Artemis Gold Inc. press release

Artemis Announces Feasibility Study for Blackwater Project

2021-09-13

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All amo unts are in Canadian Dollars (or " C$ ") unless otherwise noted

TSXV: ARTG

INDUSTRY LEADING AFTER-TAX NPV 5% OF C$2.15 BILLION COMPELLING AFTER-TAX BASE CASE IRR OF 32% FOR A WORLD CLASS, LARGE SCALE, ADVANCED DEVELOPMENT ASSET IN A TIER-ONE MINING JURISDICTION LEVERED AFTER-TAX IRR OF 43% YEARS 1-5: AVERAGE ANNUAL GOLD PRODUCTION UP 29% FROM THE 2020 PFS TO 321,000 OUNCES AT AISC OF US$578 /oz, AVERAGE GRADE OF 1.62 g/t Au AND STRIP RATIO OF 1.7:1 YEARS 1-10: AVERAGE ANNUAL GOLD PRODUCTION OF 351,000 OUNCES AT AISC OF US$643 /oz LOM: AVERAGE ANNUAL GOLD PRODUCTION OF 339,000 OUNCES AT AISC OF US$672 /oz AFTER-TAX PAYBACK PERIOD OF 2 YEARS DE-RISKS CAPEX AND OPEX ESTIMATES & UPDATES FOR CURRENT PRICES A 9% INCREASE IN INITIAL DEVELOPMENT CAPITAL TO C$645 MILLION ACHIEVES A 9% INCREASE IN INITIAL ANNUAL THROUGHPUT, COSTING UPDATED REFLECTS LARGER CRUSHING CIRCUIT AND INVESTMENTS IN ESG

VANCOUVER, BC , Sept. 13, 2021 /CNW/ - Artemis Gold Inc. (" Artemis " or the " Company ") is pleased to announce the results of its 2021 Feasibility Study (" FS " or the " Study ") for the staged development of the 100% owned Blackwater Gold Project in central British Columbia (" Blackwater " or the " Project ").

The results of the Study supersede the 2020 Prefeasibility Study ( "2020 PFS" ) dated August 26, 2020 entitled "Blackwater Gold Project British Columbia NI 43-101 Technical Report on Pre-Feasibility Study" filed on SEDAR by Artemis on September 18, 2020 . The results of the FS reflect several positive changes in the approach to the planned development of the Blackwater Project compared with the 2020 PFS. The scope changes incorporated in the Study include:

Higher initial throughput : Phase 1 throughput has been expanded 9% to 6 million tonnes per annum ( "Mtpa" ) with a larger crushing circuit, providing greater operational throughput upside potential in the early years, up from 5.5Mtpa in the 2020 PFS. Streamlined Phase 2 & 3 Expansions : a greatly reduced footprint of the FS Stage 1 facility, and the installation of a higher-capacity gyratory crusher in the proposed Stage 1 development. Importantly this allows for a streamlined and construction-ready approach to the Phase 2 Expansion throughput of 12Mtpa. The increase in up-front investment of C$53 million reduces expansion capital to:

