Centerra Gold and Premier Gold Announce Feasibility Study Results on the Hardrock Project
CSE - Canadian National Stock Exchange
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Canada NewsWire
TORONTO, Nov. 16, 2016
All figures are in Canadian dollars unless otherwise stated.
This news release contains forward-looking information that is subject to risk factors and assumptions, please refer to the sections on Material Assumptions & Risks and Cautionary Note Regarding Forward-looking Information.
TORONTO, Nov. 16, 2016/CNW/ - Centerra Gold Inc. ("Centerra") (TSX: CG) and Premier Gold Mines Limited ("Premier") (TSX: PG) are pleased to announce the Feasibility Study results for the Hardrock Project (the "Project") located in Geraldton, Ontario. On March 9, 2015, Centerra and Premier formed a 50/50 partnership (the "Partnership") for the joint ownership and development of the Trans-Canada Property (now called the Greenstone Gold Property) which includes the Hardrock Project, other deposits, and exploration properties. The managing partner of the Partnership is Greenstone Gold Mines GP Inc. (the "Managing Partner" or "GGM" or the "Company").
The Feasibility Study for the Hardrock Project – Canada, with an effective date of October 2016and an issue date of November 2, 2016, was prepared by G Mining Services Inc. ("GMS") in collaboration with third party consulting firms.
Highlights of the Feasibility Study results and life-of-mine ("LOM") plan on a 100% basis and on the assumption that the Partnership is a standalone taxable Canadian entity are as follows:
Open-pit probable mineral reserves of 4.7 million contained ounces of gold (141.7 million tonnes at average gold grade of 1.02 grams per tonne gold (g/t Au) using a cut-off grade of 0.33 g/t Au) and includes 17.3% mining dilution; LOM gold production of 4.2 million ounces and 14.5 years of operations; Average LOM annual gold production of 288,000 ounces; Mill throughput designed to operate at 27,000 tonnes per day (t/d); Gold price assumption of US$1,250/oz, and an exchange rate of CAD/USD 1.30; Initial capital cost of $1.25 billion(US$962 million), which includes a contingency of $131 million(US$101 million); Total LOM sustaining capital1 of $257 million(US$198 million); Total operating cost of $20.95per tonne and all-in sustaining cost1of $780per ounce (US$600per ounce); After-tax payback period of 4.5 years; and After-tax net present value (NPV) at 5% discount rate of $709 million(US$545 million), and an after-tax 14.4% project internal rate of return ("IRR") on a pre-finance basis.
The Partnership has not made a development or construction decision on the Project. Going forward, the Partnership expects to evaluate programs to minimize the risk profile of the Project including the advancement of permitting and First Nation discussions, continue to advance discussions relating to project financing and completing and submitting the Environmental Assessments based on the Feasibility Study which would incorporate comments already received from the agencies and affected stakeholders. Budgets for these programs are currently being developed by the Managing Partner for review.
The Partnership will be hosting a technical teach-in on this Feasibility Study via a presentation, webcast and conference call, today, Wednesday, November 16at 5:00pmat the TorontoBoard of Trade. Details of this event can be found at the bottom of this news release.
Scott Perry, Chief Executive Officer of Centerra Gold stated, "Finalizing the Feasibility Study is an important milestone for the Project. The Feasibility Study reflects the combined experience and efforts of GGM management and the Partnership's consultants under the guidance of a management committee made up of 50% Centerra and 50% Premier representatives. The Hardrock Project clearly represents one of Canada'slargest undeveloped open pit gold mines."
"The completion of this Feasibility Study is another major milestone for Premier and sets the stage for the next steps to develop this significant deposit," stated Ewan Downie, President and CEO of Premier Gold Mines. "Our engagement with the representatives of the local communities has been extremely positive and we look forward to continued advancement of the Project with Centerra, under our Greenstone Partnership Agreement, on behalf of all stakeholders."
Project Economics Over a period of 14.5 years, the Project is expected to process 141.7 million tonnes at an average grade of 1.02 g/t Au producing 4.2 million ounces of recovered gold at an average all-in sustaining cost(1)of $780per ounce sold.
Gold production is expected to average 356,000 ounces per year for the first four full years of production (38 million tonnes milled with an average head grade of 1.27 g/t Au).
