Euromax Resoures (EOX-V) sees a bright future for mining in Macedonia
It's full steam ahead for aspiring miner Euromax Resources in Macedonia, as the company positions its Ilovica copper-gold porphyry deposit, 15 km west of the border with Bulgaria, to become the European country’s first greenfield development of its kind in over 30 years.
The company has tabled a feasibility study that shows marginal improvements in the resource estimate, along with a 5.5% reduction in capital costs to US$474 million.
The news came on the heels of Euromax securing an off-take agreement on its copper-gold concentrate with German-owned Aurubis, the largest copper producer in Europe, which operates the Pirdop plant in Bulgaria.
The agreement was a key condition towards securing a US$215-million facility for the project from the German United Loan Guarantee Scheme, and builds on a US$25-million facility from Caterpillar Financial alongside a US$175-million gold-streaming agreement with Royal Gold.
During a presentation at the Denver Gold Forum in Colorado in September last year, Steve Sharpe, president and CEO of Euromax, said that the sizable financing package, which measures “eight times the value of the company’s market capitalization,” validates the project.
“It’s a robust project, as is demonstrated by our ability to raise large amount of debt financing against the project itself,” he said, expecting that 80% of the capital cost would be either financed or streamed, with construction in this year’s third quarter.
“As most new and expansion projects around the world are mothballed in response to the recent downturn in commodity prices, we believe that this is an ideal time for building, so as to exploit the supply shortages that will likely occur,” he said in a company press release.
The Ilovica deposit is a 29-million-year-old copper-gold porphyry within an acutely trending magmatic arc that strikes northwest from northern Greece through Bulgaria and Macedonia, and onto Serbia and eastern Turkey.
Sharpe said during the presentation that after Euromax sold European Goldfields’ Stratoni mine in Greece, along with its other assets in Romania, to Eldorado Gold (ELD-T) in a cash-and-share deal worth US$2.5 billion in December 2011, the company “saw inherent value” in Macedonia, because the Ilovica deposit falls along the same geological trend.
The system is 1.5 km in diameter, with resources totalling 257 million tonnes at 0.32 gram gold per tonne and 0.2% copper in the measured and indicated categories, accounting for 2.6 million oz. gold and 1.2 billion lb. copper.
“This is a simple copper-gold porphyry that’s low grade, but the grade is made up for by the exceptionally low strip ratio, it’s simple to process and there’s a smelter 120 km by rail from the mine site itself,” he said. “And all of that comes together with spectacularly low cash costs.”
The economics, as outlined in the feasibility study, returned a US$440.1-million after-tax net present value, and a 17.8% after-tax internal rate of return (IRR), assuming a 5% discount rate and long-term price forecasts of US$1,220 per oz. gold and US$2.90 per lb. copper.
“The IRR is completely meaningless because it should reflect the pure equity component of this transaction, which is almost infinite in terms of that number,” Sharpe added.
The mine is scheduled to produce 83,000 oz. gold and 16,000 tonnes of copper over a 20-year mine life, at all-in costs of US$372 per oz. gold, which was calculated assuming copper as a by-product.
Considering Macedonia has a 2.1-million population, a US$10.2-billion gross domestic product and a 25.5% unemployment rate, Sharpe says that the country’s government has gone “above and beyond the call of duty” to help get Ilovica into development.
“The average age of the ministers is 30 years old … it was an overwhelming surprise to find such a young and dynamic government that has really made foreign direct investment a cornerstone of its economic policy.”
“We’ve been so welcomed in the country that we made all our staff in London and in Canada redundant, and relocated those positions to Macedonia,” he continued. “We are the first international mining company that have its headquarters there, which is the right thing to do to be part of the emerging market, and we feel passionate about being part of that success.”
Corporate philosophy is also important to Sharpe, who says that the company’s shareholders should have a “transparent return” on their investments.
“We want to bring mining back to its fundamentals, in which our shareholders receive the full benefit of the performance of a mine, so we aim to develop a single project and return cash flow generated back to our shareholders,” he said.
On the horizon for Euromax is finishing the updated environmental and social impact study, expanding on its national environmental impact study and working on the main mining project, which is the final submission required under the Macedonian minerals law to obtain the construction permit.
