Artemis Gold Inc. press release
Artemis Announces Revised PFS for Blackwater Project
TSXV - TSX Venture Exchange · Gold · Silver · Canada
Canada NewsWire
VANCOUVER, BC, Aug. 26, 2020
Unlevered After Tax NPV5 of $2.2 Billion
After Tax IRR of 35%
Payback on Initial Capital Costs of 2 Years
All amounts are in Canadian Dollars unless otherwise noted
Trading Symbol: TSX-V: ARTG
VANCOUVER, BC, Aug. 26, 2020/CNW/ - ARTEMIS GOLD INC. ("Artemis" or the "Company") is pleased to announce the results of a Pre-Feasibility Study ("PFS" or the "Study") based on a revised development approach to the recently acquired, and 100% owned Blackwater Gold Project in central British Columbia("Blackwater" or the "Project").
Key Economic Outputs of the Study
A summary of the technical and financial metrics of the PFS is provided in the tables below.
Table 1 – Key Results of the PFS, Life of Mine (including the New Gold Inc. Stream, defined below)
| Description | Unit | Base Case | Levered Case ~ | | Physicals | | | | | Ore Tonnes | Mt | 334.0 | 334.0 | | Grade (Au) | g/t | 0.75 | 0.75 | | Grade (Ag) | g/t | 5.78 | 5.78 | | Operational Strip Ratio* | | 2.0 | 2.0 | | Recovery (Au) | % | 93% | 93% | | Recovered Ounces (Au) | k oz. | 7,450 | 7,450 | | Recovery (Ag) | % | 65% | 65% | | Recovered Ounces (Ag) | k oz. | 40,374 | 40,374 | | | | | | | Cost Metrics | | | | | Initial Capital Cost | $ million | 592 | 592 | | Phase 2 Expansion Capital Cost | $ million | 426 | 426 | | Phase 3 Expansion Capital Cost | $ million | 398 | 398 | | Sustaining & Closure Capital Cost | $ million | 712 | 712 | | Operating Costs | $/t milled | 17.65 | 17.65 | | Cash Costs/oz. | k oz. | 715 | 715 | | All-In Sustaining Costs/oz. | $/oz. | 811 | 811 | | | | | | | Economic Results | | | | | After-Tax NPV5 | $ million | 2,247 | 2,249 | | After-Tax IRR | % | 34.8% | 49.7% | | Payback on Initial Capital | Years | 2.0 | 2.2 | | Cumulative Free Cash Flow* | $ million | 5,906 | 5,934 |
| | | _*Operational strip ratio is calculated as total waste mined divided by ore mined_ | | Please refer to Non-IFRS measures notice at the end of this news release. | | _*Free Cash Flow is calculated as project operating cash flow minus sustaining/closure capital and tax _ | | ~Levered Case assumptions and parameters are disclosed below under "Economic Results".The Leveraged Case reflects the impact of debt. Financing of the Project is not a measure of the economic viability and technical feasibility of the Project, but a measure of the Company's ability to secure debt financing for the Project. |
The base case economics have been calculated on an unlevered basis, based on a gold price of US $1,541/oz., a silver price of US $19.60/oz. and a foreign exchange rate of CAD$1= USD$0.76. The economics include the effect of the Blackwater gold stream (the "Stream"), which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. ("New Gold") (refer to news release dated August 24, 2020). Under the terms of the Stream, New Gold will purchase 8.0% of the refined gold produced from the Project. Once 279,908 ounces of refined gold have been delivered to New Gold, the gold stream will reduce to 4.0%. New Gold will make payments for the gold purchased equal to 35% of the US dollar gold price quoted by the London Bullion Market Association two days prior to delivery.
The tables below show the sensitivity of after-tax NPV and IRR to changes in the US dollar gold price and the CAD/USD exchange rate.
