Gabriel finishes second Rosia Montana feasibility study
Gabriel Resources Ltd (2) GBU
Shares issued 78,018,554 Nov 1 close $3.95
Fri 2 Nov 2001 News Release
Mr. Clifford Davis reports
Gabriel has received the second definitive feasibility study (the second
study) being coordinated and compiled by GRD Minproc Limited of Perth,
Western Australia, on Gabriel's 80-per-cent-owned Rosia Montana project in
Romania. A summary of the highlights of the second study, on a 100-per-cent
project basis, is as follows:
Plant
throughput 8 Mtpa
Reserves 10.1 Moz gold
50.4 Moz silver
Mine life 25 years
Metallurgical
recovery (1) 82.1% Au & 54.2% Ag
Average annual
gold production
(1) 329,000 oz
Initial capital
cost (millions) $192(U.S.)
Working capital
(millions) $2.0 (U.S.)
Sustaining
capital
(millions)(1) $154 (U.S.)
Cash operating
costs(1)(2) $118 (U.S.)
Total cash
costs (1)(2) $124 (U.S.)
Total
production
costs (1)(2) $167 (U.S.)
Internal rate
of return (3)
(4) 20.1%
Net present
value (4)
(millions)
(0% discount) $792 (U.S.)
Net present
value (4)
(millions)
(5% discount) $332 (U.S.)
Net present
value (4)
(millions)
(10% discount) $138 (U.S.)
Pay back
period 4.3 years
(1) Over the life of the mine;
(2) Per ounce gold/net of silver credits;
(3) 100-per-cent equity basis; and
(4) After tax, $275 (U.S.) per ounce of gold.
A description of the various components of the second study is set forth
below, and additional details are set forth in the attached schedule.
Overview and scope of the second study
In addition to the first definitive feasibility study (the first study) on
Rosia Montana, the results of which were published in Stockwatch Aug. 14,
2001, Gabriel also engaged Minproc to coordinate the preparation of the
second study, using the same consultants as were used in the first study.
The second study addresses all aspects relevant to the demonstration of
both the technical and economic viability of the development of a large
scale, open pit mine producing eight million tonnes per year and a
processing plant at Rosia Montana. The first study contemplated an open pit
mine producing 20 million tonnes per year and a processing plant.
The first and second studies present Gabriel with two different development
scenarios for the Rosia Montana project and provide Gabriel with the basis
to commence an analysis to determine the optimum scale of, and approach to,
the ultimate development of Rosia Montana.
Resources
Resource Services Group Pty. Ltd. of Perth, Western Australia, calculated
the measured, indicated and inferred resources for the second study, using
a 0.6 gram per tonne gold cutoff, a 10 by 10 by 10 metre block size and
multiple indicator kriging, as follows:
Grade (g/t)
Category
of Resource Tonnes Gold Silver
Measured 134,580,000 1.6 8
Indicated 161,870,000 1.2 5
Total M&I: 296,450,000 1.4 6
Inferred 47,620,000 0.9 4
The resources were calculated by RSG in accordance with National Instrument
43-101. Julian Barnes, BSc (honours), PhD, of RSG, is the qualified person
(as defined in National Instrument 43-101) responsible for the resource
estimate included in the second study.
Reserves
RSG calculated the proven and probable reserves for the second study, using
a block value methodology approximating a 0.6 g/t Au cutoff grade, as
follows:
Grade (g/t)
Category
of resource Tonnes Gold Silver
Measured 108,000,000 1.8 9.4
Indicated 91,700,000 1.3 6.1
Total M&I: 199,700,000 1.6 7.8
The reserves were calculated by RSG in accordance with National Instrument
43-101. Harry Warries of RSG, and David Quinlivan of RSG, are the qualified
persons (as defined in National Instrument 43-101) responsible for the
reserve estimate included in the second study.
