Nevsun Resources adds Snowden report to Tabakoto study
Nevsun Resources Ltd NSU
Shares issued 27,257,209 Sep 5 close $1.50
Thu 5 Sept 2002 News Release
Mr. Don Halliday reports
TABAKOTO PROJECT MINING REVIEWS
Nevsun Resources has completion geological and mining reviews conducted by
Snowden Mining Industry Consultants of Australia (Snowden) for inclusion in
the Tabakoto project final feasibility study. The full study is scheduled
to be completed by MDM (Metallurgical Design and Management) of South
Africa during September, 2002. The final determination of the preproduction
capital cost of the process plant and associated infrastructure for
Tabakoto will conclude the feasibility study.
Highlights
Cumulative cash flow potential of $58-million (U.S.) ($325 (U.S.) gold)
from five-year to seven-year open-pit mining operations.
Estimated capital cost of $25-million (U.S.) for a 650,000-tonne-per-year
operation.
Projected annual production of 105,400 ounces gold.
Underground mining extensions add $30-million (U.S.) cash flow potential.
Development drilling at Segala to provide opportunity for second mining
operation.
Exploration drilling to commence in October on many targets within the
Tabakoto and Segala mining licences.
Open-pit operations, five to seven years
Initial pit -- five years
The optimum projected annual production rate for the Tabakoto project is
650,000 tonnes per year at an average grade of 5.45 grams per tonne gold
from an initial open-pit operation with a five-year mine life producing a
total of 526,800 ounces (an average of 105,400 ounces per year). The
metallurgical recovery applied for the open-pit operation is 94 per cent.
This may be followed by a transition to a longer-life sustainable
underground operation. The underground mine startup may be delayed should
additional surface resources be delineated on the property.
The cash cost of production outlined in the Snowden Tabakoto mining review
is $187 (U.S.) per ounce for the surface operation, and the indicative
preproduction capital cost for the surface mine (including process plant,
infrastructure and prestrip mining) is $25-million (U.S.). The capital cost
will be finalized when the final process capital is confirmed by MDM later
in September, 2002.
The cumulative cash flow for the initial five-year-life open-pit mine life
is $37-million (U.S.) at $325 (U.S.) per ounce.
The initial open pit has been designed as a three-phase operation over five
years. The first phase is concluded during the first year of production and
takes the pit to a depth of 60 metres. A cutback and deepening of the pit
takes production through to the third year at a new pit depth of 140
metres. A second cutback takes the pit to its ultimate depth of 205 metres
between years three and five. These three stages of open-pit development
have been designed to ensure steady overall mining rates throughout the
life of the surface mine to maximize the efficiency of a contract mining
fleet.
In-pit inferred -- additional four months
An additional 220,000 tonnes of inferred resource grading 8.56 grams per
tonne gold has been identified within the open-pit profile outlined in the
Snowden study. This material will be mined, according to the study, within
the waste envelope and only needs to cover processing costs to match
against potential revenue. When mined as part of the base case mine
development plan, this material has a computed additional cash flow
potential of $13-million (U.S.).
Potential extension to the pit -- additional 18 months
Extensions to the open pit (immediately adjacent to the open pit and along
the northern strike) of 978,000 tonnes at 4.2 grams per tonne gold of
measured, indicated and inferred material have also been identified
(including 73,000 tonnes at 8.48 grams per tonne gold of inferred
resource). This is considered to require minimal drilling to raise the
level of confidence for it to be included in the mining program as a
reserve. The area will be infill drilled in October, 2002. It provides an
opportunity for a further increase in cash flow of $8-million (U.S.) in net
benefit to the Tabakoto mine. Inclusive of the extensions to the initial
open pit, cumulative cash flow would total $58-million (U.S.).
Transition to underground operation -- additional six years
Snowden has evaluated the potential for future underground operations at
Tabakoto to a prefeasibility study level. The underground mining
prefeasibility recognizes the opportunity for sustained mining to a depth
of 600 metres (the current limit of drill intersections into the Tabakoto
deposit) at a mining rate of 6,000 to 8,000 tonnes per vertical metre,
provided continued drilling below the pit profile is conducted to enhance
current drill intersect density. It is anticipated that such drilling will
be conducted during the open-pit mine life and will continue from
underground as the underground infrastructure is developed. It is estimated
that the underground infrastructure will be developed over a 12-to-18-month
period during the last two years of open-pit mine production.