Table 2 – Sensitivity on Base Case After-Tax NPV (5%) ($000)to Changes in US$ Gold Price and USD/CAD Exchange Rate (Base Case Highlighted)
| US/CAD | US $ Gold Price | | | | | | | $ 1,050 | $ 1,300 | $ 1,541 | $ 1,800 | $ 2,050 | | 0.60 | 1,672,105 | 2,654,199 | 3,600,002 | 4,616,021 | 5,596,249 | | 0.65 | 1,324,653 | 2,232,499 | 3,105,715 | 4,043,857 | 4,949,033 | | 0.70 | 1,026,286 | 1,870,434 | 2,681,774 | 3,553,299 | 4,394,022 | | 0.76 | 721,073 | 1,498,745 | 2,246,820 | 3,049,606 | 3,824,263 | | 0.80 | 540,655 | 1,281,108 | 1,992,942 | 2,755,653 | 3,491,850 | | 0.85 | 329,112 | 1,037,579 | 1,708,917 | 2,427,104 | 3,120,118 | | 0.90 | 141,887 | 825,454 | 1,456,039 | 2,135,194 | 2,789,605 | | 0.95 | (33,651) | 631,179 | 1,229,101 | 1,873,937 | 2,493,860 |
Table 3 – Sensitivity on Base Case After-Tax IRR to Changes in US$ Gold Price and USD/CAD F/X
| US/CAD | US $ Gold Price | | | | | | | $ 1,050 | $ 1,300 | $ 1,541 | $ 1,800 | $ 2,050 | | 0.60 | 29% | 39% | 47% | 56% | 63% | | 0.65 | 25% | 35% | 43% | 51% | 58% | | 0.70 | 21% | 31% | 39% | 47% | 54% | | 0.76 | 17% | 27% | 35% | 42% | 49% | | 0.80 | 14% | 24% | 32% | 40% | 46% | | 0.85 | 11% | 21% | 29% | 37% | 43% | | 0.90 | 8% | 19% | 26% | 34% | 40% | | 0.95 | 4% | 16% | 24% | 31% | 37% |
The Company's revised development approach includes:
A reduction in initial capital expenditures to $592 millionby applying a disciplined three-stage approach to mine throughput ramp up, while remaining committed to achieving the full-scale project throughput of 20 million tonnes per annum ("Mtpa"); Targeting a higher-grade zone of near surface mineralization in the southern half of the pit for processing in the first seven years supporting a shorter payback period and a higher IRR; Improved gold and silver recoveries from metallurgical optimization work; Applying current consensus gold and silver price decks.
Table 4 – Key Results of the PFS by Phase (Unlevered, including the New Gold Stream)
| Description | Unit | Phase 1 | Phase 2 | Phase 3 | | Periods | Years | 1 - 5 | 6 - 10 | 11 - 23 | | Annual Throughput | mtpa | 5.5 | 12.0 | 20.0 | | Initial/Expansion Capital Cost | $ million | 592 | 426 | 398 | | Average Grade (Au) | g/t | 1.57 | 1.17 | 0.55 | | Average Strip Ratio | | 1.68 | 1.92 | 2.14 | | Operating Costs | $/t milled | 28.42 | 23.30 | 15.13 | | Average Ann. Au Production | k oz. | 248 | 420 | 316 | | All-In Sustaining Costs | $/oz. | 668 | 696 | 911 | | Average Annual Free Cash Flow | $ million | 262 | 351 | 219 |
| | | _*Operational strip ratio is calculated as total waste mined divided by ore mined_ | | Please refer to Non-IFRS measures notice at the end of this news release. | | _*Free Cash Flow is calculated as project operating cash flow minus sustaining/closure capital and tax _ | | ~Levered Case assumptions and parameters are disclosed below under "Economic Results" |
Steven Dean, Chairman and CEO of Artemis commented: "We are pleased to announce the results of the PFS, which illustrate the robust economics that management believed were achievable when the Company made the decision to acquire Blackwater earlier this year. The strategy of staging the ultimate development of the mine, among other de-risking initiatives, allows for much improved economics, while allowing the Company to phase the development before ramping up to full throughput of 20 million tonnes per annum."
"After applying this approach to the development of the Blackwater Project, the Study outlines a new project on an unlevered basis and including the gold stream granted to New Gold as part of the acquisition cost, with a payback period of 2 years, an after-tax IRR of 35% with a financeable, up-front development capital of less than $600 million. On the basis of an expected achievable 60% debt leverage of initial capital costs, the Project after-tax IRR increases to 50%. The phased approach provides the opportunity to build the Blackwater project into a new 250,000 ounce per year gold operation growing to more than 400,000 ounces of gold per year with growth financed from free cash flow. We believe that this disciplined approach is the most prudent way to advance one of the largest undeveloped gold projects in Canada. We are looking forward to working with our partners, including Lhoosk'uz Dené Nation, Ulkatcho First Nation, the Carrier Sekani First Nations and Nazko First Nation and with the support of the BC and Federal Governments, to advance the Blackwater Project. With Environmental Assessment approvals in 2019, the permitting process for the Project is already well advanced."
