Alacer Gold (ASR-T) June 16, '14 is pleased to announce the positive results of the Definitive Feasibility Study ("DFS") for the processing of sulfide ore through whole ore pressure oxidation ("POX") at its Çöpler Gold Mine in Erzincan Province, Turkey. The Company has completed extensive technical, design, engineering and procurement studies in preparing the DFS and will be carrying out basic engineering and further optimization studies, as well as completing the permitting process, in advance of a construction decision anticipated in the first quarter of 2015. The results of the DFS incorporate the outcomes of the Resource Reconciliation Study to date and resulted in new Çöpler Mineral Resources and Mineral Reserves estimates. See the separate announcement issued today titled "Alacer Gold Announces Results of Ongoing Resource Reconciliation Study for the Çöpler Gold Mine" for further information.
Together, the results of the DFS and the Mineral Resources and Reserves update represent a material step forward for the Company. They demonstrate the viability of processing sulfide ore at the mine, thereby extending the mine life while generating attractive and robust financial returns.
These outcomes show that the Company is on track to deliver the action plan laid out in September 2013 and is well on its way to the longer-term strategy of becoming a multi-mine producer in Turkey.
Key Highlights of the Definitive Feasibility Study
(all currency in US dollars and all metrics on a 100% basis1)
The DFS demonstrates the robustness of the sulfide project
In addition to the existing heap leach processing of oxide ore, the POX facility provides the ability to process sulfide ore at 5,000 tonnes per day, and will result in a 20-year mine life From July 1, 2014, life-of-mine gold production of 3.2 million ounces, including both oxides and sulfides: Total Cash Costs2 of $540/ounce All in Sustaining Costs2 of $580/ounce All in Costs2 of $801/ounce Oxide life-of-mine gold production increased 24% or 134,000 ounces Construction expected to start in Q2 2015 with commissioning in Q4 2017
The DFS project will generate attractive financial returns
Based on capital expenditure of $660 million, inclusive of a $69 million contingency and a gold price of $1,300/ounce After-tax, unleveraged internal rate of return ("IRR") of 20.0% and net present value ("NPV") of $627 million3 for the incremental cash flows as compared to the oxide only case After-tax, unleveraged NPV of $926 million3 on combined heap leach and POX production Payback achieved in 1.7 years from start of sulfide production and $1.6 billion in free cash flow generated over life-of-mine
The project is already significantly derisked
Proven technology Brownfield project Mined Çöpler orebody for over 3 years Stockpiled > 2 million tonnes of sulfide ore at 4.9g/t gold Existing infrastructure Exhaustive studies and technical peer reviews completed Strong local presence and relationships Permitting process already underway – Supplemental EIA submitted in April 2014
Clear plan in place to further derisk the execution phase
Disciplined focus on cost and capital management Detailed project management Establishing an experienced team Deploying local knowledge of the site to full advantage Clearly established milestones to track progress and costRod Antal, Alacer's Chief Executive Officer, stated, "The results of this DFS are an important and positive milestone for Alacer that not only reconfirms the world-class nature of the Çöpler Mine but provides a definitive pathway for Çöpler, and positive cash flow for Alacer for the next 20 years. Taking the time to get the DFS right has provided us the opportunity to significantly derisk the various technical aspects of the study and has produced a robust economic result.
"The DFS has proven the viability of the sulfide project and with our current cash position and Class 3 Cost Estimate4 complete, we could start construction tomorrow without the need for any additional funding. However, our work is not done. As the project moves into basic engineering, we will continue to pursue ways to derisk and optimize the project for Alacer. The focus will be on all areas of the project, including the various financial aspects of the project, capital cost controls, strengthening the execution team, and operating cost management, while continuing to look at additional ways to value engineer the project.
"The critical path requires us to secure all of the permits and land acquisition required to move into construction. This process started in earnest with the submission of the supplemental Environmental Impact Assessment in April. We anticipate receiving all required permits in the first quarter of 2015, with construction commencing in the second quarter of 2015. We believe the sulfide project provides the best growth opportunity for Alacer and solidifies our strategy of focusing our efforts and expertise on Turkey."