Accelerated Phase 2 & Phase 3 expansions: Phase 2 expansion begins with an expansion to 9Mtpa in year 5 (up from 5.5Mtpa in year 5 in the 2020 PFS), ramping up to 12Mtpa in year 6. Phase 3 expansion begins with an expansion to 15Mtpa in year 10 (up from 12Mtpa in year 10 in the 2020 PFS), ramping up to 20Mtpa in year 11; An Environment, Social Governance ("ESG") commitment in the Stage 1 development phase: an initial investment to replace diesel and propane-powered components within the process plant facility reduces the carbon footprint of the Project; Phase 3 throughput of 20Mtpa is supported by two mineral processing trains, reduced from three in the 2020 PFS: results in lower overall maintenance and labour costs, with improved economies of scale at higher throughput rates; Estimate accuracy increased with reduced risk: the FS costing accuracy has improved to +15% /-10% (from +25%/-10% in the 2020 PFS). Engineering undertaken in connection with the guaranteed maximum price ( "GMP" ) memorandum of understanding ( "MOU" ) on each of the process plant and the power transmission line have de-risked these components since the 2020 PFS. The achievement of negotiated fixed-price EPC contracts for these components of capital cost (targeted for Q4 2021/Q1 2022) will also mitigate the potential for capital cost and schedule overruns on up to approximately 50% of the initial development capital estimate; Compelling economics even after reflecting current inflationary pressures, timelines and additional management driven environmental investments: the initial development capital has increased 9% to C$645 million , up from C$592 million , which provides a 9% increase in Phase 1 annual throughput, with current pricing, and environmental investments. The net result is an after-tax net present value at a 5% discount rate ( "NPV 5% " ) of C$2.15 billion , an after-tax Internal rate of return ( "IRR" ) of 32%, and an after-tax payback period of 2.3 years, essentially in line with the 2020 PFS .

Key Economic Outputs of the Study

Base case after-tax NPV 5% of C$2.15 billion reflecting current market consensus long term forecast gold price of US$1,600 /oz and 0.79 USD /CAD exchange rate ( C$2,025 /oz, effectively the same C$ gold price as the 2020 PFS of C$2,028 /oz) increasing to C$2.76 billion at a US$1,800 /oz gold price; Base case after-tax IRR of 32%, approximating the 2020 PFS after-tax IRR of 35% after incorporating higher initial development capital and ESG investments. Levered 1 after-tax IRR of 43%; Initial development capital cost of C$645 million to develop a 6Mtpa Phase 1 open pit mining and processing operation (up from a 5.5Mtpa operation in the 2020 PFS); Exceptional after-tax payback period on initial capital cost of 2.3 years; Optimized mine plan increases average grade to 1.62 g/t Au over the first five years of production, up from 1.57 g/t Au in the 2020 PFS, combined with average throughput of 6.6Mtpa increases average annual gold production by 29% (compared with the 2020 PFS) to 321,000 ounces of gold at an all-in sustaining cash cost ( "AISC 2 " ) of C$732 /oz generating annual free cash flow ( "FCF 3 " ) of C$301 million .

Annual Gold production and AISC over the LOM is presented in Table 1.

[](https://mma.prnewswire.com/media/1623873/Artemis_Gold_Inc_1.html)

A summary of the technical and financial metrics of the Study in comparison with the 2020 PFS is provided in the Table 2.

Table 1: Average Annual Gold Production, AISC and FCF For the Blackwater Gold Project

| 1 | Levered case assumptions and parameters are disclosed under "Economic Results". The levered 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. | | 2 | Please refer to Non-IFRS measures notice at the end of this news release for definition of AISC. | | 3 | Free cash flow is calculated as project operating cash flow minus sustaining/closure capital and taxes |

[](https://mma.prnewswire.com/media/1623870/Artemis_Gold_Inc_2.html)

[](https://mma.prnewswire.com/media/1623874/Artemis_Gold_Inc_3.html)

Table 2 – Key Results of the FS (including the New Gold Inc. Stream, defined below)

| _* _ | 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 for definition of AISC. | | _* _ | Free cash flow is calculated as project operating cash flow minus sustaining/closure capital and taxes | | ~ | 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 estimate of life of mine sustaining capital in the FS has increased by C$194 million to C$831 million compared with the C$637 million estimate of sustaining capital in the 2020 PFS. The increase in sustaining capital is a reflection of more accurate cost estimates related predominantly to the continuous expansion of the tailings storage facility ( "TSF" ) and water management systems as well as the cost of the replacement mining fleet over the LOM. The increase in sustaining capital over the life of mine is the larger factor that contributed to an increase in the AISC to C$850 /oz in the FS, up from C$811 /oz in the 2020 PFS.

The base case economics are calculated on an unlevered basis, based on a market consensus long term gold price of US$1,600 /oz, a silver price of US$21.33 /oz and a foreign exchange rate of CAD$1 = USD$0.79 . 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 figures and 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.