The Feasibility Study includes mineral reserves for the open-pit Hardrock deposit only. There may be a potential opportunity to improve the LOM average grade by processing higher grade material from the other Partnership deposits such as Brookbank or the Hardrock underground resource. These opportunities are currently being reviewed; however there are no assurances that these additional deposits would be developed.
The key economic parameters and Feasibility Study results are summarized in Table 1.
Table 1 Summary of Economic Parameters and Feasibility Study Results
| Gold price - base case (US$/oz) | 1,250 | | Exchange rate (C$/US$) | 1.30 | | Mine life (years) | 14.5 | | Tonnes of ore (Mt) | 141.7 | | Strip ratio (Waste:Ore) | 3.87:1 | | Design throughput rate (t/d) | 27,000 | | Average grade (g/t Au) | 1.02 | | Average gold recovery (%) | 90.2 | | Average annual gold production (koz) | 288 | | Total recovered gold (koz) | 4,193 | | Initial capital expenditures (M $) | 1,247 | | Sustaining capital (M $)(1) | 257 | | All-in sustaining cost ($/oz)(1) | 780 | | Project after-tax NPV5%(M $) | 709 | | Project after-tax IRR (%)(2) | 14.4 |
| (1) | Non-GAAP measure. See "Non-GAAP Measures" | | (2) | The IRR is based on an after-tax, pre-financing basis. |
The Project after-tax NPV at a discount rate of 5% is estimated to be $709 million. The after-tax Project cash flow results in a 4.5-year payback period from the commencement of commercial operations with an after-tax IRR of 14.4% (after-tax and pre-financing basis). The total after-tax cash flow over the Project life is estimated to be $1,636 million.
The after-tax analysis and results in the study are based on a standalone taxable Canadian entity and not a partnership. However, the income or loss that is generated at the partnership level will be reallocated to Centerra and Premier to be treated independently. Therefore the after-tax economic assessment on a standalone basis is only conceptual and does not reflect the potential benefits of any historical Canadian tax positions held by either Centerra or Premier (if any).
As contemplated in the Partnership Agreement entered into in March 2015, Centerra agreed to make capital contributions to the Partnership in the aggregate amount of $185 million, half of which is paid on behalf of Premier. The $185 millionis subject to the satisfaction of certain feasibility study results and project advancement criteria. Centerra has contributed approximately $47.2 millionin capital contributions to the Partnership as of November 3, 2016, a portion of which has been used to fund the completion of the Feasibility Study. Once Centerra has funded the full amount of $185 million, future contributions will be on a 50/50 basis with Premier, pursuant to approved annual programs and budgets.
The yearly estimated LOM cash flow is shown in Table 2.
Table 2 Life-of-Mine Cash Flow
| Year | Gold Revenue 2 ($ M) | Operating Cost ($ M) | Initial Capital ($ M) | Sustaining Capital1 ($ M) | Other3 ($ M) | Pre-tax Cash Flow ($ M) | Taxes ($ M) | After-tax Cash Flow ($ M) | | -3 | - | - | (50) | - | - | (50) | - | (50) | | -2 | - | - | (329) | - | - | (329) | - | (329) | | -1 | - | - | (624) | - | (1) | (625) | - | (625) | | 1 | 262 | (106) | (244) | (1) | (7) | (96) | - | (96) | | 2 | 665 | (228) | - | (50) | - | 387 | (29) | 358 | | 3 | 582 | (238) | - | (32) | (1) | 311 | (31) | 280 | | 4 | 566 | (238) | - | (18) | (1) | 310 | (41) | 269 | | 5 | 501 | (235) | - | (26) | (1) | 238 | (36) | 202 | | 6 | 409 | (232) | - | (16) | (2) | 160 | (18) | 142 | | 7 | 562 | (240) | - | (33) | (7) | 282 | (68) | 214 | | 8 | 387 | (226) | - | (31) | (2) | 128 | (26) | 102 | | 9 | 432 | (221) | - | (30) | (6) | 176 | (46) | 130 | | 10 | 560 | (215) | - | (15) | (10) | 321 | (92) | 229 | | 11 | 530 | (202) | - | (3) | (7) | 318 | (90) | 228 | | 12 | 547 | (188) | - | (0) | (9) | 349 | (102) | 247 | | 13 | 362 | (159) | - | (2) | (7) | 194 | (54) | 140 | | 14 | 275 | (129) | - | - | - | 146 | (39) | 107 | | 15 | 156 | (92) | - | - | 1 | 65 | (14) | 50 | | 16 | | (1) | - | - | 43 | 42 | (4) | 37 | | Total | 6,796 | (2,950) | (1,247) | (257) | (16) | 2,325 | (689) | 1,636 |
| 1. | Non-GAAP measure, see discussion under "Non-GAAP Measures". | | 2. | Pre-production gold sales (11,000 ounces) treated as credit against pre-production costs in construction capital. | | 3. | Includes working capital, reclamation fund and salvage value. | | 4. | Numbers may not add due to rounding. |
Sensitivities of the Project NPV to the gold price, discount rate and other Project variables are presented in Table 3 and Table 4.