The Study
The Study was led by Moose Mountain Technical Services ("MMTS"), along with the support of Knight Piésold Ltd. ("KP") and John A. Thomas, all of whom are independent of the Company. The Company presents two cases as part of the Study: a base case which is unlevered, and an alternate levered case which assumes 60% of the initial funding requirement is funded through project debt.
The Company set out to achieve improved economics and financeability on the Project against the previous study (refer to the Feasibility Study technical report entitled "_Blackwater Gold Project, British Columbia, NI 43-101 Technical Report on Feasibility Study_" with an effective date of January 14, 2014, filed on SEDAR by New Gold on January 22, 2014(the "2014 Feasibility Study")). Artemis' methodology and approach to development of the Project includes the following:
Starting at 5.5 Mtpathroughput and focusing on the near-surface, higher-grade zone of mineralization in the southern half of the deposit to minimize initial capital cost intensity, improve payback and IRR; Two subsequent expansion stages ramping up to the original planned capacity of approximately 20 Mtpa outlined in the 2014 Feasibility Study, with expansions funded from future operating cashflows;
Table 5 – Throughput Levels by Phase (See Appendix A for Detailed Mine Schedule)
| Phase | Years | Annual Throughput | | 1 | 1 to 5 | 5.5 million tonnes | | 2 | 6 to 10 | 12 million tonnes | | 3 | 11 to 23 | 20 million tonnes |
The smaller-scale start-up defers a substantial portion of waste pre-stripping from initial capital, as designed in the 2014 Feasibility Study, into operating costs in the PFS. While this partly contributes to the slightly higher operating costs as compared to the 2014 Feasibility Study, it substantially reduces up front funding requirements and results in a much higher IRR for the PFS; Cost benefits from a smaller, off-the-shelf, modular approach for buildings and crushing equipment; Staged installation of three similar-sized processing trains to 20 Mtpa; Re-designed three-stage crushing with a ball mill provides improved capacity to accommodate variability of ore hardness and maintain name-plate throughput; Reduced overall process footprint and laydown area requirements; Staged tailings capital costs, including relocation of the start-up dam site downstream to optimize initial capacity and haulage distances, improve constructability by following existing access trails in an area of gentler terrain, and simplify water management during early operations; Enhanced water management flexibility with planned installation of a water treatment plant at the start of operations; Total project indirect capital costs and owner's costs significantly reduced as planned expansions will take advantage of an operating site with installed infrastructure and an established site management team;
Mineral Resource Estimate
The mineral resource is estimated from a drill hole database containing 1,002 drill holes and 288,738 assay intervals. Three domains were generated based on the major north-south fault and changes in orientation of the mineralization. The block model has a 10mx 10mx 10mselective mining unit, with interpolation of gold done by Multiple Indicator Kriging ("MIK") and interpolation of silver using Ordinary Kriging ("OK"). The interpolations were limited by the domain boundaries and were clipped to the overburden surface. Blocks were assigned a preliminary classification based on the variography and drill hole spacing by domain, with Measured and Indicated confidence classifications then adjusted for continuity of blocks.
The base case cut-off grade within the "reasonable prospects of eventual economic extraction" pit is 0.20 g/t gold equivalent ("AuEq"), as highlighted in the table below. At a 0.20 g/t AuEq cut-off, the total Measured and Indicated Mineral Resource is estimated at 597 Mt at 0.65 g/t AuEq, 0.61 g/t Au, and 6.4 g/t Ag for a total of 12.4 million AuEq ounces. Of the total Measured and Indicated Mineral Resources, 75% are in the Measured category.
