Red Lake Gold Inc. press release
International Tower Hill Mines Announces Optimization Study Results Showing Improved Livengood Gold Project
CSE - Canadian National Stock Exchange · Gold · Lithium · Uranium · Canada
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Canada NewsWire
VANCOUVER, Sept. 8, 2016
Pre-Feasibility Study Completed for Optimized Project Configuration
VANCOUVER, Sept. 8, 2016/CNW/ - International Tower Hill Mines Ltd. ("ITH" or the "Company") (TSX: ITH; NYSE-MKT: THM) today announced the results of a Pre-Feasibility Study (the "PFS") on an optimized configuration for its Livengood Gold Project (the "Project") located near Fairbanks, Alaska. The engineering optimization studies incorporated in the PFS evaluated several scenarios, ultimately selecting a project that will process 52,600 tons per day and produce 6.8 million ounces of gold over 23 years. This improved configuration has reduced the capital costs ("CAPEX") by 34% or $950 million to $1.84 billion, the process operating cost ("process OPEX") by 28% or $2.97per ton to $7.48per ton, and the all-in sustaining costs by 16% or $242 to $1,263per ounce, all as compared to the 100,000 tons per day project evaluated in the September 2013Feasibility Study (the "FS"). All dollar figures in this news release are stated in US Dollars.
"We are pleased that our Optimization Study has resulted in lower CAPEX and OPEX costs projected over a 23 year mine life. Livengood's fundamentals are compelling, with a substantial gold resource, favorable jurisdiction, proximity to infrastructure and great leverage to the gold price. We are committed to advancing our basic engineering and metallurgical work to further de-risk the project and prepare for future permitting" said Tom Irwin, CEO.
Pre-Feasibility Study Overview
The Project configuration evaluated in the PFS remains a conventional, owner-operated surface mine that will utilize large-scale mining equipment in a blast/load/haul operation. Mill feed would be processed in a 52,600 tons per day comminution circuit consisting of primary and secondary crushing, wet grinding in a single semi-autogenous (SAG) mill and single ball mill followed by a gravity gold circuit and a conventional carbon in leach (CIL) circuit.
Lower CAPEX was achieved by a reduction in tonnage from 100,000 to 52,600 tons per day, elimination of two previously planned fresh water supply reservoirs due to the inclusion of a fresh water supply from a local aquifer, elimination of a permanent accommodations camp as a result of the planned daily transport of workers to the mine site during operations, changes in project execution strategy for the placement of large development earthworks using mine pre-production material by owner instead of contractor and design changes to focus on bulk fills instead of cut/fills during construction.
Lower OPEX was achieved through mining, process, and G&A optimization as described below.
Mine design changes that lowered costs include a more direct haul route to the primary crusher and steeper pit slopes in the early phases. Changes that increased costs were higher drill and blast costs for enhanced blast fragmentation to optimize mill throughput.
Mill configuration changes that contributed to overall reduction in CAPEX and OPEX include the addition of secondary crushing ahead of the SAG mill for more efficient use of power, inclusion of a single line SAG/ball mill configuration, and simplification of the mill foundation and pebble re-grind circuit. Metallurgical studies completed since 2013 support process OPEX reduction through a combination of increasing grind size from p80 90 micron to p80 180 micron, reducing leach circuit retention time from 32 to 24 hours, and reducing reagent consumption per ton. Lower power and reagent costs, based on updated data, also contributed to a reduction in OPEX.
Total G&A costs went down due to reduced corporate overhead estimates based on current data, but went up on a unit basis due to lower throughput.
Next Steps and Opportunities
Results to date indicate that further work is warranted in order to continue to optimize the Project, such as improved resource modeling that could potentially enhance head grades and improvement to the mine plan to reduce CAPEX and OPEX.
The metallurgical tests completed to date indicate that there are further opportunities to improve overall gold recovery. Subject to available financing, work will continue to optimize flowsheet and reagent consumption to maximize recovery, confirm the grind/recovery relationships, refine the process OPEX, and thereby further de-risk the Project.
