Filo Mining Announces Positive PFS Results for Filo del Sol with a US$1.3 Billion After Tax NPV and 23% IRR

2019-01-14

TSX - Toronto Stock Exchange · Silver · Gold · Copper · Zinc · Lead · Canada

Canada NewsWire

VANCOUVER, Jan. 13, 2019

VANCOUVER, Jan. 13, 2019/CNW/ -Filo Mining Corp. (TSX-V, Nasdaq First North: FIL) ("Filo Mining", or the "Company") is pleased to announce the results of a positive Pre-Feasibility Study ("PFS") at its 100% owned Filo del Sol project located on the border of Region III, Chileand San Juan Province, Argentina. A conference call and webcast to discuss these results will be held on Tuesday, January 15, 2018at 09:00 h Eastern Standard Time. All values in this release are reported in US dollars.

Please view PDF version of News Release

Commenting on the results, CEO Adam Lundinstated, "The PFS confirmed and improved on our initial work at Filo del Sol and highlights the incredible potential of the project. We remain excited about our ongoing field season that will continue to enhance the project and in tandem explore the sulphide portion of the deposit which, to date, has not been included in any study or economics."

Filo del Sol PFS Highlights:

A $1.28 billionafter-tax NPV using an 8% discount rate and an IRR of 23% at $3.00/lb copper, $1300/oz gold and $20/oz silver; Average annual production of approximately 67,000 tonnes of copper (including copper as copper precipitate), 159,000 ounces of gold, and 8,653,000 ounces of silver at a C1 cost of $1.23/lb CuEq.; An Initial Probable Mineral Reserve of 259 Mtof 0.39% copper, 0.33 g/t gold, and 15 g/t silver; Pre-production capital cost of $1.27 billion(excluding costs prior to a construction decision); 14 year mine life (including pre-stripping) producing almost 1.75 billion pounds (lbs) of copper as cathode, and 1.92 million ounces (oz) of gold and 104 million oz of silver as doré over the 13 year leach feed schedule. Additional copper is also recovered as a high-grade copper precipitate. Low strip ratio of 1.5:1 (waste:ore) Excellent metallurgy producing LME grade copper cathodes and gold and silver doré. Incorporates planning for a fully autonomous haul truck fleet and recovery of additional copper as sulphide precipitate with coincident regeneration of a portion of the cyanide, which drives the low estimated operating costs; Potential opportunities to further improve the project include:

Project Description Filo del Sol hosts a high-sulphidation epithermal copper-gold-silver deposit associated with a large porphyry copper-gold system. The project is located in the Andes Mountains on the border of Chileand Argentina, approximately 140 km southeast of the city of Copiapó. The project is covered under the Mining Integration and Complementation Treaty between Chileand Argentina, which provides the framework for the development of cross-border mining projects.

The PFS contemplates that Filo del Sol would be mined using conventional open pit methods. From the open pit, ore would be trucked to a conventional two-stage crusher, designed to process 60,000 tonnes per day of ore. Crushed ore would be treated by sequential heap leaching, to extract copper and subsequently gold and silver from the ore followed by hydrometallurgical processing to produce copper cathodes and gold-silver doré. Groundwater for the process plant would be supplied from nearby aquifers to the plant site, and power would be supplied via 127 km of power line construction to connect to the Chilean national grid. Copper cathode and gold-silver doré would be transported by truck to Puerto Calderawhich is located approximately 245 km by road from the plant site. Approximately 60 km of the existing road between site and port would require upgrade to accommodate the truck traffic; the remaining distance comprises public highway.

Summary of Filo del Sol PFS Economic Results:

| Pre-Tax NPV (8%) & IRR | $1.86 billion NPV

27% IRR | | After-Tax NPV (8%) & IRR | $1.28 billion NPV

(undiscounted, after-tax cash flow) | 3.4 Years | | Metals Prices Assumed | $3.00/lb Cu*

$1,300/oz Au

(note – based on 12 years of leaching, excluding final partial year of leach pad operation) | 67,000 t Cu

159,000 oz Au

8,653,000 oz Ag | | LOM Average Process Recovery | 80% Cu

70% Au

82% Ag |

| *All figures reported are in 2018 US dollars and on a 100% Project and 100% equity basis valuation. Copper price shown excludes a 1.5% cathode premium which was included in the economics. Argentine revenue includes a 3% provincial mining royalty and 25% corporate tax rate. Chilean revenue includes a 1.5% private NSR royalty, a 27% corporate tax rate, and the Chilean Mining Tax. The estimated overall effective corporate tax rate for the project is 26.4%. |

The PFS was prepared and managed by Ausenco Engineering Canada Inc. ("Ausenco"), with input from AGP Mining Consultants (Canada), BGC Engineering (Canada), Knight Piésold (Canada), Advantage Geoservices Limited, Merlin Geosciences Inc., and SRK Consulting (Canada).