DFS Production and Cost Overview
The table below provides a summary of the DFS life-of-mine production profile for Çöpler.
|
| Jul 2014
to Dec 2017
Heap Leach
Only
| 2018
to 2022
First 5 years
of POX
| 2023
to 2034
Remainder of
LoM
| Total
(100%1)
| Mining
|
|
|
|
|
| Oxide Ore to Heap Leach Pad
| Mt
| 21.8
| 1.5
| 0
| 23.2
| Sulfide Ore
| Mt
| 6.35
| 13.7
| 8.9
| 28.9
| Waste
| Mt
| 85.8
| 51.4
| 24.1
| 161.2
| Total Tonnes Mined
| Mt
| 113.8
| 66.5
| 33.0
| 213.3
| Strip Ratio
|
| 3.1
| 3.4
| 2.7
| 3.1
| Processing
|
|
|
|
|
| Oxide Ore
| Mt
| 21.8
| 1.5
| 0
| 23.2
| Oxide Head Grade
| g/t gold
| 1.30
| 1.46
| 0
| 1.31
| Oxide Gold Produced
| '000 ozs
| 611
| 73
| 0
| 684
| Sulfide Ore
| Mt
| 0.0*
| 9.0
| 22.6
| 31.7
| Sulfide Head Grade
| g/t gold
| 5.20
| 3.90
| 2.18
| 2.67
| Sulfide Gold Produced
| '000 ozs
| 6
| 1,071
| 1,478
| 2,555
| Total Gold Production
| '000 ozs
| 616
| 1,144
| 1,478
| 3,239
| *38,000 tonnes processed in 2017 during commissioning
Rounding differences will occur
|
See the Appendix at the end of this press release for a life-of-mine production profile by year.
The table below provides a summary of the estimated capital costs for the sulfide project6.
| US$ (millions) (100%1)
| Crushing and grinding equipment
| 70
| Autoclaves and ancillary equipment
| 170
| Metal recovery (including Adsorption Desorption Recovery ("ADR"))
| 74
| Tailings storage facility
| 123
| Reagent handling
| 21
| Facilities and infrastructure
| 108
| Owner's costs & other
| 25
| Contingency
| 69
| Total pre-production capital
| $660
| Rounding differences will occur
|
|
Additionally, the DFS estimates: (i) sustaining capital expenditure for the sulfide project totals $106 million over 17 years; (ii) remaining sustaining capital expenditure for the heap leach operation totals $23 million; and (iii) reclamation costs total $56 million.
Alacer intends to pursue a project delivery method which utilizes an engineering, procurement and construction ("EPC") approach. This approach will involve including the construction contractors in the basic engineering phase in order to establish a well-defined project scope of work, project execution plan and control documents. Alacer will select contractors to participate in the process based on quality, experience, safety records, financial strength and other factors, and will seek fixed price proposals for the plant near the end of basic engineering.
Long-lead time and critical equipment items include the oxygen plant (28 months), autoclaves and agitators (15 months) and SAG and ball mills (14 months). Construction on site is planned to commence in Q2 2015 and lead to commissioning of the POX plant towards the end of 2017.
The table below provides a summary of the average estimated life-of-mine operating costs.
|
| Unit Cost
| Mining
| Per tonne mined
| $1.85
| Rehandle
| Per tonne rehandled
| $1.16
| Heap Leach Processing
| Per tonne heap leach processed
| $9.79
| POX Processing
| Per tonne POX processed
| $34.55
| Site Support and Offsite
| Per tonne processed
| $3.54
|
|
|
| Cash Operating Costs2
| Per ounce
| $601
| By-product Credits
| Per ounce
| ($85)
| Cash Operating Costs2 net of By-products
| Per ounce
| $517
| Royalties
| Per ounce
| $23
| Total Cash Costs2
| Per ounce
| $540
| Sustaining Capex
| Per ounce
| $40
| All-in Sustaining Costs2
| Per ounce
| $580
| Sulfide Project Pre-Production Capital
| Per ounce
| $204
| Reclamation Costs
| Per ounce
| $17
| All-in Costs2
| Per ounce
| $801
| Rounding differences will occur
|
|
|
Financial Analysis
The base-case financial metrics tabulated below are stated after tax and on an unleveraged basis.
