Aquiline's Loma study sees 15 mm oz per year production
2008-10-07 14:45 ET - News Release
Mr. Marc Henderson reports
AQUILINE RECEIVES POSITIVE SCOPING STUDY ON NAVIDAD'S LOMA DE LA PLATA ZONE; AVERAGE YEARLY SILVER PRODUCTION OF 15 MILLION OUNCES
Aquiline Resources Inc. has received a preliminary economic assessment (scoping study) conducted on the Loma de La Plata zone that forms part of Aquiline's 100-per-cent-owned Navidad project in Chubut province, Argentina. The Loma zone is a near-surface, high-grade silver (Ag) zone with minimal base metals estimated to contain 9.1 million tonnes (indicated) at average grades of 225 grams per tonne (g/t) Ag, or 66 million contained ounces Ag, plus 17.3 million tonnes (inferred) at average grades of 159 g/t Ag, or 89 million contained ounces Ag at a cut-off grade of 50 g/t Ag equivalent (Snowden Mining Industry Consultants Pty. Ltd., December, 2007). Based on the 2007 global resource estimate of 606 million contained silver ounces (all categories) distributed over seven identified zones, Loma accounts for one zone, containing roughly 25 per cent of the silver ounces in the Navidad deposit. The scoping study was performed in compliance with National Instrument (NI) 43-101 regulations by Snowden Mining Consultants of Brisbane, Australia, under the direction of Peter Myers, group general manager, mining. Highlights of the project financial modelling results, based on a production rate of 10,000 tons per day of ore, a silver price of $12.52 per ounce and a copper (Cu) price of $3.23 per pound (three-year average prices) are as follows:
Average yearly silver production of 15 million ounces, with peak production in the first year estimated up to 23 million ounces;
Ore supply from the first of two pits accounts for virtually all ore to be mined in the first three years of production, at an average grade of 231 g/t silver before declining to an average grade of 140 g/t Ag in the cutback pit mining inventory, the main source of ore mined from year four onward;
25-month payback period;
Stripping ratio under 1:1 for first stage pit;
Initial pit mining and processing costs of $4.75 per ounce Ag while first pit is mined, increasing as the cutback pit is mined due to higher strip and lower grade;
Preproduction capital expenditures of $272.6-million, most of which supports a processing plant handling throughput of 10,000 tonnes per day (3.65 million tons year) capable of being expanded to 30,000 tons per day;
Net present value (NPV) pretax at 7.5 per cent of $135.6-million and internal rate of return (IRR) of 22 per cent;
80 per cent silver recoveries using conventional flotation to produce a concentrate grading approximately 50 kilograms silver per tonne of concentrate;
Estimated personnel count of 450 during mine construction and up to 342 during mine operations.
Based on scoping study estimates, the mine will produce on average 15 million silver ounces per year for 6.6 years at average operating cash costs of $5.22 per ounce. The full National Instrument (NI) 43-101 technical report will be filed on SEDAR shortly.
Marc Henderson, Aquiline president and chief executive officer, commented as follows: "We are pleased with the results of the scoping study released today, which was undertaken to generate preliminary economics and to facilitate our next step of advancement. We are currently in a dialogue with the provincial government concerning development of the project in a safe and responsible way with special emphasis on the preservation and remediation of the environment. The relevant environmental impact studies are being prepared to be submitted to the provincial entities for their consideration. Based on these economics, the Loma zone provides the basis to commence silver production at Navidad on a robust deposit. Grades starting at 231 g/t silver are comparable with some of the world's existing underground silver mines. We are also accelerating additional metallurgical testwork on other high-grade silver zones with apparently comparable mineralogy, including the recently discovered, high-grade Valle Esperanza zone. If flotation characteristics from this zone and other neighbouring zones display similar response, it could materially impact the economics of the initial phase of operations at Navidad."
Next steps
Finally, environmental and hydrology data compilation, and testing have commenced under the direction of John Wells, Aquiline's consulting metallurgist of JAWMETC. New Loma samples and nine variability composite samples from each of Valle Esperanza and Barite Hill have been collected and shipped for analysis to G & T Metallurgical Services Ltd. for analysis to be performed in the fourth quarter of 2008. The Barite Hill zone contains 6.5 million tonnes grading 176 g/t or 37 million contained silver ounces (indicated) and 0.4 million tonnes grading 44 g/t or one million contained silver ounces (inferred), with low lead grades (0.38 per cent) in the indicated resource. The Valle Esperanza zone is not included in the Snowden technical resource estimate of 2007, but, based on reported results of roughly 40 drill holes, appears to contain high-grade silver with low base metal values. If the metallurgy for these zones exhibits similar responsiveness to conventional flotation testwork, then the metallurgy program and pre-engineering program will be accelerated toward a wider scoping study or prefeasibility study. Such a study would encompass material from Loma and other deposit areas that could be processed with incremental infrastructure additions, as the main capital expenditures (capex) will be repaid in the first 25 months of production from Loma. Further drill results on Valle Esperanza are anticipated to be reported in the fourth quarter this year and an updated resource estimate, incorporating Valle Esperanza and expansion from the other zones, is anticipated in the first quarter of next year. Metallurgical results are expected late in the fourth quarter this year or early in the first quarter of 2009. Required baseline information to follow the prefeasibility or feasibility study that will be contingent on further advancement of the deposit.
Study assumptions and sensitivities
Selling prices of $12.52 per ounce Ag and $7,110 per tonne Cu are based on three-year average prices, and assume treatment through a Cu smelter. A change of $1.00 per ounce in the selling price of silver results in a change of roughly $59.8-million to NPV; in other words, at $14.00 per ounce the NPV rises to $224.0-million and at $9.20 per ounce it is cash break-even.
Total costs (including fixed and mobile capex, process and administration, ore, and waste mining and royalties) have been estimated to be $40.70 per tonne processed or $7.10 per silver ounce mined. The largest components of these costs on a per-silver-ounce basis are fixed capex ($1.85), process and administration ($2.00), and royalties ($1.44) comprising a 3-per-cent provincial royalty, 1-per-cent Chubut silver and gold tax, and 10-per-cent export tax duty payable to the government of Argentina on the export of concentrate.
Start-up capital expenditures of $272.6-million comprise mainly $198.6-million for the process plant, which will operate at daily throughput of 10,000 tons per day with the plant layout providing for expansion to 30,000 tons per day. After total direct and indirect costs of $124.6-million, engineering, procurement, construction management (EPCM) at 18 per cent direct and indirect costs is added ($22.4-million), and contingency at 35 per cent of direct, indirect and EPCM items ($51.5-million) are added for total process plant capital of $198.6-million.
The highest sensitivities are to grade and recoveries, where a silver recovery improvement to 85 per cent, for example, increases NPV from $135.6-million to $180.0-million.
Qualified person
Under the guidelines of the National Instrument 43-101, the qualified persons for the technical report are Mr. Myers, group general manager -- mining and principal consultant, and Pamela L. De Mark, senior consultant, both of Snowden Mining Industry Consultants. The qualified person for the metallurgical program and metallurgy description of the scoping study is Mr. Wells, consulting metallurgist, JAWMETC. Both Mr. Myers and Mr. Wells have reviewed the technical content of this news release.
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