The Company will also continue to advance environmental baseline work in support of future permitting in order to better position the Project for a construction decision when warranted by market conditions.
Pre-Feasibility Study Summary
The PFS was prepared by independent third party consultants and provides information on the optimized Project with lower throughput, updated resource estimate, and capital and operating cost estimates as compared to the project evaluated in the FS. The final version of the NI 43-101 technical report containing the PFS will be filed on SEDAR within the next 45 days and investors are urged to review this report in its entirety. As a result of the changes to the Project as evaluated in the PFS, including differences in the economic parameters applied to the geologic block model that resulted in a change in resources (gold price, recovery, CAPEX, and OPEX), the original project as evaluated in the FS is no longer considered current and the FS should therefore no longer be relied upon by investors.
The Company cautions that the PFS is preliminary in nature, and is based on technical and economic assumptions which would be further refined and evaluated in a full feasibility study. The PFS is based on an updated Project resource estimate effective as of August 26, 2016using the same resource model as used in the FS.
The following is a summary of the material aspects and assumptions of the PFS. Investors are urged to review the complete NI 43-101 report following its filing on SEDAR for all details of the PFS.
The engineering design to estimate capital costs used in the PFS are within a -20%/+25% accuracy.
Project Location
The Project is connected by an existing paved highway to the city of Fairbanks, 70 miles to the southwest in central Alaska. The Project is located in an active mining district that has been mined for gold since 1914. The State of Alaskaland use plan designates mining as the primary surface land use for the area in which the Project is located.
Infrastructure
The Project would include a lined tailings management facility, an administration office/shop/warehouse complex, and would also include construction of a 50-mile 230kV electrical transmission line to the mine site from the existing grid power near Fairbanks, Alaska. The total power demand is estimated to be 55MW.
Environmental and CommunityRelations
Eight continuous years of baseline environmental work continues to indicate that all aspects of the Project can be successfully and safely managed. The design of the tailings facility incorporates best practices including a lined rock fill structure with a lined tailings basin. The Project development team has had considerable experience working with Alaska'slarge mine permitting process and has a proven and respected track record of developing mining projects safely and in an environmentally sound manner. The Project has already and will continue to provide local economic opportunities with local access to a highly skilled and available work force. The Company is also working within Fairbanksand the nearby community of Mintoto seek early input on the Project and to explore ways to maximize economic benefits to the local communities.
Summary of Results of the 52,600 Tons Per Day PFS and Comparison to 2013 FS
| OPERATING METRICS | 2016 PFS | 2013 FS | | | Mill Throughput | 52,600 | 100,000 | tons/day | | Head Grade – LOM | 0.71 | 0.69 | g/tonne | | Head Grade – Year 1-5 | 0.88 | 0.83 | g/tonne | | Gold Recovery – LOM | 75.3 | 78.4 | % | | Mine Life | 23 | 14 | years | | Total Ounces Produced | 6,763,900 | 7,893,800 | Troy ounces | | Average Annual Production – LOM | 294,100 | 563,800 | Troy ounces | | Average Annual Production – Year 1-5 | 378,300 | 681,700 | Troy ounces | | Total Ore Processed | 432 | 501 | Million tons | | Total Waste | 468 | 720 | Million tons | | Annual Mining Rate | 54 | 95 | Million tons | | Waste Rock to Mill Ore (tonnes) Ratio – LOM | 1.3:1 | 1.4:1 | Waste to Ore | | Low Grade Stockpile Maximum Size | 145 | 93 | Million tons |
| FINANCIAL METRICS | 2016 PFS | 2013 FS | | | CAPEX – Initial | 1.84 | 2.79 | $Billion | | CAPEX – Sustaining | 665 | 667 | $Million | | Reclamation & Closure | 342 | 353 | $Million | | OPEX – Mining | 1.73 | 1.67 | $/ton material | | OPEX – Processing | 7.48 | 10.45 | $/ton ore | | OPEX – General &Administrative (G&A) | 1.28 | 0.89 | $/ton ore | | OPEX - Operating Cost – LOM | 877 | 1,054 | $/Ounce | | OPEX - Operating Cost – Year 1-5 | 782 | 906 | $/Ounce | | All-In Sustaining Cost of Production – Pre-Tax (CAPEX+OPEX) – LOM | 1,247 | 1,481 | $/Ounce | | | | | | | All-In Sustaining Cost of Production – After-Tax (CAPEX+OPEX) – LOM | 1,263 | 1,505 | $/Ounce |
Gold Price Sensitivity Analysis
The following table shows the after-tax economics at various gold prices.
