Rusoro Mining Limited: Positive Feasibility Study on Expansion of Choco Mine to 20,000 Tonnes Per Day Completed
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 02/27/12 -- Andre Agapov, President and CEO of Rusoro Mining Ltd. (TSX VENTURE: RML) ('Rusoro' the 'Company') is pleased to provide details on the recently completed positive feasibility study (the 'Study') on the expansion of the Choco Mine to 20,000 tonnes per day. The Study was conducted by Micon International Limited ('Micon') in association with Ausenco and Knight Piesold, based on gold resources and reserves from the Choco 10 mine (95% owned) and the near-by Increible 6 (100% owned) gold deposit.
The Study demonstrates the viability of the project as proposed, and that expansion of the mine to process 20,000 tonnes per day is warranted.
Base Case Cash Flow Evaluation
The base case, which uses a gold price of US $1,225/ounce, evaluates to an internal rate of return (IRR) of 40% before tax and 30% after tax.
At the selected discount rate of 7.0%, the net present value (NPV7) of the cash flow is $1,261 M before tax and $758M after tax.
Over the LOM period, the average cash operating cost equates to $487/oz gold. The base case cash flow evaluation results are shown in the following table, which also shows the effects of discount rates of 5% and 9% for comparison.
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Discounted Discounted Discounted IRR
$ million LOM Total at 5%/y at 7%/y at 9%/y (%)
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Gross Sales 5,481 3,673 3,180 2,775
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Cost of Sales and
Royalty (218) (146) (127) (111)
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Net Sales Revenue 5,263 3,527 3,053 2,665
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Mining Costs 1,089 841 767 703
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Processing Costs 799 542 472 413
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G&A costs 291 207 184 165
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Total cash operating
costs 2,180 1591 1,423 1,282
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Net Operating Margin 3,083 1936 1,630 1,383
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Capital expenditure 444 387 369 354
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Net cash flow before tax 2,638 1549 1,261 1,029 40%
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Taxation payable 952 597 503 426
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Net cash flow after tax 1,686 951 758 603 30%
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Life of mine production totals 4.5 million ounces averaging 328,000 ounces per year (following expansion) and reaching a maximum of 475,000 ounces in year 12.
In addition to the expansion capital of $311M, the project requires additional funding for the acceleration of waste mining and increases in working capital, bringing the cumulative cash flow at the end of Year 2 to (negative) $331M. From the completion of the expansion project, the project demonstrates an undiscounted pay back of 3.7 years or approximately 4.4 years when discounted at the selected rate of 7.0%. The latter leaves a production tail of 8.0 years on the current mineral reserve.
To see the graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/rml227i.jpg.
The sensitivity of the project returns to changes in all revenue factors (including grades, recoveries, prices and exchange rate assumptions) together with capital and operating costs was tested over a range of 20% above and below base case values showing positive results over the tested range.
Mining and Milling
The Rosika, Coacia and Pisolita deposits have been mined for six years. The current mill has a capacity of 5,000 t/d. The Study proposes to increase the plant capacity to 20,000 t/d. This increase in capacity is based on continuing to mine the three current pits, bringing the relatively large VBK open pit on line as well as developing the Increible 6 deposits.
Mining will be carried out by a contractor, most likely using a fleet of up to 25 x 240 tonne trucks with suitable hydraulic shovels (3 x 28m3), wheel loaders, drills and supporting equipment.
In Years 0 to 2, the current mill is fed at the rate of 5,000 t/d, comprising a mixture of oxide, transition and fresh ore types. During this period, waste mining ramps up to expose additional ore in anticipation of the expansion of milling capacity. After Year 3, the rate of ore mining increases, run of mine tonnage being dominated by fresh ore, with remnant oxides being mined during stripping of the new open pits, including those in the Increible area.
The expanded facilities will consist of a new gyratory crusher which will be capable of treating 20,000 t/d. Crushed ore will then be transferred to a stockpile from which it will feed 15,000 t/d to the new milling circuit and 5,000 t/d to the existing facilities. The new plant will consist of a SAG mill which will operate in partial open circuit, with the trommel screen oversize being recycled through a pebble crusher. The trommel undersize will be combined with the ball mill discharge and pumped to a nest of classifying cyclones. The cyclone underflow returns to the ball mill and the verflow gravitates to a thickener for feed to the leach/CIL circuit. The cyclone overflows from the two circuits will be thickened in a common unit, and the underflow split proportionally to feed the new leach/CIL circuit and existing CIP circuit.
The two Zadra elution circuits (new and existing) will be separate as the stripping cycle times will be different. Electrowinning and bullion production will occupy a new, secure building.
Capital and Operating Costs
Capital expenditures for the expansion project are estimated to total $311M, including $153M processing, $15M for services, $42M infrastructure, $15M for design growth, $46M indirect costs and a contingency of $40M, equivalent to almost 18% of the direct capital cost estimate. In addition, sustaining capital has been provided for in the amount of $86M over the LOM period. A mine closure and rehabilitation provision of $48 million is also provided for, including expenditure of $2M per year for 15 years and final closure costs of $18 million.