[](https://mma.prnewswire.com/media/1623999/Artemis_Gold_Inc_4.html)

[](https://mma.prnewswire.com/media/1623865/Artemis_Gold_Inc_5.html)

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[](https://mma.prnewswire.com/media/1624011/BlackwaterGoldProduction_8.html)

Steven Dean , Chairman and CEO of Artemis commented: "Since the release of the 2020 PFS, Artemis has been focused on optimizing and de-risking the Blackwater project, which has culminated in the compelling economics outlined in the FS. Expanded Phase 1 throughput and an acceleration of the Phase 2 expansion supports a 29% increase in gold production over the first five years of operations and a 5% increase in gold production over the first 10 years. By installing a larger capacity crushing circuit with a primary gyratory crusher up front, the Phase 2 expansion has been streamlined with the addition of major items such as an upgradable conveyor, an additional ball mill and additional tanks, which supports the ultimate expansion to 20Mtpa in two mineral processing trains, down from three in the 2020 PFS, improving economies of scale. The FS has a more constrained cost estimate accuracy, better mitigates Project risk, reflects current costs, and reflects an investment in electrification of the process plant in phase 1 to reduce the Project's carbon footprint."

"After applying this approach to the development of the Blackwater Project, the initial development capital has increased to C$645 million , a 9% increase in line with the 9% increase in the initial throughput rate. The FS base case economics demonstrate a payback period of two years, an after-tax IRR of 32% and an NPV 5% of C$2.15 billion based on a US$1,600 /oz gold price, increasing to C$2.8 billion at a US$1,800 /oz gold price. We look forward to continuing to work with our partners, including the 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 further advance the Blackwater Project. With the FS now completed, Blackwater continues to target a start of construction in Q2 2022, which puts the Project on track to develop into a new tier 1 gold operation in Q1 2024."

The Study

The Study was led by Ausenco Engineering Canada Inc. ( "Ausenco" ), together with the support of Knight Piésold Ltd. (" KP "), Moose Mountain Technical Services ( "MMTS" ), Allnorth Consultants Ltd. (" Allnorth "), Lorax Environmental Services Ltd. (" Lorax "), ERM Consultants Canada Ltd. (" ERM ") and JAT MetConsult Ltd., all of which are independent of the Company.

The Company presented two cases as part of the FS: a base case which is unlevered, and an alternate levered case which assumes C$360 million (plus up to C$25 million of capitalized interest) is funded through project debt.

The Company set out to meet or exceed the economics of the Blackwater Project and improve the accuracy and financeability of the Project against the 2020 PFS. Artemis' methodology and approach to development of the Project includes the following:

Phase 1 : increasing throughput to 6.0Mtpa, up from 5.5Mtpa in the 2020 PFS, increasing gold production while maintaining an average grade of 1.62 g/t Au over the first five years of operations; Phase 2 : acceleration of the Phase 2 expansion to 12Mtpa ramping up to 9Mtpa in year five with full Phase 2 throughput expansion achieved in year six; Increased production Years 1-5 : the higher initial throughput and accelerated expansion supports a 29% increase in average annual gold production over the first five years of operation to 321,000 ounces; Phase 3 : acceleration of the Phase 3 expansion to 20Mtpa ramping up to 15Mtpa in year 10 with full Phase 3 expansion achieved in year 11; Increased production Years 1-10 : higher throughput and accelerated expansion results in a 5% increase in the average annual gold production to 351,000 ounces of gold over the first 10 years of operations; Phase 4 : Mining operations are assumed to cease in year 17 with stockpiled ore rehandled and processed through the process plant in years 18-22. The decrease in mine life to 22 years from 23 years in the 2020 PFS is a direct result of the increased throughput rate and production during the first 10 years of the mine life in the FS; Table 5 outlines the throughput rates by phase;

[](https://mma.prnewswire.com/media/1623875/Artemis_Gold_Inc_9.html)