Table 6 – Mineral Resource Sensitivity (effective date of May 5, 2020)
| | | | In situ Grades | In situ Metal | | | | | | Classification | Cutoff | Tonnage | AuEq | Au | Ag | AuEq | Au | Ag | | (g/t) | (ktonnes) | (g/t) | (g/t) | (g/t) | (koz) | (koz) | (koz) | | | Measured | 0.20 | 427,123 | 0.68 | 0.65 | 5.5 | 9,360 | 8,905 | 75,802 | | 0.30 | 313,739 | 0.84 | 0.80 | 5.9 | 8,463 | 8,109 | 59,009 | | | 0.40 | 238,649 | 0.99 | 0.96 | 6.1 | 7,627 | 7,347 | 46,727 | | | 0.50 | 186,687 | 1.15 | 1.11 | 6.2 | 6,881 | 6,656 | 37,333 | | | 0.60 | 149,261 | 1.30 | 1.26 | 6.4 | 6,223 | 6,039 | 30,521 | | | 0.70 | 120,916 | 1.45 | 1.41 | 6.6 | 5,633 | 5,479 | 25,619 | | | Indicated | 0.20 | 169,642 | 0.56 | 0.51 | 8.5 | 3,046 | 2,766 | 46,578 | | 0.30 | 123,309 | 0.68 | 0.61 | 10.4 | 2,677 | 2,431 | 41,112 | | | 0.40 | 86,473 | 0.81 | 0.74 | 12.4 | 2,264 | 2,057 | 34,419 | | | 0.50 | 64,305 | 0.94 | 0.85 | 14.8 | 1,947 | 1,763 | 30,681 | | | 0.60 | 50,527 | 1.05 | 0.95 | 17.2 | 1,705 | 1,537 | 27,957 | | | 0.70 | 40,317 | 1.15 | 1.03 | 19.6 | 1,493 | 1,340 | 25,458 | | | Measured + Indicated | 0.20 | 596,765 | 0.65 | 0.61 | 6.4 | 12,406 | 11,672 | 122,381 | | 0.30 | 437,048 | 0.79 | 0.75 | 7.1 | 11,140 | 10,540 | 100,120 | | | 0.40 | 325,122 | 0.95 | 0.90 | 7.8 | 9,890 | 9,404 | 81,146 | | | 0.50 | 250,992 | 1.09 | 1.04 | 8.4 | 8,828 | 8,419 | 68,014 | | | 0.60 | 199,788 | 1.23 | 1.18 | 9.1 | 7,928 | 7,577 | 58,478 | | | 0.70 | 161,233 | 1.37 | 1.32 | 9.9 | 7,125 | 6,819 | 51,077 | | | Inferred | 0.20 | 16,935 | 0.53 | 0.45 | 12.8 | 288 | 246 | 6,953 | | 0.30 | 11,485 | 0.66 | 0.57 | 16.2 | 245 | 210 | 5,971 | | | 0.40 | 8,690 | 0.77 | 0.65 | 19.2 | 214 | 182 | 5,373 | | | 0.50 | 5,552 | 0.95 | 0.79 | 26.0 | 169 | 142 | 4,648 | | | 0.60 | 4,065 | 1.10 | 0.90 | 32.7 | 143 | 118 | 4,279 | | | 0.70 | 3,328 | 1.20 | 0.97 | 36.9 | 128 | 104 | 3,951 | |
| | | | Notes: | | | 1. | The Mineral Resource estimate has been prepared by Sue Bird, P.Eng., an independent Qualified Person. | | 2. | Resources are reported using the 2014 CIM Definition Standards and were estimated in accordance with the CIM 2019 Best Practices Guidelines. | | 3. | Mineral Resources are reported inclusive of Mineral Reserves. | | 4. | Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. | | 5. | The Mineral Resource has been confined by a "reasonable prospects of eventual economic extraction" pit using the following assumptions: US $2,000/oz. Au and US $21.43/oz Ag at a currency exchange rate of 0.75 US$ per CAD$; 99.9% payable Au; 95.0% payable Ag; $8.50/oz Au and $0.25/oz Ag offsite costs (refining, transport and insurance); a 1.5% NSR royalty; and uses a 93% metallurgical recovery for gold and 55% recovery for silver. | | 6. | The AuEq values were calculated using US $1,400/oz Au, US $15/oz Ag, a gold metallurgical recovery of 93%, silver metallurgical recovery of 55%, and mining smelter terms for the following equation: AuEq = Au g/t + (Ag g/t x 0.006). | | 7. | The specific gravity of the deposit has been determined by lithology as being between 2.6 and 2.74. | | 8. | Numbers may not add due to rounding. |
There are no other known factors or issues that materially affect the Mineral Resource estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors and additional risk factors as listed in the "Cautionary Note Regarding Forward-Looking Information" section below.