| Gold Price ($/Oz) | NPV 5% ($M) | IRR (%) | Payback (Years) | | $1000 | (1,429) | -13.1 | N/A | | $1100 | (1,064) | -5.1 | N/A | | $1200 | (708) | -0.9 | N/A | | $1250 | (552) | 0.5 | 22.07 | | $1300 | (404) | 1.8 | 14.91 | | $1400 | (116) | 4.1 | 12.10 | | $1500 | 165 | 6.2 | 10.70 |
Capital Costs
Key capital expenditures for initial and sustaining capital requirements are identified in the following table.
| | $Million | | | | Initial | Sustaining | | Process Facilities | $ 732 | $ 24 | | Infrastructure Facilities | 168 | 442 | | Power Supply | 79 | - | | Mine Equipment | 173 | 123 | | Mine Development | 146 | - | | Owners Costs | 307 | - | | Contingency | 213 | 76 | | Subtotal Before Reclamation | 1,818 | 665 | | Funding of Reclamation Trust Fund (1) | 18 | 201 | | Total | $ 1,836 | $ 866 |
_Rounding of some figures may lead to minor discrepancies in totals. (1) Includes initial funding, total $342 Millionestimated costs. _
All-in Sustaining Costs of Production
The table below highlights the all-in operating cost of production over the life of the Project:
| All-in Sustaining Cost of Production | $/Ounce | LOM ($Million) | | On-Site Mine Operating Costs | $ 782 | $ 5,286 | | Royalties | 37 | 252 | | Third-Party Smelting, Refining and Transport Costs | 8 | 54 | | Sub-Total | 827 | 5,592 | | Reclamation & Remediation | 50 | 342 | | Sub-Total Production Cost Before Capital | 877 | 5,934 | | Capital Expenditures (initial and sustaining) (1) | 370 | 2,501 | | All-In Sustaining Costs of Production – Pre-Tax | 1,247 | 8,435 | | Mining and Income Taxes | 16 | 104 | | All-In Sustaining Costs of Production – After-Tax | $ 1,263 | $ 8,539 |
_Rounding of some figures may lead to minor discrepancies in totals. (1) Excludes $18Mupfront funding included in reclamation and remediation aboveand $37Mof recoverable initial stores inventory._
Annual Gold Production
The chart below highlights the anticipated production schedule. Total life-of-mine production is anticipated to be 6,763,900 ounces. Mill feed will consist of reclaimed ore from the stockpile for Years 17 through 23.
| Year | Mill Feed Grade (g/tonne) | Ounces Produced (000) | | 1 | 0.99 | 368.5 | | 2 | 0.96 | 404.2 | | 3 | 0.92 | 407.9 | | 4 | 0.60 | 288.8 | | 5 | 0.97 | 422.2 | | 6 | 0.81 | 340.9 | | 7 | 0.92 | 372.0 | | 8 | 0.78 | 364.5 | | 9 | 0.88 | 374.6 | | 10 | 0.80 | 317.0 | | 11 | 0.65 | 284.6 | | 12 | 0.81 | 335.9 | | 13 | 0.82 | 337.3 | | 14 | 0.79 | 311.7 | | 15 | 0.89 | 335.7 | | 16 | 0.55 | 249.0 | | 17 | 0.46 | 201.4 | | 18 | 0.46 | 190.5 | | 19 | 0.44 | 195.8 | | 20 | 0.41 | 206.8 | | 21 | 0.48 | 166.5 | | 22 | 0.50 | 171.7 | | 23 | 0.50 | 116.4 | | LOM | 0.71 | 6,763.9 |
Rounding of some figures may lead to minor discrepancies in totals.