Table 3: After-Tax NPV Sensitivity to Discount Rate
| Discount Rate | After-Tax Project NPV (M $) | | 5% | 709 | | 6% | 587 | | 7% | 481 | | 8% | 387 |
Table 4: After-Tax Sensitivity Analysis to NPV5%and IRR
| | NPV5% | IRR | | | | | | Feasibility Study (FS) Variable | -15% ($ M) | FS ($ M) | +15% ($ M) | -15% (%) | FS (%) | +15% (%) | | Operating Costs | 873 | 709 | 543 | 16.3 | 14.4 | 12.4 | | Capital Costs | 824 | 709 | 590 | 17.4 | 14.4 | 12.1 | | Exchange Rate (CAD/USD) | 314 | 709 | 1,093 | 9.6 | 14.4 | 18.5 | | Gold Price | 293 | 709 | 1,113 | 9.2 | 14.4 | 19.0 |
Geology & Mineral Resources
Geology The Hardrock deposit is an epigenetic non-stratiform banded iron-formation ("BIF") hosted gold deposit.
Mineral Resources The in-pit mineral resources at the Hardrock deposit are constrained within an optimized pit design shell using a cut-off grade of 0.30 g/t Au. In addition to in-pit mineral resources, underground mineral resources were estimated outside the optimized pit design shell using a 2.0 g/t Au cut-off grade. Combined open pit and underground indicated mineral resources total 146 million tonnes grading 1.36 g/t Au containing 6.4 million ounces of gold. The Project open pit and underground Mineral Resources are summarized in Table 5 Mineral Resource Estimate. Mineral resources as presented are exclusive of mineral reserves.
Table 5: Mineral Resource Estimate (1)(2)(3)(4)(5)(6)(7)
| Resource Type | | In-Pit >0.30 g/t Au cut-off | Underground >2.00 g/t Au cut-off | Total | | Indicated | Tonnes (Mt) | 11.4 | 13.7 | 25.1 | | Grade (g/t Au) | 0.36 | 3.91 | 2.29 | | | Au (koz) | 131.2 | 1,719.9 | 1,851.1 | | | Inferred(8) | Tonnes (Mt) | 0.2 | 21.5 | 21.7 | | Grade (g/t Au) | 0.87 | 3.57 | 3.55 | | | Au (koz) | 4.8 | 2,470.4 | 2,475.2 | |
| 1. | CIM definitions were followed for Mineral Resources. | | 2. | The effective date of the estimate is August 11, 2016. | | 3. | Mineral Resources are exclusive of Mineral Reserves. | | 4. | Density data was established on a per zone basis and ranges from 2.72 to 3.26 g/cm3. | | 5. | In-pit Mineral Resources are estimated within the Pit Design shell. Parameters included (all amounts in Canadian dollars): reference mining cost: $1.80/t, incremental bench cost ($/10 m bench): $0.030/t, milling cost: $7.46/t, royalty: 3%, G&A: $1.42/t, rehandling: $0.12/t, sustaining capital: $0.60/t, gold price: $1,625/oz, milling recovery: 90%, pit slope: 55°. | | 6. | Mineral resources that are not mineral reserves do not have demonstrated economic viability. | | 7. | Numbers may not add due to rounding. | | 8. | Inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can be mined economically. It cannot be assumed that all or part of the inferred resources will ever be converted to a higher category. |
Mineral Reserves Mineral reserves are based on indicated mineral resources within a designed pit, and generated using Feasibility Study parameters for gold price, exchange rate, metallurgical recovery, dilution, mine design criteria, and operating costs. This generated an estimated probable mineral reserve of 142 million tonnes with an average grade of 1.02 g/t gold, containing 4.7 million ounces of gold at a cut-off grade of 0.33 g/t gold, as shown in Table 6.