Mineral Reserve Estimate
The Mineral Reserves for Blackwater are a subset of the Measured and Indicated Mineral Resources, described above. Proven and Probable Mineral Reserves are modified from Measured and Indicated Mineral Resources and are summarized in the table below. Inferred Mineral Resources are set to waste. Mineral Reserves are estimated in accordance with the CIM 2019 Best Practices Guidelines and are classified using the 2014 CIM Definition Standards.
Table 7 – Mineral Reserve Estimate
| Classification | Run of Mine
(Mt) | AuEq Grade
(g/t) | Gold Grade
(Au, g/t) | Contained Metal
(Au, Moz.) | Silver Grade
(Ag, g/t) | Contained Metal
(Ag, Moz.) | | Proven | 325.0 | 0.78 | 0.74 | 7.8 | 5.8 | 60.5 | | Probable | 9.1 | 0.84 | 0.80 | 0.2 | 5.5 | 1.6 | | Total Reserve | 334.0 | 0.78 | 0.75 | 8.0 | 5.8 | 62.1 |
| | | | Notes: | | | 1. | The Mineral Reserve estimates were prepared by Marc Schulte, P.Eng. (who is also the independent Qualified Person for these Mineral Reserve estimates), reported using the 2014 CIM Definition Standards, and have an effective date of August 18, 2020. | | 2. | Mineral Reserves are based on the PFS Life of Mine Plan. | | 3. | Mineral Reserves are mined tonnes and grade, the reference point is the mill feed at the primary crusher and includes consideration for operational modifying factors. | | 4. | Mineral Reserves are reported at an NSR cut-off grade of $13.00/t. | | 5. | Cut-off grade assumes US$1,400/oz. Au and US$15/oz Ag at a currency exchange rate of 0.75 US$ per C$; 99.9% payable gold; 95.0% payable silver; $8.50/oz Au and $0.25/oz Ag offsite costs (refining, transport and insurance); a 1.5% NSR royalty; and uses a 93% metallurgical recovery for gold and 55% recovery for silver. | | 6. | The cut-off grade covers processing costs of $10.00/t and administrative (G&A) costs of $3.00/t. | | 7. | The AuEq values were calculated using commodity prices of US$1,400/oz Au, US$15/oz Ag, a gold metallurgical recovery of 93% silver metallurgical recovery of 55%, and mining smelter terms for the following equation: AuEq = Au g/t + (Ag g/t x 0.006). | | 8. | Numbers have been rounded as required by reporting guidelines. |
There are no other known factors or issues that materially affect the Mineral Reserve estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors and additional risk factors as listed in the "Cautionary Note Regarding Forward-Looking Information" section below.
Project Description
Location
The Project is located in central British Columbia, approximately 160 km southwest of Prince Georgeand 446 km northeast of Vancouver. The Project is accessible by major highway and access/service roads.
Artemis has a 100% recorded interest in 328 mineral claims covering an area of 148,688 ha distributed among the Property and the Capoose, Auro, Key, Parlane and RJK claim blocks. Surface rights over the Project area are controlled by the Crown.
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Project Development Plan
The Blackwater Project will comprise the construction, operation, and closure of an open pit gold and silver mine and ore processing facilities commencing with a nominal milling rate of 15,000 t/d (5.5 Mtpa). The ore processing facilities will be expanded to achieve 33,000 tpd (12 Mt/y) starting in year 6 with a final expansion to achieve 55,000 t/d (20 Mt/y) starting in year 11 of operation. A combined gravity circuit and whole ore leaching (WOL) will be used for recovering gold and silver.
The proposed mine plan involves mining 334 Mtof ore, 584 Mt of waste rock and 83 Mt of overburden. The material will be sourced via conventional open pit mining methods, initially targeting high-grade, near-surface ore for processing, with lower-grade material being stockpiled for processing at the end of the mine life.
Most of the waste material sourced from the pit will be used for construction of the tailings storage facility ("TSF") or placed in the TSF itself. Overburden and non potentially acid generating waste rock not required for construction will be placed in stockpiles adjacent to the open pit. Potentially acid generating waste rock, along with tailings, will be deposited into the TSF located to the north/northwest of the open pit.
At closure, all buildings will be removed, disturbed lands rehabilitated, and the property returned to otherwise functional use according to future approved reclamation plans and accepted practices at the time of closure.