“It’s a win-win, both for our shareholders and for Macedonia,” he said. “Neighbouring countries will look at what we’re doing here, and that will kick-start a lot of the projects that have been on hold.”
Lesley Stokes
_________________________________________________________________________
Euromax Resources (EOX-V) Jan 6th 2016 is pleased to announce the results of the Feasibility Study ("FS"), for its 100% owned Ilovica gold-copper porphyry project in Macedonia (the "Project").
The FS supports the economic robustness of the Project previously indicated by the Pre-Feasibility Study and, through the optimization of the processing flow sheet and a more precise level of costing, demonstrates significant reductions in both capex and operating costs, and a consequential increase in the IRR.
FS Highlights:
Financial
Pre-tax NPV(5%) of USD 513.0 million and Post-tax NPV(5%) of USD 440.1 million*
Pre-tax IRR of 19.8% and Post-tax IRR of 17.8%
Initial Capex USD474.3 million including contingency
World Gold Council defined Adjusted Operating Cash Costs of USD 200/oz and All-In Costs of USD 372/oz**
*(Based on Analyst Consensus Long Term Price Forecasts of USD1,220/oz Au and USD2.90/lb Cu)
Reserves & Resources
Total Measured and Indicated Resources of 256.8 million tonnes sulphide material containing: 2.6 million ounces of gold at an average grade of 0.32 g/t Au 1,208 million pounds (548 thousand tonnes) of copper at an average grade of 0.21% Cu
Total Proven & Probable Mineral Reserve of 198.1 million tonnes containing: 2.01 million ounces of gold at an average grade of 0.32 g/t Au 898.9 million pounds (408 thousand tonnes) of copper at an average grade of 0.21% Cu
Operational
Average annual payable production of 83,000 oz of gold and 16,000 tonnes of copper
Throughput of 10 million tonnes per annum and mine life of 20 years
Conventional open pit with strip ratio of 1:1
Process comprises flotation to a copper-gold concentrate and doré production via Carbon-in-Leach ("CIL") on cleaner-scavenger tailings
Average overall process recoveries of 83.3% gold and 81.3% copper
The FS further develops and increases the level of engineering for the Project from the Pre-Feasibility Study announced on June 5th 2014 and as per the Amended Technical Report filed on SEDAR on 22nd December 2014, (the "PFS"). The results of the FS also provide for an updated Reserve estimate. A detailed breakdown and discussion of the FS results can be found in the Appendix and an independent NI 43-101 compliant technical report will be filed on SEDAR and the Company's website within 45 days of this announcement.
The FS was produced by the following experts who worked with the Company's technical team:
Amec Foster Wheeler - Processing Plant & Infrastructure and overall report coordination
Tetra Tech - Geology & Resources
DMT - Mining
Golder Associates - Environment; Tailings in association with the Faculty of Civil Engineering from St. Cyril and Methodius University of Skopje
Schlumberger Water Services - Hydrology & Hydrogeology, Water
Project Advancement
With the completion of the FS the Company is well positioned to continue the development through to construction of Ilovica, which is targeted for the 3rd quarter of 2016. The Front-End Engineering and Design ("FEED") work has already been initiated with Amec Foster Wheeler. As well as advancement of long-lead and critical path elements of the project engineering, the FEED will include value engineering aimed at further optimising the project in parallel with the appointment of an EPC contractor during the period up to construction. Work is continuing on the updated Environmental and Social Impact Study ("ESIA"); the national Environmental Impact Study, which has already been approved, is being expanded to include EBRD Performance Requirements and Equator Principle compliance. In parallel, the Company is working on the Main Mining Project, which is the final submission required under the Macedonian Minerals Law to obtain the construction permit.
Euromax has begun the process of hiring the key personnel required to oversee construction of Ilovica with Alan Baker recently appointed Vice President, Project & Construction Manager.