Table 6: Open Pit Mineral Reserve Estimate(1)(2)(3)(4)(5)(6)
| Category | Diluted(7)Ore Tonnage (Mt) | Diluted(7)Gold Grade (g/t Au) | Contained Gold (koz Au) | | Proven | - | - | - | | Probable | 141.7 | 1.02 | 4,647 | | Total | 141.7 | 1.02 | 4,647 |
| 1. | CIM definitions were followed for Mineral Reserves. | | 2. | Mineral Reserves are estimated at a cut-off grade of 0.33 g Au/t. | | 3. | Mineral Reserves are estimated using a long-term gold price of USD 1,250/oz and an exchange rate of CAD/USD 1.30. | | 4. | A minimum mining width of 5 metre was used. | | 5. | Bulk density of ore is variable but averages 2.83 t/m3. | | 6. | The average strip ratio is 3.87:1. | | 7. | Mining dilution factor is 17.3%. |
Mining The Feasibility Study proposes conventional open pit mining techniques with 10 metre benches using hydraulic shovels. The open pit operation is planned to be owner operated, with outsourcing of certain support activities.
Production drilling will be by blast hole drill rigs with both rotary and down-the-hole ("DTH") drilling capability. Drilling of 203 mm blast holes will be undertaken on a 6.0 m x 6.5 m pattern with one metre of sub-drill. The majority of the loading in the pit will be carried out by three hydraulic face shovels, two 26 m3and one 19 m3and two front-end wheel loaders (21 m3). The shovels and loaders will be matched with a fleet of 181 tonne payload mine trucks. As the open pit is recovering resources from past producing underground mines, the presence of mined-out stopes was considered when designing the pits. Most of the underground openings are backfilled with sand fill or rock fill.
Mining of the Hardrock main pit will occur in four phases with a single phase for the smaller satellite pit to the east. Waste rock will be disposed of in four distinct waste dumps with three located around the pit and one further to the south. The open pit generates 548.9 million tonnes of overburden and waste rock (inclusive of historic tailings and underground backfill) for a strip ratio of 3.87:1.
The key yearly mining metrics are outlined in Table 7.
Metallurgy & Processing Metallurgical testing spanned a period of four years and included mineralogy, grindability, and gold recovery testwork performed by third party consultants.
The processing options for the Project were selected based on the results of this testwork and are well known technologies that are currently used in the mining industry. The gold recovery process consists of a crushing circuit (gyratory and cone), a grinding circuit (high pressure grinding roll (HPGR) and ball mill), pre-leach thickening, a leach and carbon-in-pulp (CIP) circuit, cyanide destruction and tailings disposal, carbon elution and electrowinning, carbon regeneration and a gold refinery. The HPGR is designed to be energy efficient compared to other conventional comminution methods particularly when the ore is extremely competent. HPGR is expected to assist in reducing GGM's operating costs and providing consistent predictable mill tonnage throughput.
The processing plant is designed to operate at a throughput of 27,000 tonnes per day and the mill operation schedule is 24 hours per day, 365 days per year, with an overall availability of 92%. The initial milling rate is expected to be 24,000 tonnes per day in Year 1 and 2, which reflects the processing of high grade material in Year 2, increasing to 27,000 tonnes per day from Year 3 onward.
The yearly processing metrics are included in Table 7.