Project Mineral Reserves
The table below provides a new Mineral Reserve estimate for the Project (effective as of August 26, 2016) utilizing a gold price of $1,250per ounce. These Proven and Probable Mineral Reserves formed the basis of the economic evaluation of the Project. The economic assumptions and parameters used for the calculation of reserves are the same as those used for the PFS financial model.
Livengood Gold Project Mineral Reserve Estimate
| Classification | Tonnes (Mt) | Au (g/t) | Contained Au (000's) | | Proven | 377.65 | 0.71 | 8,620.43 | | Probable | 14.01 | 0.72 | 352.86 | | Total P & P | 391.66 | 0.71 | 8,973.29 |
| (1) | Canadian Institute of Mining, Metallurgy and Petroleum standards were followed in the estimation of the Mineral Reserves. | | (2) | Mineral Reserves are estimated using a gold price of $1,250 per ounce, 3% royalty and average metallurgical recoveries of 81.8% for Rocktype 4, 84.7% for Rocktype 5, 75.6% for Rocktype 6, and weighted average of 62.4% for Rocktype 7 and 69.6% for Rocktypes 8 and 9 (when applied to the 15 x 15 x 10m block model). | | (3) | Mineral Reserves are based on a cut-off grade of 0.306 g/t for Rocktype 4, 0.303 g/t for Rocktype 5, 0.345 g/t for Rocktype 6, 0.431 g/t for Rocktype 7 and 0.393 g/t for Rocktypes 8 and 9. | | (4) | Totals may not add due to rounding | | (5) | The foregoing mineral reserves based upon and are included within the current mineral resource estimate for the Project. |
Project Mineral Resources
The current resource estimate for the Project (effective as of August 26, 2016) is based on the statistical analysis of data from 783 drill holes totaling 717,435 feet (218,674 m) and 14 trenches totaling 1,678 feet (516 m) within a model area covering 3.1 square miles (7.9 sq. km). The three dimensional geology was modelled and the structural/stratigraphic units have been used to constrain the resource model.
Multiple Indicator Kriging (MIK) was used to calculate the gold grades for the blocks (15 x 15 x 10 meters) in the model using the assay data composited to 10 meter lengths. Statistical analysis indicated a significant relationship between the tenor of mineralization and the individual structural/stratigraphic units, consequently the resource interpolation for each individual geologic unit was restricted to: 1) the composite data within that unit, 2) contained within a 0.10 g/t gold grade shell, and 3) where data were available from a minimum of two octants and from two separate drill holes. Spatial statistics indicate that the mineralization shows very reasonable continuity within the range of anticipated operational cutoff grades. Bulk density for blocks within each of the structural stratigraphic units was assigned the mean value for density measurements of core and RC samples from that unit (total of 98 measurements for all the units). The resource model (15 x 15 x 10 meter blocks) was estimated using nine indicator thresholds, then a change-of-support correction was imposed on the model based on the assumption of 7.5 x 7.5 x 10 meter selectable mining units. Resource classification into measured, indicated, and inferred categories was based on estimation variance.
To determine the quantities of materials with "reasonable prospects for eventual economic extraction" by open pit methods, pit constraining limits were developed using the Lerchs-Grossman©economic algorithm which constructs lists of related blocks that could or could not be mined. The final list defines a surface pit shell that has the highest possible total value, while honoring the required surface mine slope and economic parameters. The following table indicates the input parameters at a $1,230per ounce gold price – the three year trailing average gold price at August 26, 2016.
