 5.24 625,000
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Inferred 3,181,000 0.32 4.97 508,000
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(1)Mineral resources, which are not mineral reserves, do not have demonstrated economic viability. Environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues may materially affect the estimate of mineral resources. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.
(2)The potentially mineable portion of the mineral resource estimate was prepared by Eugene Puritch, P. Eng and James L. Pearson P.Eng. of P&E Mining Consultants Inc. Mineral resource estimates reported in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions.
Planned Production Facility and Infrastructure
Gold and copper will be processed in a 2,000 tpd expandable mill and paste backfill plant using conventional crushing, grinding, flotation and Carbon In Leach (CIL) processes. The current flow sheet does not include a gravity circuit as more testing is required to determine if this step is warranted, particularly as the design considerations will examine this mill as a future central milling facility for all of Queenston's Projects within the Kirkland Lake gold camp. Metallurgical testwork completed by SGS Lakefield Research Limited indicates gold recovery of 98% and copper recovery of 90% using simple floatation and cyanidation. Payable gold and copper are estimated at 95% for gold and 90% for copper. Approximately 80% of the gold is recovered in flotation with the balance being recovered from CIL. The projected gold-rich copper concentrate will be shipped to a smelter off site.
Power to the project will be supplied by extending the existing 115-kV line 2 km to a substation then through a new 7 km long 44-kV transmission and communications line to Upper Beaver Mine and Mill Complex. Site overall power consumption (mine + mill) will be in the range of 25-30 MW with power draw expected to be 36 MW at peak production.
Pre-Production Capital Costs
Major capital expenditures during the pre-production period (3.25 years) of the Project are presented below.
Table 5: Pre-Production Capital Costs
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Item Cost (CDN$M)(i)
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Development 22.6
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Shaft Sinking 50.0
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Shaft Headframe, Hoist & Hoist Room, LP 14.4
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Mine Equipment 18.3
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Under Ground Infrastructure 2.8
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Surface Infrastructure, Powerline, Road Upgrade 28.7
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Process Plant 68.5
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Closure Bond 3.6
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Contingency (15%) 31.2
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Total Pre-Production Capital $240.1
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(i)Total does not reflect rounding
Operating Costs
The following average life-of-mine costs are projected for the operating phase of the project.
Table 6: Operating Costs
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Item Cost(CDN$/t)
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Mining 20.70
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Backfill, waste and paste 7.00
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Tailings to Tailings Dam 1.00
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Tailings Pond Water Treatment 0.32
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Process Plant 17.81
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Under Ground Haulage 3.50
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Under Ground Hoisting Services 1.50
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General and Administration 6.00
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Contingency (20%) 12.18
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Total Operating Costs $73.06
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Tailings Management Facility
Queenston plans to take advantage of the historical tailings facility located at site in the design of the Tailings Management Facility ('TMF'). Engineering and environmental studies are progressing on this facility. The TMF design will incorporate engineered features to manage the chemical and physical stability of the deposited tailings in accordance with current best-in-class practices. Approximately, 35%-55% of the tailings will be converted to paste backfill and deposited underground. This paste backfill will enhance ore recovery and improve stope stability for the underground mine. The remaining tailings will be deposited in the TMF.
Cyanide will be destroyed in tailings slurry prior to exiting the mill. TMF and effluent treatment plant will be designed to withstand at a minimum a 1 in 100 year rain on snow event (i.e. TMF can contain and discharge the resultant runoff via the effluent treatment plant).
Major surface facilities to support the Upper Beaver mine will include an administration/engineering building, security, weigh station, warehouse, fuel storage, explosive storage, effluent treatment facility, fire protection and maintenance shop. While a construction camp for the project development phase is planned, it is not anticipated during operations.
Closure Plan and Rehabilitation Costs
Rehabilitation measures will be designed to ensure the long-term physical and chemical stability of the site in accordance with Ontario's closure plan approval process. The rehabilitation measures will return the site to a productive land use that will not require long-term care and maintenance. The rehabilitation cost is estimated to be approximately $6 million in total.
Environmental baseline studies to support the permitting process and permit applications are underway to support the project timeline. Testing to date indicates that the mill tailings will be non-acid generating, which will allow them to be impounded at the same location as the historic tailings near Upper Canada from the mines that previously operated on Queenston's property. The current development plan envisions the expansion of the historic tailings impoundment site in order to support future mining.
Project Enhancements and Risks
Resource Expansion: The PEA is based on the 2011 mineral resource and does not take into account drill results after December 31, 2010. During 2011 an additional 84 drill holes and wedge holes (41,019 m) were drilled on the project both upgrading the inferred category towards indicated as well as extending the footprint of the deposit. A resource update is planned for the third quarter of 2012 and is expected to include all of the drilling conducted in calendar 2011 as well as the early part of 2012.
Metallurgy: There exists a potential to improve metallurgical recoveries through process optimization.
Mining: Underground design optimization will be undertaken with a view to minimize capital requirements and to control/minimize dilution and optimize mineral recoveries.
Risks: Project risks include but is not limited to variations in metal prices, exchange rates, constraints in the supplier, contractor, labour markets as well as changes in the general or regional economic and social fabric that Queenston operates in at the Upper Beaver Project.