A NI43-101 Technical Report that summarizes the results of the PFS and incorporates the initial reserve statement for Filo del Sol will be filed within 45 days on SEDAR and on the Company's website.

Project Economic Sensitivity to Metals Prices A cash flow valuation model for the project has been developed based on the PFS. The model was developed using a long-term copper price of $3.00/lb, gold price of $1,300/oz, and silver price of $20/oz. The following figure shows the sensitivity of estimated NPV for the Project's cash flow at various changes to metal prices at 8% discount rate.

Image 1 - Metal Price Sensitivity

Capital & Operating Cost Estimates Capital costs were derived from a variety of sources including derivation from first principles, equipment quotes and factoring from other costs contained within the PFS study. Costs are estimated to an accuracy of +/- 25% which is equivalent to an AACE International, Class 4 Estimate.

| Estimated Capital Costs | (US$ million) | | Mine Pre-strip | 59 | | Mining | 121 | | Crushing | 67 | | Processing | 325 | | On-Site Infrastructure | 94 | | Off-Site Infrastructure | 124 | | Total Direct Costs | 789 | | Indirect Costs | 132 | | Project Delivery | 101 | | Owner's Costs | 50 | | Contingency | 194 | | TOTAL INITIAL CAPEX | 1,266 | | LOM Sustaining Capital | 217 | | Closure | 51 | | Total Life of Mine Capital | 1,534 |

The PFS estimates that the C1 cash costs (co-product basis) over the life of mine will average $1.23/lb CuEq. C1 cash costs include at-mine cash operating costs, treatment and refining charges, royalties, selling costs, and transportation costs and are reported on a $/equivalent payable unit of the primary metal.

Initial Filo del Sol Mineral Reserve Statement The Initial Mineral Reserve estimate for Fil del Sol, shown below, is based on the Mineral Resource Statement with an effective date of June 11, 2018(see the news release titled "_Filo Mining Reports Updated Mineral Resource Estimate for the Filo del Sol Project_" dated August 8, 2018and available under the Company's profile on SEDAR). The Mineral Resources are inclusive of Mineral Reserves.

(all domains) | (Mt) | Cu (%) | Au (g/t) | Ag (g/t) | NVPT ($/t) | Cu

(M lbs) | Au

(K oz) | Ag

(K oz) | | Proven | - | - | - | - | - | - | - | - | | Probable | 259.1 | 0.39 | 0.33 | 15.1 | 25.30 | 2,226 | 2,764 | 126,028 | | Total Proven and Probable | 259.1 | 0.39 | 0.33 | 15.1 | 25.30 | 2,226 | 2,764 | 126,028 |

| Notes to accompany Filo del Sol Mineral Reserves table: | | | 1. | Mineral Reserves have an effective date of 13 January 2019. The Qualified Person for the estimate is Mr. Jay Melnyk, P.Eng. of AGP Mining Consultants, Inc. | | 2. | The Mineral Reserves were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves; | | 3. | The Mineral Reserves are supported by a mine plan, based on a pit design, guided by a Lerchs Grossmann (LG) pit shell. Inputs to that process are: | | | - Metal prices of Cu $3.00/lb, Ag $20/oz, Au $1300/oz; Mining cost of $2.00/t; An average processing cost of $9.73/t; General and administration cost of $2.02/t processed; Pit slope angles varying from 29 to 45 degrees, inclusive of geotechnical berms and ramp allowances; Process recoveries were based on rocktype. The average recoveries applied were 83% for Cu, 73% for Au and 80% for Ag, which exclude the adjustments for operational efficiency and copper recovered as precipitate which were included in the financial evaluation; | | | | | | | | | | | | | | | | | 4. | Dilution and Mining Loss adjustments were applied at ore/waste contacts using a mixing zone approach. The volumes of dilution gain and ore loss were equal, resulting reductions in grades of 1.0%, 1.3% and 1.0% for Cu, Au and Ag respectively; | | 5. | Ore/Waste delineation was based on a Net Value Per Tonne (NVPT) breakeven cut-off considering metal prices, recoveries, royalties, process and G&A costs as per LG shell parameters stated above; | | 6. | The life-of-mine (LOM) stripping ratio in tonnes is 1.52:1; | | 7. | All figures are rounded to reflect the relative accuracy of the estimate. Totals may not sum due to rounding as required by reporting guidelines. |

Mining & Processing The study contemplates open pit mining methods, with conventional drilling, blasting and loading performed on 12mbenches. Autonomous haulage was incorporated to take advantage of the technology's proven productivity improvements and operating cost savings. The open pit would have a mine life of 14 years, including pre-stripping, with a life of mine strip ratio of 1.5:1. A maximum mining rate of approximately 65 Mt per year (including waste) is required to provide the nominal 60,000 tonnes per day of ore to the process facility. A total of 259 Mtof ore is expected to be processed over the life of the mine.