Pit Constraining Parameters Used For the Livengood Gold Project Resource Estimation
| Parameter | Unit | Rocktype 4 | Rocktype 5 | Rocktype 6 | Rocktype 7 | Rocktype 8 | Rocktype 9 | | Mining Costs | $/total tonne | 1.77 | 1.77 | 1.77 | 1.77 | 1.77 | 1.77 | | Au Cut-Off | g/tonne | 0.33 | 0.32 | 0.35 | 0.40-0.851 | 0.38 | 0.38 | | Processing Cost | $/process tonne | 9.03 | 9.55 | 9.42 | 9.25 | 9.87 | 9.87 | | Au Recovery | % | 80.4 | 86.5 | 78.3 | 64.01 | 75.4 | 75.4 | | Administrative Cost | $/process tonne | 1.07 | 1.07 | 1.07 | 1.07 | 1.07 | 1.07 | | Royalty | % | 3 | 3 | 3 | 3 | 3 | 3 | | Au Selling Price | $/oz | 1,230 | 1,230 | 1,230 | 1,230 | 1,230 | 1,230 | | Overall Slope Angle | Degrees | 40 | 40 | 40 | 40 | 40 | 40 |
1- Variable cutoff grade related to geological characteristics unique to Rocktype 7 quartz stibnite+jamesonite ratios.
The parameters listed in the table above define a realistic basis to estimate the Mineral Resources for the Project and are representative of similar mining operations throughout North America. The Mineral Resource has been limited to mineralized material that occurs within the pit shells and which could be scheduled to be processed based on the defined cut-off grade. All other material within the defined pit shells was reported as non-mineralized material.
Mineral Resource Statement – Livengood Gold Project
The table below lists the current mineral resource estimate for the Project.
Livengood Gold Project Mineral Resource Estimate
| Classification | Tonnes (Mt) | Au (g/t) | Contained Au (000's) | | Measured | 497.34 | 0.68 | 10,840.84 | | Indicated | 28.04 | 0.69 | 620.33 | | Total M & I | 525.38 | 0.68 | 11,461.17 | | Inferred | 52.80 | 0.66 | 1,127.21 |
*_Effective Date: August 26, 2016 The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Mineral Reserves for the project_.
Sensitivity of Mineralization to Gold Price
The sensitivity of mineralization defined by the evaluation of the mineralization inventory at different gold prices was performed for gold prices of $984per ounce (-20%), $1,230per ounce (resource base case) and $1,476per ounce (+20%). The input parameters defined above were used in the analysis. The table below lists the amount of the mineralization contained within the pit shells that could be scheduled to process.
Sensitivity of Mineralization Inventory Contained In Pit Shells Defined By Whittle Analyses at Different Gold Prices within Pit Shells
| WhittleTMPit Gold Price | Classification | Tonnes (Mt) | Au (g/t) | Contained Au (000's) | | $984 | Measured | 322.75 | 0.79 | 8,166.23 | | Indicated | 15.06 | 0.83 | 399.36 | | | Total M & I | 337.81 | 0.79 | 8,565.59 | | | Inferred | 19.77 | 0.79 | 504.68 | | | $1,230 | Measured | 497.34 | 0.68 | 10,840.84 | | Indicated | 28.04 | 0.69 | 620.33 | | | Total M & I | 525.38 | 0.68 | 11,461.17 | | | Inferred | 52.80 | 0.66 | 1,127.21 | | | $1,476 | Measured | 663.11 | 0.61 | 13,004.65 | | Indicated | 46.76 | 0.60 | 899.03 | | | Total M & I | 709.88 | 0.61 | 13,903.68 | | | Inferred | 115.01 | 0.56 | 2,070.62 | |
Rounding of some figures may lead to minor discrepancies in totals.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.
Exploration Target
Exploration work at the Project since 2006 has identified an exploration target of between 490 and 965 million tonnes at a gold grade between 0.36 and 0.48 g/t (between 7.5 million and 11.0 million ounces of gold), which lies outside of (and therefore does not include) the estimated Project resource stated above. Identification of this exploration target is based upon 455 drill holes with aggregate footage outside the shell exceeding 182,000 feet (55,470 m), which was drilled on a similar grid spacing as the drill holes defining the current estimated Project resource. Investors should be aware that the potential quantity and grade of the exploration target noted above is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the noted exploration target ever being delineated as a mineral resource.