Newstrike Capital (NES-V) Sept 15, '14 reports the results of an independent technical report developed in accordance with CIM guidelines for a National Instrument 43-101 Preliminary Economic Assessment ("PEA") on its Ana Paula Project ("Ana Paula" or the "Project") located in the prolific Guerrero Gold Belt, Mexico.
This study indicates that Ana Paula is a robust, high margin, rapid payback, 8.2-year open pit mining project that benefits from high gold grades with a low strip ratio. The Ana Paula project has excellent access to infrastructure and is located in an established mining jurisdiction.
The PEA study was prepared by JDS Energy & Mining Inc., under the direction of Thomas H. Bagan, Vice President, Project Development (Newstrike).
The reader is advised that the preliminary economic assessment summarized in this press release is only intended to provide an initial, high-level review of the project. The PEA mine plan and economic model include the use of inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized.
All dollar amounts in this release are stated in US currency.
PEA HIGHLIGHTS
Base Case at $1,300 Au & $20 Ag per ounce
Pre-tax NPV@5% of $405.3 million, IRR of 47.5% with a 2.0 year payback
After-tax NPV@5% of $232.1million, IRR of 32.8% with a 2.4 year payback
Initial capital costs of $163.9 million (Total life-of mine ("LOM") - $219.7 includes sustaining/closure costs of $55.8 million and contingency costs of $36.2 million)
Open pit mine with 6,000 tonne per day ("tpd") gravity/flotation/CIL process plant
Cash costs of $527/ oz gold, $486/oz gold Net of By-Product credits
All-in sustaining costs ("AISC") of $567/oz gold, $526/oz gold Net of By-Product credits
Average annual production of 116,000 gold ounces and 239,000 silver ounces over a 8.2 year mine life
LOM average head grades of 2.24 g/t gold and 6.89 g/t silver
LOM gold and silver recoveries of 75% and 50%, respectively
LOM strip ratio of 2.60 to 1 of waste to mineralized material
"This PEA supports our view Ana Paula is one of the best development-stage gold projects in Mexico. It is a straightforward open pit mine, utilizing conventional milling and flotation concentration with robust economics. The combination of high gold grades, low capital requirements with low operating costs makes this a compelling development project," commented Richard Whittall, President and CEO of Newstrike. "With a positive PEA in hand, our next step is to evaluate the significant underground potential at Ana Paula and to support high priority exploration targets in this prolific gold belt."
In management's view, the economics concluded by the PEA provide a strong incentive for continued geotechnical, metallurgical and engineering studies. Newstrike believes there are excellent opportunities to refine various project elements and improve the economics through gold recovery optimization.
PEA SUMMARY OF RESULTS
| | | | Mine Life | Years | 8.2 | | Total Resource | M tonnes | 17.8 | | Total Waste | M tonnes | 33.6 | | Total Capitalized Waste | M tonnes | 12.5 | | Total Mined | M tonnes | 63.9 | | | | | Strip Ratio | w:mr | 2.60 | | Mining Rate | tpd | 23,385 | | Plant Throughput | tpd | 6,000 | | | | | Average Head Grades | | | | Au | g/t | 2.24 | | Ag | g/t | 6.89 | | Payable Metal | | | | Au | LOM k oz | 957 | | k oz/yr | 116 | | Ag | LOM k oz | 1,961 | | k oz/yr | 239 | | | |
SUMMARY OF ECONOMICS AT BASE CASE US$1,300/Oz GOLD
| | | | LOM Pre-Tax Cash Flow | US $M | $742.6 | | Avg Pre-Tax Cash Flow per Year | US $M | $90.4 | | Taxes | US $M | $223.6 | | LOM After-Tax Cash Flow | US $M | $519.0 | | Avg After-Tax Cash Flow per Year | US $M | $63.2 | | | | | Discount Rate | | 5% | | Pre-Tax NPV (US$M) | | $405.3 | | Pre-Tax IRR | | 47.5% | | Pre-Tax Payback (Yrs) | | 2.0 | | After-Tax NPV (US$M) | | 232.1 | | After-Tax IRR | | 32.8% | | After-Tax Payback (Yrs) | | 2.4 | | | | | Au Cash Cost (US $/oz) | | $527.26 | | Au Cash Cost Net of By-Products (US $/oz) | | $486.29 | | Au Cash Cost incl. Sustaining Capital (US $/oz) | $566.93 | | Au Cash Cost Net of By-Products incl. Sustaining Capital (US $/oz) | $525.97 | | |
The PEA mine plan and economic model include the use of inferred resources which are considered to be too speculative to be used in an economic analysis except as permitted by NI 43-101 for use in PEA's. There is no guarantee that inferred resources can be converted to indicated or measured resources and, as such, there is no guarantee that the project economics described herein will be achieved.