Table 7: Hardrock Project Life-of-Mine Mining and Processing Plan Metrics
| | Mining | Processing | | | | | | | | | | Year | Ore Mined (Mt) | Grade (g/t) | Contained Gold (koz) | Waste Mined (Mt) | Total Mined (Mt) | Ore Milled (Mt) | Grade (g/t) | Contained Gold (koz) | Recovered Gold (koz) | | | | | | | | | | | | | | | -1 | 4.8 | 1.07 | 166 | 17.5 | 22.3 | | | | | | | 1 | 10.3 | 0.97 | 323 | 41.5 | 51.8 | 5.3 | 1.15 | 195 | 176 | | | 2 | 9.3 | 1.01 | 301 | 59.2 | 68.5 | 8.8 | 1.59 | 447 | 409 | | | 3 | 13.4 | 1.01 | 436 | 54.8 | 68.2 | 9.9 | 1.25 | 396 | 358 | | | 4 | 11.0 | 1.09 | 385 | 56.4 | 67.5 | 9.9 | 1.22 | 387 | 349 | | | 5 | 8.8 | 1.12 | 315 | 59.2 | 67.9 | 9.9 | 1.08 | 342 | 308 | | | 6 | 8.0 | 1.01 | 258 | 56.5 | 64.5 | 9.9 | 0.88 | 280 | 252 | | | 7 | 13.5 | 0.98 | 423 | 48.9 | 62.4 | 9.9 | 1.20 | 382 | 346 | | | 8 | 9.3 | 0.86 | 258 | 43.5 | 52.8 | 9.9 | 0.84 | 265 | 238 | | | 9 | 10.4 | 0.90 | 301 | 37.5 | 47.9 | 9.9 | 0.93 | 296 | 266 | | | 10 | 12.2 | 1.04 | 407 | 27.6 | 39.8 | 9.9 | 1.20 | 380 | 344 | | | 11 | 12.0 | 1.00 | 386 | 21.7 | 33.8 | 9.9 | 1.14 | 360 | 326 | | | 12 | 10.5 | 1.13 | 380 | 13.9 | 24.4 | 9.9 | 1.18 | 373 | 336 | | | 13 | 5.4 | 1.14 | 197 | 8.5 | 13.8 | 9.9 | 0.78 | 249 | 223 | | | 14 | 2.9 | 1.18 | 110 | 2.4 | 5.3 | 9.9 | 0.60 | 190 | 169 | | | 15 | | | | | | 9.3 | 0.36 | 107 | 92 | | | Total | 141.7 | 1.02 | 4,647 | 548.9 | 690.6 | 141.7 | 1.02 | 4,647 | 4,193 | |
The tailings management facility ("TMF") is planned to be located approximately 5 kilometres southwest of the processing plant site with a design capacity of 145 million tonnes. Several experts were involved in evaluating various location scenarios. The proposed location was selected following a detailed analysis of options that considered environmental, technical, economic, and socio-economic selection criteria.
Infrastructure The Feasibility Study contemplates that existing infrastructure within the footprint of the Project limits will require relocation, including the Trans-Canada Highway Route 11, an existing Hydro One substation, the OPP Police station, a gas station, and other properties. The relocation plans have been discussed with the related parties and discussions are continuing.
The existing Hydro One grid is insufficient for powering the processing facilities and associated infrastructure. A 65 MW natural gas-fired power plant will be constructed which will include a natural gas pipeline originating from the existing TransCanada PipeLines Limited Canadian Mainline pipeline directly to the site power plant.
Capital Costs The initial capital costs of $1.25 billionduring the pre-production period include all direct and indirect costs for the processing plant and related infrastructure, relocation of existing facilities, mining equipment, and mining during the pre-production period. The capital expenditure estimate base date is the end of the second quarter 2016, and has been developed assuming an owner-managed execution strategy. The peak construction and mining workforce is estimated at 850 during the two-year construction period. The breakdown of initial capital costs is provided in Table 8.
Table 8: Initial Capital Cost
| Initial Capital Cost | Total Costs ($ M) | | Infrastructure | 63 | | Power & Electrical | 72 | | Water & Tailings Management | 80 | | Mobile Equipment | 178 | | Infrastructure Relocation | 46 | | Process Plant | 343 | | Construction Indirect Costs | 175 | | General Services – Owner's Cost | 60 | | Preproduction, Start up, Commissioning | 94 | | Contingency | 131 | | Total Initial Construction Capital Cost | 1,242 | | Other Initial Capital Costs | 5 | | Total Initial Capital Cost | 1,247 |
Sustaining capital1required during the LOM operations for additional mine equipment purchases, mine equipment capital repairs, mine civil works, tailings dam raises, and additional infrastructure relocation is estimated in the Feasibility Study at $257 million.
Operating Costs The average operating cost is $705per ounce or $20.95per tonne milled over the LOM. The all-in sustaining cost1, which includes royalties, closure, reclamation, and sustaining capital1costs, averages $780per ounce sold. The operations workforce peaks at 550 employees. Table 9 presents the LOM operating costs.