Brazilian Gold Corporation (TSXV: BGC) is pleased to announce
the positive results of a Preliminary Economic Assessment (PEA) on
its 100% owned São Jorge gold deposit located in the Tapajós region
of northern Brazil. The PEA was prepared by the Canadian office of
Coffey Mining Pty Ltd. (Coffey) with offices in Toronto,
Ontario.
HIGHLIGHTS OF SÃO JORGE PEA:
- A gold price of US$1,500 per ounce was
used for the economic assessment of São Jorge project, which price
equates to the three-year trailing average gold price as of the end
of January 2013.
- After-tax Internal Rate of Return (IRR)
of 46.4%
- After-tax Net Present Value (NPV5%) of
US$407.5 million
- Life of Mine (LOM) of 10 years.
- Net after-tax cash flow over LOM of
US$612.3 million
- LOM average cash cost of US$635/oz
including refining and royalty costs.
- LOM average annual free cash flow
(after tax and sustaining capital expenditures) of US$71.3
million.
- LOM average gold grade of 1.51 g/t gold
for total production of 980,300 oz of recovered gold.
- LOM average annual recovered gold of
98,030 oz with ranges between 92,300 oz (Year 2) and 130,400 oz
(Year 9).
- Base case capital expenditures of
US$125.5 million for the LOM using contract mining.
- Study based on mineral resource as
documented in Amended Independent NI43-101 Technical Report by
Coffey Mining on Dec. 7, 2012.
Commenting on the announcement, Brazilian Gold’s CEO, Ian
Stalker stated: “The publishing of the São Jorge PEA is a major
milestone for Brazilian Gold. The low capital costs for a project
of this size, year-round paved road access, grid power, nearby
community of Novo Progresso and established permitting process in
Brazil translates into a low risk project with robust economics
that can rapidly be advanced to production.
The PEA did not consider any additional resources from the
nearby Surubim project (Jau deposit) that could be river barged to
the process plant to increase the production rate or extend the
life of the mine. Near mine site exploration has identified
geophysical targets on strike and southeast of the deposit as well
as geochemical anomalies southwest of the deposit that require
drill testing and could potentially provide additional sources of
feed to the process plant and extend the LOM.
We are exploring a variety of funding options and are in active
discussion with a number of sources to secure financing to advance
the São Jorge project including a Bankable Feasibility Study and
Environmental Impact Statement as well as explore our other nearby
highly prospective projects.”
The PEA is based on the outcomes of an engineering study
completed by Coffey Mining according to preliminary economic
assessment study standards as defined by Canadian legislation in
NI43-101. The PEA includes the project concept, infrastructure,
geotechnical assessment, mining, mineral processing, environmental,
permitting, social aspects and project economics. The study is
based on a mineral resource estimate using a 0.3 g/t gold cut-off
and documented in an amended independent NI43-101 Technical Report
by Coffey with an effective date of Sept. 17, 2012 and publish date
of Dec. 7, 2012.
An open cast mine will be employed to extract mineralized oxide
and sulphide material over a planned 10 year production life. A
two-year development period has been estimated from time of project
financing (Year 0). Contract mining will commence halfway through
Year 1 with the mill being commissioned very shortly thereafter and
processing 1.25 Mt of mineralized oxide rock by the end of the
first year of operation.
The deposit is overlain by an oxide cap averaging 30 m in depth,
which will be mined and processed separately and in advance of
fresh rock sulphide material. The deferred capital requirements
with this schedule, and the lower mining and processing costs for
the mineralized oxide rocks will generate a larger margin during
the initial years, thus enabling payback of the invested capital in
2.8 years.
The total project life will be 11-years from the release of
project financing to mine closure based on the current resource
estimate. The mine has been designed to a depth of 250 m below
surface. Infrastructure requirements will be lower compared to
other projects in Amazon region given the project site is within 4
km of a paved highway (BR 163), which connects the project with the
town of Novo Progresso, located 70 km to the south. Electric power
is available from the Brazilian power grid with the upgrading of
the existing 70-km power line and installation of a sub-station at
site. Process water is available from a dammed stream adjacent to
proposed mill location. If additional water is required, it can be
drawn from a river with year round flow 9 km to the west.
The project has an IRR of 46.4% and a NPV5% of US$407.5 million
(Table 1) using a base case gold price of US$1,500/oz (3-year
trailing average at Jan. 31, 2013 is US$1,503.30). Using a gold
price of US$1,650/oz that is closer to today’s gold price, the
project has an IRR of 53.9% and a NPV5% of US$494.7 million.
Table 1: São Jorge PEA study result.
Category Values Oxides
mined 3.5 Mt Sulphides mined 18.2 Mt Total
mineralized rock mined 21.7 Mt Total mineralized rock and
waste mined 128.1 Mt Stripping ratio 4.9:1 Total gold
recovered 980,300 oz Average annual gold production*
98,031 oz/y Average cash cost US$635/oz Gold price
US$1,500 After tax IRR 46.4 % NPV5 US$407.5 M Capital
payback 2.8 years
*At nameplate capacity
The PEA is preliminary in nature as it includes inferred mineral
resources that are considered too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves and there is no certainty that
the PEA will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.