CAPITAL AND OPERATING COSTS SUMMARY
| | | | | Capital Costs | Pre-Production
($M) | Sustaining/Closure
($M) | LOM
($M) | | Capitalized Stripping | 16.7 | 13.4 | 30.2 | | Contractor Mob/Demob | 0.4 | 0.4 | 0.8 | | Process Plant | 45.7 | 2.8 | 48.5 | | General Site & Utilities | 5.1 | 0 | 5.1 | | Laboratory | 1.5 | 0 | 1.5 | | Construction Camp | 0.6 | 0 | 0.6 | | Camp Site (Operations) | 1.5 | 0.3 | 1.8 | | Administration Facilities | 1.1 | 0.2 | 1.3 | | Tailings Facility | 13 | 14.8 | 27.8 | | Electrical Supply & Distribution | 4.6 | 0.2 | 4.8 | | Water Supply & Distribution | 1.8 | 0 | 1.8 | | Royalty Purchase | 2.8 | 0 | 2.8 | | Reclamation/Closure | 0 | 14.4 | 14.4 | | Indirects | 22.4 | 0 | 22.4 | | EPCM | 15.4 | 0 | 15.4 | | Owners Costs | 4.4 | 0 | 4.4 | | Subtotal | 137.1 | 46.5 | 183.6 | | Contingency (20%) | 26.9 | 9.3 | 36.2 | | Total Capital Costs | 163.9 | 55.8 | 219.7 |
| | | | | | | | | Operating Costs | | | LOM Total | | Resource & Waste Mined for OPEX | tonnes | 51.4M | | Pre-Stripping and Capitalized Waste | tonnes | 12.5M | | Resource Processed | | tonnes | 17.8M | | Mining‡ | US$/t processed | $6.58 | $116.7M | | Resource Rehandle* | US$/t processed | $0.12 | $2.1M | | Processing | US$/t processed | $17.75 | $315.0M | | G&A | US$/t processed | $2.49 | $44.2M | | Total Operating Costs | US$/t processed | $26.93 | $478.1M | | | | |
| ‡Mining Cost is based on $2.30/t mined | | *Rehandle Cost is based on $0.50/t rehandled | |
SENSITIVITIES
| | | | | | | | Gold Price US$/oz | $1,000 | $1,100 | $1,200 | $1,300 | $1,400 | $1,500 | | Pre-Tax NPV5%US$ | 186.7 | 259.6 | 332.4 | 405.3 | 478.2 | 551.1 | | After-Tax NPV5%US$ | 91.5 | 138.4 | 185.2 | 232.1 | 278.9 | 325.8 | | Pre-Tax IRR | 27.8% | 34.8% | 41.4% | 47.5% | 53.3% | 58.8% | | After-Tax IRR | 17.6% | 23.1% | 28.1% | 32.8% | 37.2% | 41.4% | | Pre-Tax Payback Yrs | 2.6 | 2.4 | 2.1 | 2.0 | 1.8 | 1.6 | | After-Tax Payback Yrs | 3.3 | 2.9 | 2.6 | 2.4 | 2.2 | 2.1 | | | | | | | |
As shown above, the Project has the potential to provide investors with commodity resilience as well as significant leverage to movements in the gold price.
PROJECT DESCRIPTION
The Ana Paula Project is located in the Guerrero Gold Belt in the State of Guerrero, Mexico, roughly half way between the cities of Mexico City and Acapulco. Mexico is a favourable jurisdiction for mining investment with clearly established mining law and regulatory due process as demonstrated by the existence of operating gold mines such as Goldcorp's Los Filos, located in close proximity to Ana Paula. Furthermore, Torex Gold's El Limon/Guajes Mine is currently under construction in close proximity to the Project. Ana Paula is close to all necessary infrastructure including water, road, power, and people.
Mining is via conventional open pit mining methods. Mining will be contracted so no capital is included for mining equipment, instead contractor mining rates used as the basis for mining costs.
Open pit mining costs were calculated from first principles based on equipment required and include pit and dump operations, road maintenance, mine supervision and technical services cost.
PREPARATION OF PEA
The PEA was independently prepared by JDS Energy & Mining Inc. ("JDS") of Tucson, Arizona. A technical report following the guidelines of the Canadian Securities Administrators' National Instrument 43-101 will be filed on SEDAR and on the Newstrike Capital's Inc. website within 45 days.
The PEA is based on a mineral resource estimate prepared by Independent Mining Consultants, Inc., Tucson Arizona, USA. This mineral resource estimate has been developed under the direction of Mr. H. E. Welhener. The resource is based on 223 diamond core drillholes aggregating 108,832 metres and containing 77,183 assay intervals, of which effectively all are assayed for gold and silver. The mineral resource estimate has an effective date of August 8th, 2014.