Financing
On 3rd November, Euromax agreed and signed a Second Amendment to the Gold Purchase and Sale Agreement with Royal Gold. The signing of the Second Amendment allowed the further drawdown of USD 3.75 million from Royal Gold under the Gold Purchase and Sale Agreement in during November. The Second Amendment has been filed on SEDAR. The Company expects to draw the remaining USD 3.75 million of the second tranche under the Gold Purchase and Sale Agreement from Royal Gold on satisfaction of the conditions in the Second Amendment during the first quarter of 2016.
Euromax has made significant progress towards on the Project Financing announced on 1st May 2015. Société Générale S.A. and UniCredit Bank AG the Mandated Lead Arrangers for the USD 215 million Senior Secured Project Finance Facility and their consultants completed their site visits in October 2015. They are in the process of completing their technical, environmental and social due diligence reports, incorporating the results from the FS. On 8th December 2015, Euromax signed an offtake term sheet with Aurubis, which was a key condition to the UFK in-principle eligibility secured in May 2015. Management views UFK eligibility as an important step in securing the financing for the project as it allows Euromax to secure very attractive terms on the Project Finance Facility. The FS incorporates the terms agreed with Aurubis. In addition, a term sheet has been signed with Caterpillar Financial for a USD 25 million equipment financing facility.
Commenting on the results of the PFS, Pat Forward, Chief Operating Officer, said: "Following a year of intense work on site and with our various partners in the study, we are delighted that Ilovica still highlights a robust project. We have been able to achieve all the main aims of the study including an improvement in Mineral Resource and Reserve classification, refinement of the flow sheet, estimation of costs to +/- 10% and an improved level of engineering. Both capital and operating costs have been optimised in the new study, which provides an excellent basis for the project implementation. "
Commenting on the results of the PFS, Steve Sharpe, President & CEO, said: "The Feasibility Study results support the economic viability of the Ilovica Project. As most new and expansion projects around the World are mothballed in response to the recent downturn in commodity prices, we believe that this is an ideal time for building, so as to exploit the supply shortages that will likely occur. We believe that not only are we well positioned to benefit from any improvement in commodity prices, but with cash operating costs now reduced to the USD 200/oz level we are equally well equipped to withstand any sustained weakness in commodity markets, whilst remaining cash flow positive. With a 20-year mine life, this is an important project for Macedonia which could enhance the economic profile of the country. The overwhelming support that we continue to receive from all stakeholders allows us to move confidently towards our stated goal of starting construction later this year."
Qualified Person
Mr Patrick Forward, FIMMM, a Qualified Person under National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators and COO of the Company, reviewed and approved the scientific or technical disclosure in this release and has verified the data included.
About Euromax Resources Ltd.
Euromax has a major development project in Macedonia and an exploration services company in Bulgaria. We are focused on building and operating the Ilovica copper/gold project in Macedonia, as well profitably deploying the wealth of exploration experience within our Bulgarian Exploration Services subsidiary.
Notes:
**Adjusted Operating Cash Costs and All-In Costs as defined by the World Gold Council, which assumes copper as a by-product and includes USD1.8M corporate G&A per annum.
For more information, please visit www.euromaxresources.com.
APPENDIX A
Geology & Resources - The Ilovica porphyry system is located in southeast Macedonia, within the tertiary belt associated with the Carpathian arc. The intrusive is about 1.5 km in diameter and comprises a dacite-granodiorite plug, emplaced along the northeastern border of the Strumica graben. Mineralisation is typical porphyry style veining, most intense within the potassic zone. The mineralisation shows good continuity and homogeneity that lends itself well to bulk-mining methods as outlined in the PFS and confirmed in the FS.
A total of 130 holes have been drilled over 10 campaigns between 2004 and July 2015. Of the 130 holes, 20 were drilled for geotechnical investigation, 15 were drilled for hydrogeological investigation, and 95 were drilled for mineral resource determination. In total, 42,032 m have been drilled.