Ore would be trucked from the mine and either stockpiled or direct tipped into the primary crusher. The ore would be further crushed through a closed-circuit secondary crushing system to a stockpile.

Crushed ore would be processed at an on/off heap leach pad where the copper would be leached in acid and then recovered from the leach solution by solvent extraction and electrowinning to produce LME grade copper cathodes. Metal leaching is expected to span over 13 years. Once the copper is leached, the ore would be rinsed, neutralized and removed from the on/off leach pad by a bucket wheel reclaimer. The material would then be agglomerated using cement, and subsequently stacked on a permanent heap leach pad where gold and silver would be leached in a cyanide solution. Gold and silver would be recovered from the pregnant gold leach solution by a Merrill-Crowe zinc precipitation process. Gold and silver would then be smelted to produce doré. A portion of the barren leach solution, following zinc precipitation, would be treated to avoid a build-up of recirculating copper and cyanide through the gold circuit. This treatment is based on the SART process which produces a copper sulphide precipitate (which grades approximately 65% copper) and recovers cyanide for use in the heap leach.

The proposed PFS production schedule and metal production profile is shown in the attached figures. Note: the project assumes a 24-month construction period.

Image 2 - Cu Production Schedule

Image 3 - Au and Ag Production Schedule

Metallurgy

In 2016 and 2017, comprehensive metallurgical test programs were carried out at SGS Lakefield on selected samples from the Filo del Sol deposit. These focussed mostly on assessing the feasibility of using heap leaching to recover the copper, gold and silver from the various mineralization types identified.

To confirm these results a sampling campaign was carried out in early 2018 to collect surface samples, RC chips and diamond drill core samples. A total of more than 3,500 kg of sample was shipped to the SGS facility in Lakefield, Ontario. Samples were submitted to various physical, chemical and detailed mineralogical characterisation tests.

Most of the metallurgical program was devoted to the leaching stage of the process, more particularly heap leaching. Heap leaching was simulated by conducting column leaching tests on material ranging from 0.5 to 2.5 inch crush size and using 50 to 250 kg of sample per column test. Cyanide column leaching was tested for the gold oxide ore types (a total of 11 column tests), while sequential column leaching (acid leaching followed by washing/neutralization and cyanide leaching) was used for the copper-gold oxide ore types (a total of 18 sequential column tests).

Variability and process optimization testing were carried out using bottle roll tests on minus 10 mesh material. Both cyanide leaching (a total of 21 bottle roll tests) and sequential leaching (a total of 72 sequential leach bottle roll tests) were conducted during the 2018 program.

The results of the test program were used to determine the optimal leach program together with expected leach recoveries for copper, gold and silver. Additionally, deductions to the testwork extractions were applied to expected copper, gold, and silver recoveries to simulate scale-up to a commercial production facility.

Infrastructure The major infrastructure items considered and costed in the PFS are:

Water Supply:Water would be supplied from aquifers in Argentina, located near the proposed plant site. The industrial water make-up requirement is estimated to be 75 L/s and is expected to be fully supported by the aquifers. Power Supply:The site would be supplied with electricity through a 127 km long, 110 kV, single circuit power transmission line connected to the Los Loros substation in Chile. Average electrical demand is estimated to be 52 MW. A price of $0.075/kWh was used for long-term power supply. Product Transport: Copper cathode would be transported by truck to Puerto Caldera, a port near the city of Caldera which is located 77 km by road northwest of Copiapó. The approximate trucking distance from the plant site is 245 km, of which roughly 60 km of existing road will require upgrade to accommodate the truck traffic. Doré would be transported approximately 175 km to Aeropuerto Desierto de Atacama for ongoing airfreight.

Social & Environmental Knight Piésold completed the environmental baseline work for the Company in 2017 and 2018 in addition to reviewing the historical work from other independent consultants who assisted in the preparation of the environmental work. This work will be used to support the preparation of the respective Environmental Impact Assessments ("EIA").

Baseline studies to date include geosciences, air & water, terrestrial biota, the human environment, and natural & cultural heritage. The list of environmental components to be studied was derived from the Chilean national environmental assessment regulations, the Argentine national mining environmental law and from the International Finance Corporation's Sustainability Performance Standards (IFC 2012). Baseline studies are ongoing and will continue into the upcoming field season.

Communication with the local community, private land owners, and other interested parties is also ongoing.