Higher capacity up front crushing circuit optimizes Stage 2 expansion constructability : the crushing circuit was re-designed to incorporate a primary gyratory crusher within the three-stage crushing circuit, provides greater operational throughput upside potential in the early years, which allows for an optimized expansion case for Phase 2 throughput of 12Mtpa. Infrastructure : reduced overall process footprint and laydown area requirements, resulting in a net reduction in the length of the conveyor belts and reduced mine haulage distances; Electrification of process plant : the 2020 PFS included diesel and propane-fueled process plant components, which have been converted to electrical components as an ESG investment to reduce the carbon footprint of the process plant.

Mineral Resource Estimate

The Mineral Resource Estimate for the Blackwater Project is effectively unchanged from the estimate incorporated into the 2020 PFS. 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 10 x 10 x 10 m selective 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 domain boundaries and were clipped to the overburden surface. Blocks were assigned a preliminary classification based on variography and drill hole spacing by domain, with Measured and Indicated confidence classifications then adjusted for block continuity.

The base case cut-off grade, within the "reasonable prospects of eventual economic extraction" pit shell is 0.20 g/t gold equivalent (" AuEq "), where the AuEq is calculated as AuEq = Au g/t + (Ag g/t x 0.006). At the base case prices, exchange rate and smelter terms a 0.20g/t AuEq cut-off covers the processing costs of C$9.00 /t processed. 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 summarizes the Mineral Resource estimate and includes sensitivity cases to show the estimate sensitivity to changes in cut-off grade.

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Table 6 – Mineral Resource Table Showing Sensitivity to Cut-off Grades (base case highlighted)

| Notes: | | | 1. | The Mineral Resource estimate was prepared by Sue Bird, P.Eng., the Qualified Person for the estimate and an employee of MMTS. The estimate has an effective date of May 5, 2020. | | 2. | Mineral Resources are reported using the 2014 CIM Definition Standards and are estimated in accordance with the 2019 CIM 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 conceptual pit shell to meet "reasonable prospects of eventual economic extraction" using the following assumptions: the 143% price case with a base case of US$1,400/oz. Au and US$15/oz Ag at a currency exchange rate of 0.75 US$ per C$; 99.9% payable Au; 95.0% payable Ag; US$8.50/oz Au and US$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. Additional risk factors are listed in the "Cautionary Note Regarding Forward-Looking Information" section at the end of this news release.

Mineral Reserve Estimate

The Mineral Reserve Estimate for the Blackwater Project is effectively unchanged from the estimate incorporated into the 2020 PFS. 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 Table 7. Inferred Mineral Resources are set to waste.

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Table 7 – Mineral Reserve Estimate

| Notes: | | | 1. | The Mineral Reserve estimates were prepared by Marc Schulte, P.Eng., an MMTS employee, and have an effective date of September 10, 2021. | | 2. | Mineral Reserves are reported using the 2014 CIM Definition Standards and are estimated in accordance with the 2019 CIM Best Practices Guidelines | | 3. | Mineral Reserves are based on the FS LOM plan. | | 4. | 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 such as loss and dilution. | | 5. | Mineral Reserves are reported at an NSR cut-off of C$13.00/t. The cut-off grade covers processing costs of C$9.00/t, general and administrative (" G&A ") costs of C$2.50/t and stockpile rehandle costs of C$1.50/t. | | 6. | 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; US$8.50/oz Au and US$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. | | 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. |

Mineral Reserves are based on the Feasibility Study engineering and economic analysis for the Blackwater Project. Specific risk to the Mineral Reserves include changes to the following factors: Metal Prices, Foreign Exchange Rates, Interpretations of mineralization geometry and continuity of mineralization zones, geotechnical and hydrogeological assumptions, ability of the mining operation to meet the annual production rate, operating cost assumptions, mining and process plant recoveries, the ability to meet and maintain permitting and environmental license conditions and the ability to maintain the social licence to operate.