The tonnage and grades of the Ana Paula mineral resource* at a 0.46 g/t AuEq cutoff are shown in the table below:
| Category | | | | | Contained Ounces | | k tonnes | AuEq,
g/t | Au,
g/t | Ag,
g/t | Gold | Silver | | Measured | 27,767 | 1.661 | 1.608 | 4.90 | 1,176,748 | 3,587,101 | | Indicated | 18,243 | 1.229 | 1.163 | 5.95 | 682,243 | 3,488,565 | | Sum M&I | 41,010 | 1.469 | 1.410 | 5.37 | 1,858,991 | 7,075,666 | | | | | | | | | Inferred | 1,904 | 1.233 | 1.113 | 10.85 | 68,145 | 664,484 |
| | *The resources are classified according to their proximity to sample locations and are reported, as required by NI 43-101, according to the CIM Definition Standards for Mineral Resources and Mineral Reserves. | | Notes and assumptions: | | 1. Mineral Resources are not Mineral Reserves until they have demonstrated economic viability | | 2. Mineral Resources are reported as undiluted | | 3. Mineral Resources were developed in accordance with CIM (2010) guidelines | | 4. Mineral Resources are reported using a long-term gold price of $1,450/oz and silver price of $23/oz | | 5. Mining costs used are estimated at $1.85/ton plus $0.02/bench below 900m elevation | | 6. Processing costs +general and administrative expenses are estimated at $17.25 per tonne | | 7. Gold recoveries are estimated at 80% | | 8. Silver recoveries are estimated at 55%. A silver divisor of 91.7 was used to calculate equivalent gold. (Silver is assumed to be recovered along with gold during processing.) | | 10. Pit slope angles are 55 degrees east-facing, 45 degrees west-facing | | 11. Resource QP is H. E. Welhener of IMC | | 12. M&I = measured and indicated, Mt = million tonnes, g/t = grams per tonne, Moz = million ounces, Au = gold, Ag = silver, AuEq = gold equivalent | | 13. There can be no assurance that all or any part of this resource will be converted into a mineral reserve | |
PROJECT DEVELOPMENT PLAN
The proposed project concept is to develop a green-fields gold-silver deposit with open pit mining and gravity/flotation/CIL process plant with a production rate assumed of 6,000 tonnes per day.
The PEA forecasts an 8.2 year mine life and a LOM strip ratio (the ratio of waste rock to economic mineralized rock) of 2.60 to 1. A total of 17.8 million tonnes of mineralized resource could be mined and processed with 33.6 million tons of waste and 12.5 million tonnes of capitalized waste. Some of the waste rock would be stockpiled and an undetermined portion may be reclassified as a resource at a later date should metallurgical testwork support economic viability. Throughout the life-of-mine, an estimated 957,000 ounces of payable gold and 2.0 million ounces of payable silver would be produced at an average head grade of 2.24 g/t gold and 6.89g/t silver.
METALLURGY AND PROCESSING
A metallurgical testwork program for the PEA was carried out on samples of composited drill core selected to represent the first four years of feed to the process plant. The composites were made from six rock types and subjected to direct cyanidation testing, flotation and gravity concentration followed by cyanidation, coarse particle leaching, and mineralogical deportment. The composite responded positively to both direct cyanidation and flotation concentration followed by cyanidation. Testwork was conducted by ALS Metallurgy in Kamloops BC and reported January 31st, 2014.
The flowsheet selected for Ana Paula consists of a tertiary crushing system, followed by ball mill grinding and gravity recovery, flotation, disposal of flotation tails, leaching of a combined gravity and flotation concentrate, and recovery of precious metals by the carbon-in-leach method. This flowsheet is commonly used throughout the world.
ENVIRONMENT, PERMITTING AND CORPORATE SOCIAL RESPONSIBILITY
The project area is not within a known environmental protection area. Formal environmental baseline studies have not been initiated but will be required to obtain the environmental permits for future mining operations. Communication with the local community, private land owners and the "Ejido" (cooperative land tenure system) was initiated as part of the exploration program.
PEA CONTRIBUTORS
Qualified Persons and QA/QC
The technical information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 ("NI 43-101) and reviewed by Mr. Thomas H. Bagan, a Qualified Person. The field programs and selection of the metallurgical samples from Ana Paula were carried out under the supervision of Dr. Craig Gibson, PhD, CPG, and a Qualified Person under NI 43-101.
The PEA was conducted under the overall direction of Mr. Michel Creek, of JDS Energy and Mining, Inc. of Tucson Arizona. Mr Creek is a JDS Project Manager and an independent "Qualified Person" under NI 43-101 who has verified the technical and scientific information and prepared the economic analysis included in this news release. There are no known legal, political, environmental, or other risks that could materially affect the potential development of the Project.
Under Mr. Creek's review, the following Qualified Persons contributed to their respective sections:
Kelly McLeod P.Eng, JDS - Mineral Processing and Recovery Methods
Tony Loschiavo P. Eng, Associate, JDS - Mine Design
Dawn Garcia CPG, JDS - Environmental Studies, Permitting, & Social
Robert Matter P.E., JDS - Infrastructure and Tailings |