The current pit-constrained Mineral Resources for the property, can be summarised as follows:
Mineral Resource (Effective 5 January 2016)
| Classification | Tonnage (Kt) | Grade | Contained Metal | | Au (g/t) | Cu (%) | Au (Koz) | Cu (Klb) | | Sulphide (based upon a dollar equivalent cut-off of USD16/t.) | | Measured | 147,100 | 0.31 | 0.23 | 1,500 | 729,500 | | Indicated | 109,700 | 0.33 | 0.20 | 1,100 | 479,000 | | Total M+I | 256,800 | 0.32 | 0.21 | 2,600 | 1,208,500 | | | | | | | | | Oxide (based upon a dollar equivalent cut-off of USD8/t.) | | Measured | 12,500 | 0.41 | - | 160 | - | | Indicated | 9,600 | 0.37 | - | 110 | - | | Total M+I | 22,100 | 0.39 | - | 280 | - |
Notes:
Dollar equivalent cut-off based upon the following calculation Dollar Eq. = (Au * recovery * price) + (Cu * recovery * price), using the following inputs:
Au process recovery in oxide 74%
Cu process recovery in oxide 0%
Cu process recovery in fresh 84%
Au process recovery in fresh 88% Spot metal prices (Au = USD1,250/oz, Cu = USD3.00/ lb)
Resource cut-off of USD16 used for sulphide material Resource cut-off of USD8 used for oxide material Numbers may not add exactly due to rounding Recoveries are based on those quoted by Euromax in the PFS. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. The mineral resources in this news release were estimated using current Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") standards, definitions and guidelines.Mining & Reserves -
The mining method will use conventional drilling and blasting together with shovel and trucks supported by a fleet of ancillary equipment. The main mining fleet will comprise two hydraulic 16.5 m3 shovels with a fleet of 90t nominal payload rigid dump trucks, 9 trucks during pre-strip at the start of operations and 19 trucks at its peak. Maximum material movement is some 22.5 million tonnes per annum. The mine schedule will provide 10 million tonnes of Sulphide ore per year to the plant. A primary gyratory in pit crusher will feed a conveyor running from the pit to the processing plant
With the completion of the FS, the Company is pleased to announce new Mineral Reserves for the project, which are summarised in the table below:
Mineral Reserve (Effective January 2016)
| Reserves | | Description | Units | Proven | Probable | Total | | Sulphide Ore | Mt | 112.6 | 85.5 | 198.1 | | Waste | Mt | | | 199.9 | | Total | Mt | | | 398.0 | | Strip Ratio | t : t | | | 1.10 | | Gold Grade | g/t | | | 0.315 | | Gold Content | Moz | | | 2.01 | | Copper Grade | % | | | 0.206 | | Copper Content | Mlbs | | | 898.9 |
Notes:
The sulphide ore reserves are based on a 0.22 g/t Au and 0.17% Cu cut-off, 96% mining recovery, 4.4% dilution on tonnage, 1.9% dilution of Au grade and 0.9% dilution of Cu grade. Oxide ore is not included and is considered waste for the purposes of pit optimisation. The mineral reserves in this news release were estimated using current Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") standards, definitions and guidelines.
Processing - Ore will be milled by SAG and Ball mills and then processed by a concentrator using conventional flotation to produce a copper-gold concentrate with the cleaner-scavenger tailings being re-treated via a CIL to recover further gold doré on site. The modified flow sheet, as compared to the PFS, has led to a modest reduction in recoveries but this is more than offset by reductions in capital and operating costs. The remainder of tailings are sent straight to the tailings management facility. Test work conducted by SGS Mineral Services in the UK has confirmed an overall process recovery of 83.3% for gold and 81.3% for copper and the terms used in FS study is based the terms agreed in the Aurubis term sheet and on shipping concentrate by truck to the Pirdop smelter in Bulgaria.
Tailings - Waste rock from the open pit will be used to construct the tailings embankment. The dam will then be raised over the mine life using the down-stream construction approach to safeguard the long term integrity of the facility. The plant site is situated above the tailings facility and thickeners will be utilised to produce a thickened tailings to be pumped to the facility below. A minimum operational freeboard of 2.0m has been adopted to comply with International Commission on Large Dams (ICOLD). Starter wall embankment and future wall raises will be constructed from rockfill from the open pit waste rock. Tailings will be deposited into TMF from various discharge points - a western pipe line will discharge from the dam crest and an eastern line will deposit tailings from the side hill on east side of the facility.