Working capital has been estimated to include 15 days product inventory comprising the mill, leaching circuit, carbon and elution inventories, and 15 days accounts receivable. Stores provision is for 60 days of consumables and spares inventory, less 30 days accounts payable. A balance of $14M in working capital is assumed to be brought forward from the current operation.
Cash operating costs average $22.7/t milled over the LOM period, including $11.4/t mining, $8.3/t processing and $3.0/t general and administrative costs. The mining cost estimate includes a provision for increases in the contractors' unit rate to cover leasing charges for the expanded mining fleet and its periodic replacement. This operating expense is in lieu of capital expenditure of approximately $153M for new mining equipment over the LOM period.
Andre Agapov, CEO and President of Rusoro, commented,'The Feasibility Study confirms the potential at Choco and Increible 6 and clearly shows the added benefits to be gained by expanding the production from current levels. Rusoro remains committed to fully unlocking the value of these excellent gold assets. Rusoro continues in discussion with representatives of the Bolivarian Republic of Venezuela, as a result of Nationalization Decree No. 8413, negotiating the compensation due to Rusoro and the terms of the migration of Rusoro's mining assets to a Mixed Enterprise to be controlled by the Venezuelan Government.'
Reserves
The Study considered mining from the Choco 10 and Increible 6 deposits at a combined rate of 20,000 t/d or 7.3 Mt/y of mill feed. New resource block models generated by Micon were used as the basis for the open pit designs. As of December 31, 2010, the mineral reserves for the Choco 10 and Increible 6 deposits are as summarized in the following tables respectively.
Choco 10 Mineral Reserves (December 31, 2010)
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Proven Probable Total P+P
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Grade Au oz Grade Au oz Grade Au oz
Deposit COG (Mt) (g/t) (000) (Mt) (g/t) (000) (Mt) (g/t) (000)
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Rosika 0.4 1.95 1.88 118 8.15 2.10 549 10.10 2.05 667
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Coacia 0.4 0.18 1.28 8 0.61 1.39 27 0.79 1.36 35
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Pisolita 0.4 0.07 1.35 3 1.26 1.91 78 1.33 1.88 81
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VBK 0.4 28.66 1.82 1,676 45.77 1.36 2,005 74.43 1.54 3,681
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TOTAL 0.4 30.86 1.82 1,804 55.79 1.48 2,659 86.65 1.60 4,463
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Increible 6 Mineral Reserves (December 31, 2010)
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Proven Probable Total P+P
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Grade Au oz Grade Au oz Grade Au oz
Deposit COG (Mt) (g/t) (000) (Mt) (g/t) (000) (Mt) (g/t) (000)
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Culebra 0.4 0.17 2.23 12 3.49 1.69 190 3.65 1.72 202
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Christina 0.4 0.09 2.40 7 0.67 1.65 36 0.76 1.74 43
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Elisa/Ingrid 0.4 0.01 2.02 1 4.81 2.03 314 4.82 2.03 315
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Olga/Enoc 0.4 0.00 0.00 0 0.00 0 0 0.00 0.00 0
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TOTAL 0.4 0.27 2.28 20 8.97 1.87 540 9.24 1.88 559
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Future Studies and Development
This Study recommends additional work including further resource drilling, geotechnical studies related to the tailing storage facility, plant site and open pits, further waste rock testing, continued metallurgical testing, definition of future power supply, and updated scheduling analyses.
The capital estimates presented in the Study have been compiled by Micon from information provided by Ausenco and Knight Piesold during 2010. In Micon's opinion, the impact on these estimates of inflation and exchange rate variances between the effective date and the signature date of this report lie within the expected range of accuracy of the estimate.
Due to the passage of time since the preparation of the capital and operating cost estimates used in this Feasibility Study, the Study recommends that, subject to project approval, an update or revalidation of the estimates should be prepared as a basis for management of the implementation phase.
Detailed Report
The NI 43-101 compliant Technical Report titled 'NI 43-101 Technical Report Feasibility Study Expansion of Gold Production at Choco 10 and Increible 6, Bolivar State, Venezuela' with an effective date of 31 December, 2010 and a signature date of 30 December, 2011 authored by C. Jacobs, CEng MIMMM, G. Lane, F.AusIMM (Ausenco), R. Gowans, P.Eng., D. Anderson, QP MMSA, D. Friedman, P.Eng. (Knight Piesold), and D. Makepeace P.Eng., for Rusoro Mining Ltd. is available at www.sedar.com and on the Company's corporate website at www.rusoro.com
Qualified Person
The Feasibility Study was prepared by Micon International Limited.
Mr. Gregory Smith, P.Geo, the Vice-President Exploration of Rusoro, is the Qualified Person as defined by National Instrument 43-101, and is responsible for the accuracy of the technical information contained within this news release.
ON BEHALF OF THE BOARD
Andre Agapov, President & CEO
Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.
'Neither the 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.'
Contacts:
Rusoro Mining Limited
Andre Agapov
President & CEO
604-632-4044 or Toll Free: 1 800-668-0091
info@rusoro.com
www.rusoro.com