Mineral Resource The Filo del Sol Resource remains unchanged from the Mineral Resource estimate reported by the Company on August 8, 2018and is based on a total of 44,600 metres of drilling in 188 holes, of which 158 holes are reverse circulation (RC) and 30 holes are core holes. The resource estimate presented below is the total Indicated and Inferred Resource, divided between oxide and sulphide mineralization.

The Mineral Resource estimate as of the effective date of June 11, 2018is shown in the table below. The Mineral Resources are inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Filo del Sol Mineral Resource Estimate

| Zone | Cutoff | Category | Tonnes | Cu | Au | Ag | lbs Cu | Ounces Au | Ounces Ag | | (millions) | (%) | (g/t) | (g/t) | (millions) | (thousands) | (thousands) | | | | | Oxide | * see notes | Indicated | 349.6 | 0.34 | 0.32 | 12.6 | 2,656 | 3,623 | 141,364 | | Inferred | 103.9 | 0.26 | 0.32 | 8.7 | 585 | 1,083 | 29,067 | | | | Sulphide | 0.30 % CuEq | Indicated | 75.5 | 0.27 | 0.34 | 2.2 | 451 | 813 | 5,374 | | Inferred | 71.2 | 0.30 | 0.33 | 2.5 | 469 | 751 | 5,743 | | | | Total | | Indicated | 425.1 | 0.33 | 0.32 | 10.7 | 3,107 | 4,436 | 146,738 | | Inferred | 175.1 | 0.27 | 0.33 | 6.2 | 1,054 | 1,834 | 34,811 | | |

| Notes to accompany Filo del Sol Mineral Resource table: | | | 1. | Mineral Resources have an effective date of 11 June 2018; | | 2. | The Qualified Person for the resource estimate is James N. Gray, P.Geo. of Advantage Geoservices Ltd.; | | 3. | The Mineral Resources were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves; | | 4. | Sulphide copper equivalent (CuEq) assumes metallurgical recoveries of 84% for copper, 70% for gold and 77% for silver based on similar deposits, as no metallurgical testwork has been done the Sulphide mineralization, and metal prices of US$3/lb copper, US$1300/oz gold, US$20/oz silver. The CuEq formula is: CuEq=Cu+Ag*0.0089+Au*0.5266; | | 5. | All figures are rounded to reflect the relative accuracy of the estimate; | | 6. | Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability; | | 7. | The resource was constrained by a Whittle® pit shell using the following parameters: Cu $3/lb, Ag $20/oz, Au $1300/oz, slope of 45°, a mining cost of $2.50/t and an average process cost of $13.26/t; | | 8. | Cutoff grades are 0.2 g/t Au for the AuOx material, 0.15% CuEq for the CuAuOx material and 20 g/t Ag for the Ag material. These three mineralization types have been amalgamated in the Oxide total above. CuAuOx copper equivalent (CuEq) assumes metallurgical recoveries of 82% for copper, 55% for gold and 71% for silver based on preliminary metallurgical testwork, and metal prices of US$3/lb copper, US$1300/oz gold, US$20/oz silver. The CuEq formula is: CuEq=Cu+Ag*0.0084+Au*0.4239. |

Qualified Persons The following Qualified Persons will co-author the technical report that will be based on the PFS. These QPs have approved the information in this news release that pertain to the sections of the PFS technical report that they are responsible for.

Geology: Fionnuala Devine, P.Geo., of Merlin Geosciences Inc. Metallurgy: Robin Kalanchey, P.Eng., of Ausenco Engineering Canada Inc. Mineral Resource: James N. Gray, P.Geo., of Advantage Geoservices Mining & Mineral Reserve: Jay Melnyk, P.Eng., of AGP Mining Consultants, Inc. (Canada) Processing: Robin Kalanchey, P.Eng, of Ausenco Engineering Canada Inc. Infrastructure: Scott Elfen, P.Eng, of Ausenco Engineering Canada Inc. Economic Evaluation: Neil Winkelmann, B.E. (Mining), MBA (FAusIMM), of SRK Consulting (Canada) Environmental & Social: Bruno Borntraeger, P.Eng., of Knight Piésold (Vancouver)

Each of the individuals above are independent QP's for the purposes of NI 43-101. All scientific and technical information in this press release in respect of the Filo del Sol project or the PFS is based on information prepared by or under the supervision of those individuals.

Conference Call and Webcast

A conference call and webcast to discuss the PFS results will be held on Tuesday, January 15th, 2018 at 09:00 Torontotime, 14:00 UK time, or 15:00 Swedish time.

Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist you).

Earlier from GoGold Resources Inc.

Filo Mining Reports Q3 2018 Results 2018-11-10
Filo Mining Announces Grant of Incentive Stock Options 2018-08-14
Filo Mining Reports Q2 2018 Results 2018-08-09