Mining
Mining method
The second study contemplates that the Rosia Montana project will be
operated as a large scale, bulk tonnage, conventional open pit mine using
an owner-operated fleet of 140 tonne hydraulic excavators and 90-tonne haul
trucks for primary production. As reserves are distributed among four
principal areas, being Cetate, Cirnic, Orlea and Jig, located in close
proximity to one another and straddling the Rosia Montana valley, mining
will occur in four separate open pit mine sites. The mine has been designed
to operate 24 hours a day, seven days a week.
Throughput
Mining is based on an average mining rate of eight million tonnes per year
over a mine life of 25 years. Throughput will vary from a rate of
approximately 6.4 million tonnes per year for hard ore, 7.5 million tonnes
per year for medium ore, and 9.6 million tonnes per year for soft ore. The
average breakdown in ore hardness is approximately 10-per-cent hard,
43-per-cent medium and 47-per-cent soft ore. Accordingly, the process plant
has been specifically designed to accommodate throughputs varying from 800
tonnes per hour (tph) for hard ore, to 1200 tph for soft ore.
Mine scheduling
Mining is scheduled to commence at Cetate, as it is situated closest to the
process plant and requires the least amount of development. Cirnic will be
mined next. Cetate and Cirnic together comprise the majority of the proven
and probable reserves. Orlea will follow, with Jig being the final pit to
be developed. Staged pits have been designed for Cirnic, Cetate and Orlea
to allow proper sequencing of development and mining from all pits, while a
single stage was designed for Jig. All pits will use bench heights of 10
metres, will have average pit slope angles of between 40 and 50 degrees and
extend to a maximum depth of between 220 metres and 260 metres.
Waste
A total of approximately 196.4 million tonnes of waste material will be
removed from the four open pits during the mine life of the project, giving
an overall life of mine waste/ore stripping ratio of 0.98 to 1. The
operational mine plan involves the use of approximately 33 million tonnes
of mine waste rock in the construction of the tailings management facility.
All additional waste will be deposited on one of the two principal waste
dumps, being the Cirnic waste dump, located south of Cirnic, and the Cetate
waste dump, located to the west of Cetate.
Metal production
The second study contemplates that the Rosia Montana project will produce
an average of 329,000 ounces of gold per year over the life of the mine,
ranging from 476,000 ounces of gold per year early in the life of the mine
to 210,000 ounces of gold per year later in the mine life. In addition, an
average of 1.1 million ounces of silver will be produced per year as a
byproduct over the life of the mine, ranging from 2.3 million ounces to 0.3
million ounces.
Metallurgical testwork and process design
The metallurgical testwork program for the first study was used for the
second study and such testwork results indicate overall gold recoveries of
82.1 per cent and silver recoveries of 54.2 per cent.
Process plant
The optimal process facilities are the same as for the first study and
include conventional coarse crushing, SAG and ball mill grinding with
recycle crushing, gravity concentration and carbon-in-leach (CIL) recovery.
Run-of-mine material will be transferred from a stockpile directly into the
gyratory crusher, and then into the grinding and classification circuit
consisting of a SAG mill, ball mill and a pebble crusher. Primary and
secondary gravity recovery of free gold by in line pressure jigs will be
followed by a full CIL circuit consisting of seven 3,500-cubic-metre tanks.
The elution circuit will generate eluate for treatment by electrowinning,
with precious metals to be recovered in dore bars. Tailings slurry will be
washed for cyanide recovery prior to discharge to the tailings management
facility. Provision has been made for cyanide destruction prior to
discharge of tailings to the tailings management facility.
The process plant has been designed to operate seven days per week, 24
hours per day.
The process plant will be located as described in the first study. The
Rosia Montana project is well serviced from an infrastructure perspective
as it is situated in a region with existing large mines. The project is
accessible by sealed roads, has adequate power and water supply nearby and
will benefit from a new fibre optic link to the village of Rosia Montana.
