Sherwood Announces Update to Feasibility Study on Minto Copper-Gold Project, Yukon
First Round of Project Optimization Improves Already Robust Project Returns
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 28, 2006) - Sherwood Copper Corporation (TSX VENTURE:SWC) today announced the results of the first round of several anticipated optimizations to the feasibility study on its high-grade Minto copper-gold project in the Yukon. The changes incorporated to date include an optimized mine plan, adjustments to the handling of the proposed capital cost for the refurbishment of the port of Skagway and the results of recent changes in Federal tax rates. These changes improve project economics over the already robust returns announced July 10, 2006. Additional optimizations to the feasibility study are being examined and will be announced as results become available. In the meantime, the rapid pace of mine construction continues at Minto and Sherwood is on track to meet its accelerated production start during the second quarter of 2007. Sherwood has also filed a technical report on the feasibility study, including the changes reported herein, as required under National Instrument 43-101.
"We continue to work on several opportunities to enhance the already robust returns from the Minto Project," said Stephen Quin, President & CEO of Sherwood Copper Corp. "The changes reported today are but the first round in what is anticipated to be several such optimizations to be assessed and, if warranted, incorporated into the project before and after production commences. The largest potential impact opportunities still being worked on include inclusion of additional high grade reserves from Area 2, where resource definition drilling is currently being completed, switching to grid power, and optimizing processing parameters, including a coarser grind and changes to the tailings handling approach," said Mr. Quin. "We hope to make significant progress in each of these areas over the next several months."
Project Optimization
As announced July 10, 2006, a number of opportunities were identified in the feasibility study whereby improvements could be made to the planned project. The changes reported below are just the first round of such optimizations, and result in enhanced project returns. The only three optimizations incorporated to date, as compared to the feasibility study results announced July 10, 2006, are set out below.
1. Optimized Mine Plan -- The amended mine plan removes the majority of the low grade stock pile processing from the tail end of the mine life, improving project returns. This low grade material will still be stockpiled and would be available for processing should economics warrant in Year 8 of operations or beyond, but the costs of processing and related items have been removed from the feasibility study, improving the overall project economics. This approach also simplifies the anticipated development of additional high grade reserves at Area 2, where resource definition drilling is currently being completed.
2. Port of Skagway - In the July 10 announcement, the capital cost for the refurbishment of the Skagway Ore Terminal was treated as an up front capital cost in the financial analysis but this amount was excluded from the total capital cost. However, Sherwood has signed a memorandum of understanding (MOU) with the Alaska Industrial Development and Export Agency (AIDEA) whereby these capital costs will be paid over the life of the project, as announced June 15, 2006. The current financial model incorporates the approach contemplated in the MOU.
3. Federal Tax Changes -- Recent changes in Federal tax rates have reduced the overall taxes payable on the Minto project, and these changes have been incorporated into the current financial analysis.
Updated Project Highlights
The following sets out the updated highlights of the Feasibility Study for the Minto Project prepared by Hatch Ltd. and certain other consultants, as set out in the technical report, with changes in brackets:
- Head grade of 3.3% copper & 0.94g/t gold in first year of operation, and averaging 2.4% copper and (0.89g/t) gold over first six years, essentially the same as previously reported;
- Production averaging (41.0) million pounds of copper, (17,295) oz gold and 0.25 million oz of silver per year for first six years of operations versus 40.7 million pounds of copper and 17,150 oz of gold previously reported;
- Cash costs of (US$0.57/lb), net of by product credits, over first six years of operations and (US$0.60/lb) over the life of mine, reduced from US$0.60/lb and US$0.73/lb previously;
- Operating cash flow of (C$49 million) and (C$61 million) in Years 1 and 2 of operations, respectively, on an all equity basis versus C$51 million and C$61 million previously as a result of the conversion of Skagway costs to sustaining capital and changes to the mine plan;
- The study still uses the same 5-year average metal price assumptions, comprised of 3-year historic and 2-year forward prices, that average to US$2.00 per pound for copper, US$550 per oz for gold and US$9.00 per oz for silver, and an exchange rate of C$1.192 per US dollar;
- Life of mine production of (269 million pounds of copper, 113 thousand oz of gold and 1.6 million oz of silver) versus 300 million pounds of copper, 122 thousand oz gold and 1.8 million oz of silver previously reported, based on excluding the low grade material removed from the mine plan in this update;
- Total project pre-production direct and indirect capital cost of C$86.7 million, plus a contingency allowance of C$8.2 million and owner's costs of C$3.3 million, which is unchanged;
- Of the pre-production capital budget, (C$8 million) already been spent and paid for on mine development up to the end of July 2006 versus $4.4 million at the end of June 2006, with additional expenditures incurred but not yet paid for;
- Rate of return of (37.1%), pre-tax assuming 100% equity financing versus 34.6% previously;
- Pre-tax net present value of (C$126.9 million) at a 7.5% discount rate, or (C$152.1 million) at a 5% discount rate, assuming 100% equity financing versus C$119.1 million and C$144.6 million previously reported;
- Payback in (2.4 years) versus 2.5 years previously;
- Mine Life of (7.2 years) versus 10.6 years previously;
- Optimization process continues, focused on project improvements.
Unless otherwise stated, all reporting is in Canadian dollars and metric units.
Updated Mineral Resources and Reserves
Mineral resources remain unchanged from the previous announcement on July 10, 2006 while the new mine plan results in updated reserves using a 0.62% copper cut-off versus the 0.5% copper cut-off used previously, excluding any oxide material but including dilution, as set out below.
Updated Proven & Probable Sulphide Mineral Reserves
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