The initial capital cost for developing the underground mine is estimated
at $7-million (U.S.). A six-year production operation at 6,000 tonnes per
vertical metre could provide 330,000 tonnes per year of mill feed at an
average grade of 7.5 grams per tonne gold (metallurgical recovery 96 per
cent) to a depth of 600 metres producing approximately 75,000 ounces per
year. This could provide a cumulative cash flow for the underground
production of approximately $30-million (U.S.) at a gold price of $325
(U.S.) per ounce. The structures containing the Tabakoto resources are
known to continue to at least 900 metres (the sensitivity limit of the
geophysical interpretation).
Cumulative cash flows
The following table provides the range of possible cumulative cash flows
from each stage of future development of the Tabakoto mine. It is presented
at a range of gold prices from $300 (U.S.) to $350 (U.S.).
INCREMENTAL CASH FLOW
(UNDISCOUNTED NET PRESENT VALUE)
(in millions of U.S. dollars
except gold price)
Gold price (per ounce) $300 $325 $350
Five-year-life
open pit 24 37 49
In pit inferred 12 13 14
Pit extension 6 8 11
Underground 18 30 40
---- ---- ----
Total 60 88 114
Internal rates of return
The incremental impact on the internal rate of return (per cent IRR) for
the open pit expanding from the base case, adding in the in pit inferred
and then adding in the pit extension, is presented below. The subsequent
impact from the underground project as a project extension to the surface
mine is also presented.
INTERNAL RATE OF RETURN
Gold price (U.S.
dollars per ounce) $300 $325 $350
Five-year-life
open pit 19% 29% 38%
Add in pit inferred 24 33 44
Add pit extension 25 35 43
Add underground 30 39 47
The underground aspect of the project could provide an extension to the
Tabakoto mine life of up to six years, continuing to use the installed
metallurgical processing capacity of the base case open-pit operation. The
internal rate of return of the underground operation as a future
stand-alone investment using the infrastructure already paid for by the
initial surface operations is 98 per cent at a gold price of $325 (U.S.)
per ounce -- initial preproduction underground capital of approximately
$7-million (U.S.) with a potential annual net cash flow of approximately
$6-million (U.S.) for six years of underground operation.
Mine financing
The company intends to seek debt financing for the Tabakoto project during
2002 in order to be able to commence mine construction early in 2003 for
eventual production from Tabakoto early in 2004. The company has an
existing banking advisory relationship with Barclays Capital and a
financing relationship with ABSA Bank of South Africa.
The initial sourcing of capital for the Tabakoto mine will be focused on
the open-pit opportunity to the ultimate pit depth of 205 metres. The
economic crossover from surface to underground mining will be continuously
assessed throughout the period of open-pit mining. The eventual development
of the underground operations is expected to be financed from the internal
cash flow of the surface mining project.
Exploration potential
Nevsun's adjoining 23-square-kilometre Segala concession will be a focus
for infill drilling to more fully define the known resource for a future
Segala feasibility study. Additional ounces defined in a new Segala
feasibility study may provide the basis for a second mining operation or
may be used as future mill feed to further extend the life or increase the
capacity of the Tabakoto mining operation. In addition, there are several
new targets to be drilled on the Segala property along the northern
extension of the Tabakoto deposit.
Running concurrent with the Segala program, exploration drilling will be
conducted on several targets within the Tabakoto mining licence which now
covers 60 square kilometres in the Kenieba district of western Mali. Some
of these targets are the direct extensions of the Tabakoto deposit. This
includes the recently acquired Fougala, Koutila and Dioulafoundou gold
properties. A diamond and reverse circulation drilling program worth
$2.5-million (U.S.) is planned to commence in October, 2002, on the Segala
and Tabakoto mining licence areas.
John Clarke, Nevsun's president and chief executive officer, states: "The
company is extremely pleased to have brought the Tabakoto project to the
feasibility stage and it is now better positioned than at any time in its
corporate history to develop one of Africa's exciting new mining camps.
With the Tabakoto project, the Segala deposit and the exploration potential
of its combined 83-square-kilometre landholding, Nevsun is poised to become
a significant regional producer and explorer."
(c) Copyright 2002 Canjex Publishing Ltd. stockwatch.com |