Tailings management facility
Tailings from the process plant will be pumped to a tailings management
facility with a capacity of 250 million tonnes situated in the Corna
valley, located immediately to the southwest of Cirnic. The tailings
facility will be developed and expanded in 19 stages over the operating
life of the mine and will be constructed mostly from waste rock from mine
development. Upon completion, the maximum height of the tailings embankment
will be approximately 180 metres above the floor of the Corna valley.
As in the first study, the water balance analysis of the tailings facility
indicates that it will be in water deficit under most climatic conditions.
The tailings facility will therefore not need to discharge water to the
environment and at all times there will be adequate storage in the tailings
facility to contain the runoff from a probable maximum precipitation event.
Provision has been made for a lime treatment facility for any runoff water
from the waste dumps and open pits. In the event of an extreme storm event,
provision will be made to treat and discharge surplus water. The tailings
management facility will be reclaimed as a covered dry facility.
Environmental impact and management
An environmental impact assessment (EIA) was prepared as part of the second
study. The EIA addresses the construction, operation and closure of the
project and covers all identified significant environmental issues.
Community development and resettlement
For the second study, Planning Alliance, of Toronto, prepared a
resettlement action plan (the RAP) for the relocation and resettlement of
the communities within the Rosia Montana borough that will be affected by
the development of a large-scale mining operation at Rosia Montana. The RAP
conforms to existing World Bank directives on involuntary resettlement, as
well as Romanian legal requirements.
Capital costs
Initial capital costs will be approximately $192.4-million (U.S.),
comprising approximately $9.4-million (U.S.) in preproduction mining,
$24-million (U.S.) in mining equipment and mine development, $101.2-million
(U.S.) in process plant and infrastructure costs, $13.1-million (U.S.) in
tailings management facility costs, $24-million (U.S.) in village
resettlement costs and $20.8-million (U.S.) in owners' costs. Working
capital of $2-million (U.S.) is required during year one of operations.
Total sustaining capital over the life of mine will be approximately
$153.5-million (U.S.)
Operating costs
Cash operating costs average $118 (U.S.) per ounce of gold recovered, net
of silver credits, over the life of the mine, while total cash costs
average $124 (U.S.) per ounce of gold recovered. Total production costs
average $167 (U.S.) per ounce of gold recovered over the life of the mine.
Per tonne onsite operating costs, including costs for mining, processing,
tailings and general and administrative costs, average $5.42 (U.S.) over
the life of the mine. All per ounce calculations of costs have been made in
accordance with the guidelines established by the Gold Institute.
Financial analysis
Based on $275 (U.S.) per ounce gold and $5 (U.S.)per ounce silver, the
Rosia Montana project produces an after-tax internal rate of return of 20.1
per cent on a 100-per-cent equity basis, and an after-tax net present value
of $332-million (U.S.) at a discount rate of 5 per cent.
The project economics benefit from the disadvantaged zone status enjoyed by
the region within which the Rosia Montana project is located, as well as
the provisions of the Romanian mining law. This results in the project
being exempt from income taxes until October, 2009, and being exempt from
customs duties for the life of the project. Gabriel will pay a 2-per-cent
gross production royalty to the Romanian government on all production from
the mine.
The second study concludes that the project economics are more sensitive to
changes in metal prices and less sensitive to similar percentage changes in
capital and operating costs.
Future development of Rosia Montana
The first study and the second study present Gabriel with two different
development scenarios for the Rosia Montana project and provide Gabriel
with the basis to undertake an analysis to determine the optimum scale of,
and approach to, the ultimate development of Rosia Montana.
An integral part of this analysis will include further review of optimum
throughput levels, potential alternate tailings management facility sites,
contract mining scenarios, project debt capacity, as well as a variety of
other studies designed to optimize Gabriel's ultimate approach to
development. Gabriel expects this analysis to be complete by year-end.
This analysis will be followed by a production decision, the commencement
of the process to relocate and resettle the communities within the Rosia
Montana borough that will be affected by the ultimate mine development,
land acquisition associated with such relocation, as well as basic
engineering and project debt financing. |