Advancing to Feasibility
In order to advance the project to feasibility a number of steps are necessary to be completed over the next two years.
Technical: Complete detailed engineering of shaft and all technical programs (metallurgical, geotechnical and environmental) to be in a position to commence shaft sinking. Procurement of a shaft sinking contractor and hoists is in progress.
Exploration: Continue both infill and step-out drilling of deposit to both upgrade and expand the mineral resource. This work will also include the condemnation drilling of selected infrastructure sites.
Permitting: Complete the permitting procedure to procure Advanced Exploration Permit for shaft sinking at Upper Beaver. Continue baseline studies towards Environmental Assessment of the project.
Community Engagement: The Company is continuing to engage with First Nations and the Metis Nation of Ontario. Queenston has and will continue to work cooperatively with aboriginal communities as the project's scope, impacts and benefits become better understood both at Advanced Exploration and Production stages.
Qualified Persons
The PEA was prepared under the supervision of Mr. Eugene J. Puritch, P. Eng., President of P&E. Mr. Puritch is an independent Q.P. in accordance with NI 43-101 and has reviewed and approved the contents of this news release. A NI 43-101 compliant PEA Technical Report is currently being prepared by P&E and will be filed on SEDAR within 45 days of this news release by Queenston.
This news release was reviewed by Queenston's Chief Operating Officer and QP, Philip Ng, P. Eng.
About the Upper Beaver Deposit
Gold was first discovered on the property in 1912 and two shafts were sunk exploring a series of gold-copper veins. In 1919 Argonaut Gold Mines built a small mill with limited production occurring until 1928. Between 1935 and 1964 a variety of companies conducted exploration on the property with no reported production. In 1964, Upper Canada Gold Mines Limited acquired the property and resumed production, mining to a depth of 365 m until closure in 1971. In 1977 Queenston Gold Mines Limited purchased the Kirkland Lake assets held by Upper Canada Resources Limited. Total production from the mine was 140,000 oz of gold and 11.9 M lbs. of copper from 526,678 tonnes grading 8.3 g/t Au and 1% Cu. When the mine was closed in 1971 there remained underground resources of approximately 200,000 t grading 7.9 g/t Au with 1.2% Cu.
From 2005 to 2010 Queenston completed 201 drill holes outlining multiple gold-copper zones adjacent and below the Upper Beaver mine. Two NI 43-101 mineral resource studies were completed by Watts, Griffis and McOuat Limited one dated September 2008 and the second May 2011.
The majority of the mineral resources occur in a series of breccia zones that dip steeply north (75 degrees) below the old mine workings. These zones contain chalcopyrite, magnetite, pyrite and visible gold within a mineralized corridor that extends over a horizontal length of approximately 500 m and a dip length of approximately 1,300 m. The most prominent are the Porphyry Zones that contain approximately 80% of the mineral resource.
About Queenston
Queenston is a Canadian mineral exploration and development company with a primary focus on its holdings in the historic Kirkland Lake gold camp comprising 235 km2 of prime exploration lands. The Company's assets include 6, 100% owned gold deposits, all with NI 43-101 compliant mineral resources and ongoing exploration and development. The objective of the Company is to advance the flagship, Upper Beaver project towards feasibility and production. The project is currently being permitted for Advanced Exploration leading to new shaft development beginning in 2012. The Company is also very active in exploring and advancing the other five 100% owned deposits that will provide additional feed for a central milling facility. The Company has cash and short-term investments of approximately $75 million, no debt and a fiscal 2012 exploration budget of $25 million.
FORWARD LOOKING STATEMENTS
This news release may contain certain statements regarding future events, results or outlooks that are considered forward looking statements within the meaning of securities regulation. These forward looking statements reflect management's best judgment based on current facts and assumptions that management considers reasonable and include the words 'anticipate', 'believe', 'could', 'estimate', 'expect', 'intend', 'may', 'plan', 'potential' and 'should'. Forward looking statements contain significant risks and uncertainties. A number of circumstances could cause results to differ materially from the results discussed in the forward looking statements including, but not limited to, changes in general economic and market conditions, metal prices, political issues, permitting, environmental, exploration and development success, continued availability of capital and other risk factors. The forward looking statements contained in this document are based on what management believes to be reasonable assumptions, however, we cannot assure that the results will be compatible to the forward looking statements as management assumes no obligation to revise them to reflect new circumstances. The Corporation has no knowledge that would indicate the information is not true or is incomplete and the Corporation assumes no responsibility for the accuracy and completeness of the information. Readers should not place reliance on forward looking statements. More information concerning risks and uncertainties that may affect the Company's business is available in Queenston's most recent Annual Information Form and other regulatory filings of the Company at www.sedar.com.
Contacts:
Queenston Mining Inc.
Charles E. Page, P. Geo.
President and CEO
(416) 364-0001 (ext. 224)
Queenston Mining Inc.
Philip Ng, P. Eng.
COO
(416) 364-0001 (ext. 225)
Queenston Mining Inc.
Ann Gibbs-Baines
Investor Relations
(416) 627-8872
Queenston Mining Inc.
Andreas Curkovic
Investor Relations
(416) 577-9927
Info@queenston.ca
www.queenston.ca