Financial Metrics
(as of July 1, 2014)
|
| Base Case
(Oxide
Only)
A
| DFS Case
(Heap Leach +
POX)
B
| Incremental
B - A
| LOM cash flow
| (millions)
| $323
| $1,600
| $1,277
| NPV at 5%
| (millions)
| $299
| $926
| $627
| IRR
| %
| N/A
| N/A
| 20.0
| Payback from start of sulfide gold production
| Years
| N/A
| 1.7
|
|
The DFS base-case economic analysis was predicated on the capital and operating costs summarized above and the following parameters:
Gold price of $1,300 per ounce based on analyst consensus long-term pricing assumptions; Copper price of $3.29 per pound and average annual copper production of 3.7 million pounds; Silver price of $22 per ounce and average annual silver production of 40,000 ounces; US$/Turkish Lira exchange rate: 2.2; Electricity ($/kWh): 0.09; and Diesel cost: $2.12/liter. Tabulated below are financial metrics at a range of gold prices:
(as of July 1, 2014)
| Gold Price
$1,100/ounce
| Gold Price
$1,200/ounce
| Base Case
$1,300/ounce
| Gold Price
$1,400/ounce
| Gold Price
$1,500/ounce
| After-tax
| Total cash flows ($ millions)
| $984
| $1,292
| $1,600
| $1,869
| $2,122
| Total NPV at 5% ($ millions)
| $521
| $724
| $926
| $1,113
| $1,289
| Payback from start of sulfide gold production
| 2.8
| 2.2
| 1.7
| 1.4
| 1.1
| NPV at 5% ($ millions)
| $313
| $470
| $627
| $768
| $898
| Incremental IRR (%)
| 13.0%
| 16.6%
| 20.0%
| 23.1%
| 26.0%
|
Mining
The Çöpler deposit will continue to be mined by a contractor using conventional truck and shovel methods. Three open pits are currently being mined for oxide ore, which will ultimately converge into a single open pit over the life of the sulfide project. The mine design for the sulfide project was based on an optimized pit shell using a gold price of US$800 per ounce.
During the pre-production phase of the sulfide project, sulfide ore mined is being stockpiled while oxide ore mined is placed on the heap leach pad. At March 31, 2014, sulfide ore totaling 2.0 million tonnes at 4.9g/t gold had been stockpiled. Prior to the planned commissioning of the POX plant in 2017, the sulfide ore stockpile is estimated to increase to approximately 9.0 million tonnes at 3.0g/t gold.
Life-of-mine strip ratio (waste to ore) is estimated to average 3.1 from July 2014. The total mining rate per annum will continue at current rates of roughly 33 million tonnes per annum ("Mtpa") until 2018 when the rate is halved to roughly 17Mtpa. The mining rate is then planned to reduce further in 2020, averaging roughly 11Mtpa from 2020 until mining ceases at the beginning of 2026. Processing of stockpiled sulfide ore is planned to continue until 2034.
Processing
The planned throughput of the POX plant is based on a nominal 5,000 tonnes per day (1.8Mtpa). Gold recoveries are expected to average 94% from sulfide ore.
The ore is first crushed and milled to a slurry with water in a conventional grinding circuit. That slurry is then pumped into the acidulation circuit where it is treated with acid to reduce the carbonate levels in the ore.