Infrastructure - A site plan has been developed covering haul roads, workshops, access roads from the National Highway, water management systems and power infrastructure from existing substations have been developed for the project using rates based on quotations supplied by Macedonian and other European contractors, following enquiries using bills of quantities from designs by Amec Foster Wheeler.
Capital Costs - The capital cost estimate is +/-10% and includes engineering, procurement, construction, start-up and cold commissioning. Provision is also made for owner's costs. The base date for pricing is September 2015. The estimate covers the direct field costs of executing the project, the indirect costs associated with the design, construction and commissioning plus support costs for items such as management teams, operational staff, environmental, permitting, insurance and utilities such as water supply, bulk power and construction power:
Capital Cost Summary
| Description | Total Project Cost
(USD M) | Growth and Project Risk
(USD M) | Contingency
(USD M) | Total
(USD M) | | Process Plant and Infrastructure | 315.70 | 9.21 | 18.63 | 343.54 | | TMF | 42.94 | 1.25 | 2.53 | 46.72 | | Mining | 75.27 | 2.89 | 5.85 | 84.01 | | Total | 433.91 | 13.35 | 27.01 | 474.27 |
Operating Costs - Operating costs were derived from quotations for fuel, power, consumables and reagents from suppliers in Macedonia and internationally. Labour costs were developed based on local and expatriate salaries currently being employed as well as in consultation with recruitment specialists Stratum International. The Operating Costs estimate is included in the table below:
Operating Cost Summary
Cost Centre | Total Sulphide Ore | Fixed
Cost | Variable
Cost | | | USD M/Year | USD/t | USD/Year | USD/Year | USD/t | | Mining (average - including labour) | 35.36 | 3.53 | 8.38 | 26.99 | 2.70 | | Labour | 8.80 | 0.88 | 8.80 | - | - | | Reagents | 17.59 | 1.76 | 0.35 | 17.24 | 1.73 | | Operating Consumables | 10.82 | 1.08 | 0.89 | 9.93 | 0.99 | | Power | 22.93 | 2.29 | 0.16 | 22.77 | 2.28 | | Maintenance Materials | 6.51 | 0.65 | 5.86 | 0.65 | 0.07 | | Mobile Equipment | 0.14 | 0.01 | 0.14 | - | - | | Laboratory | 0.47 | 0.04 | 0.47 | - | - | | Sub Total | 102.62 | 10.26 | 25.04 | 77.58 | 7.76 | | | | | | | | | General & Administration | 3.76 | 0.37 | 3.76 | - | - | | Sub Total | 3.76 | 0.37 | 3.76 | - | - | | | | | | | | | Total Sulphide Ore | 106.37 | 10.64 | 28.79 | 77.58 | 7.76 |
Financial Analysis - The FS demonstrates a robust NPV at a 5% discount of USD 513.0 million with an IRR of 19.8% before tax and an after tax NPV at a 5% discount of USD440 million and after tax IRR 17.8%. The following table illustrates the sensitivity to changes to the calculated IRR and NPV at 0%, 5% and 10% discount rates at various gold and copper prices. No assurance or guarantee is provided that the calculated IRR or NPV values will be achieved.
NPV and IRR sensitivity to metal prices
Gold
(USD/oz) | Copper (USD/lb) | NPV @ 0% discount
(USD m) | NPV @ 5% discount
(USD m) | NPV @ 10% discount
(USD m) | IRR
(%) | | | | Pre-tax | Post-tax | Pre-tax | Post-tax | Pre-tax | Post-tax | Pre-tax | Post-tax | | 1,100 | 2.50 | 473.9 | 411.8 | 221.3 | 174.4 | 61.3 | 24.6 | 12.7% | 11.1% | | 1,220 | 2.90 | 939.1 | 838.7 | 513.0 | 440.1 | 260.5 | 205.2 | 19.8% | 17.8% | | 1,400 | 3.50 | 1,636.8 | 1,468.7 | 950.5 | 834.5 | 559.3 | 474.3 | 28.6% | 25.9% |
Note: Silver price fixed at USD 18/oz
Steve Sharpe, President & CEO
+44 (0)20 3667 2970
ssharpe@euromaxresources.co.uk
Patrick Forward
+44 (0)20 3667 2970
pforward@euromaxresources.co.uk |