From there, the slurry is pumped to the autoclave circuit, comprised of seven individual pressure vessels, where the contained sulfide minerals react with oxygen gas at high temperature and pressure to convert gold and copper into recoverable forms. The hot slurry from the last pot is discharged through two flash vessels in which the temperature and pressure of the oxidized slurry is reduced. Steam from this process is used to preheat the autoclave circuit feed slurry, making the POX process autogenous, with all energy required to maintain the process in normal operation derived from oxidation of the sulfide sulfur contained in the Çöpler ore.
The gold-bearing solids are then processed in a conventional cyanide leach and Carbon-in-Pulp ("CIP") gold recovery circuit.
Following the CIP circuit, the cyanide in the tailings slurry is destroyed in the cyanide detoxification circuit. The tailings are then pumped to the lined Tailings Storage Facility located roughly 1.5 km east of the processing plant.
Copper bearing liquid is then treated with a reagent to recover the copper as a high grade synthetic sulfide concentrate, which is shipped to a copper smelter for further processing.
Heap leach processing continues at current rates of stacking during the sulfide project pre-production phase until the end of 2017. Ore is crushed and agglomerated before being placed on the heap leach pad where gold is leached into solution and collected for processing in an ADR circuit. Gold is poured as dore bars for shipment to a third-party precious metals refinery. Heap leach gold production will continue in 2018 and 2019 at reduced rates, stemming from intermittent stacking of the highest grade heap leach ores coming out of the pits until ultimate capacity of the heap leach pad is reached as well as residual ounces collected from the heap leach. Gold recoveries from the heap leaching of oxide ores are expected to average 70%.
Permitting
The permitting process for the sulfide processing facility has already begun, with the submission of the supplemental Environmental Impact Assessment ("EIA") in early April 2014. The EIA approval process involves the filing of an initial application defining the scope of the proposed project, a public consultation process, and a final submission. Upon receipt of approval, the Company will then proceed to apply for forestry, operating, construction and other required permits.
It is important to note that the Company was previously successful in gaining permits for the Çöpler oxides. This permitting experience has been further enhanced with the excellent operating, safety, environmental and community engagement record at Çöpler since 2010.
The Company expects to obtain the supplemental EIA approval in late 2014 and all required land use permits in Q1 of 2015, allowing construction to begin in Q2 of 2015. Stakeholder engagement has begun with the community consultation process and will continue through project development and operations.
Next Phase
The next stage of the project will be to further reduce risk by completing the basic engineering phase. During this stage a number of work streams will be progressed including:
Completion of basic engineering; Metallurgical testing for operational readiness; Remaining land acquisition; and Recruiting for key project execution and operational positions. The basic engineering phase will provide the control estimate and the project execution plan for the sulfide project.
Although the DFS is based on a conventional EPC approach, as noted above, a fixed-price EPC approach will be pursued during this next stage.
Basis for Production Targets and Forecast Financial Information
The production targets in this announcement are based on the estimates of Mineral Reserves included in Alacer's announcement issued today titled "Alacer Gold Announces Results of Ongoing Resource Reconciliation Study for the Çöpler Gold Mine". The production targets are underpinned solely by Probable Reserves, and are based on Alacer's current expectations of future results or events and should not be solely relied upon by investors when making investment decisions.
The estimated Mineral Reserves and Resources underpinning the production targets have been prepared by a competent person or persons in accordance with the requirements of the JORC Code, as specified in Alacer's announcement issued today titled "Alacer Gold Announces Results of Ongoing Resource Reconciliation Study for the Çöpler Gold Mine".
All forecast financial information in this announcement has been derived from the production targets set out in this announcement.
Qualified Person Statement
The scientific and technical information in this announcement is based on information compiled by Robert D. Benbow, PE, who is a full-time employee of Alacer. Mr. Benbow has sufficient experience with respect to the technical and scientific matters set forth above to be a "qualified person" for the purposes of National Instrument 43-101. Mr. Benbow consents to the inclusion in this announcement of the matters based on this information in the form and context in which it appears. |