The PEA is based on mineral resource estimates containing an
indicated mineral resource of 14.42 Mt grading 1.54 g/t gold
(715,000 oz) and inferred mineral resource of 28.19 Mt grading 1.14
g/t gold (1,035,000 oz); both the resource estimate and PEA have
been prepared by Coffey Mining.
I.
MINERAL RESOURCES
The São Jorge gold deposit is a structurally controlled
stockwork and disseminated gold system hosted in Proterozoic-age
granitic rocks. The gold bearing mineralization has been
intersected by drill holes from surface (approx. +215 masl) to -150
masl and is open at depth. Coffey Mining estimated indicated and
inferred resources for the São Jorge deposit on the basis of
analytical results available up to Sept. 17, 2012; no additional
drilling or assaying has been completed since this time. The
summarized mineral resource statement in Table 2 has been prepared
and reported in accordance with NI43-101 standards and the
classifications adopted by CIM Council in December 2010. The
resource estimate has been classified as an indicated and inferred
mineral resource based on the confidence of the input data,
geological interpretation and grade estimation.
Table 2: São Jorge mineral resource
estimate using a 0.3 g/t gold cut-off.
Material Million Tonnes
Average Grade (g/t Au) Contained Gold(K oz)
Indicated Resource Oxide 1.78 1.42 81
Indicated Resource Sulfide 12.64 1.56
634
Total Indicated All 14.42
1.54 715
Inferred Resource* Oxide
1.97 1.1 70 Inferred Resource* Sulfide
26.23 1.15 965
Total Inferred
All 28.19 1.14
1,035
Mineral resources are not mineral reserves and do not have
demonstrated economic viability. Mining methods, metallurgical
recoveries, environmental permitting, legal, marketing, or other
relevant issues may materially affect the conversion of mineral
resources to mineral reserves.
*As is allowed under CIM rules, inferred mineral resources may
be used in a PEA. The São Jorge mine plan has been designed to
include as much of the indicated and inferred mineral resource as
economically possible.
II.
MINING, PROCESSING AND PRODUCTION
SCHEDULE
The São Jorge deposit is amenable to open pit mining of its gold
bearing mineralization. The processing plant of 2.5 Mtpa will
necessitate a nominal mining rate of 12.8 Mtpa according to the pit
design and its 4.9:1 stripping ratio and 10 year LOM. The LOM
production summary is shown in Table 3.
Table 3: São Jorge LOM production
summary.
Units
Values Oxide tonnes 3,484,609 Sulphide
tonnes 18,213,820 Mineralized rock mined
tonnes 21,698,429 Average gold grade g/t 1.51
Contained gold oz 1,054,784
Overburden Tonnes - Waste tonnes
106,362,559 Waste + OB tonnes 106,362,559
Stripping Ratio
4.9 Total Tonnes Mined
tonnes 128,060,988
Standard drill and blast bench mining will be employed with
excavator loading of dump trucks. Waste rock will be delivered to a
waste rock stockpile near the pit mouth and mineralized material
will be delivered directly to the crusher and the processing mill
with a run-of-mine (ROM) stockpile accepting surge material.
Contract mining costs for the operation are estimated to be
US$3.11/t mined and the mine is projected to have a 4.9:1 strip
ratio of waste tonnes to mineralized rock tonnes for a total mining
cost of US$18.37/t.
Coffey Mining has undertaken a process flow design and
scoping-level cost estimate based on metallurgical testwork
conducted in 2006 and 2012, and reported in previous technical
reports by SGS Lakefield Limited and Testwork Desenvolvimento de
Processo Ltda. An overall recovery of 93.7% for the sulphide
mineralized rock based on limited testwork completed to date, which
makes up 86.7% of the LOM feed, indicates the mineralized material
responds well to conventional gold extraction processes. Oxide
mineralized material, which will be processes in the first two
years of production and comprising 13.3% of the LOM feed, had a
recovery of 88% based on limited testwork completed to date.
Additional testwork using different grind sizes, retention times
and reagent dosages on the oxide mineralized material is currently
in progress to optimize recoveries.
The test work that has been completed, in conjunction with
costing estimates, has resulted in the proposed standard gold plant
process flow sheet for precious metal recovery as detailed in the
study. The proposed flow sheet incorporates crushing, grinding,
thickening and Carbon in Leach (CIL) processing to produce gold
doré.
III.
INFRASTRUCTURE
Road Access
The São Jorge project is accessed by a paved highway (BR-163)
that traverses the property approximately 4 km east of the deposit.
The highway connects the city of Cuiaba in Mato Grosso state with
the port city of Santarem in Pará state that is located on the
Amazon River. The town of Novo Progresso is located 70 km to the
south along the highway and will form the operation base from where
workers will be housed and bussed to the site daily avoiding the
expense of on-site living quarters. Novo Progresso is of sufficient
size (approx. 60,000 people) with associated services to supply the
project with fuel, labour and many of the services required for a
project of this size. Regional commercial aircraft connect Novo
Progresso with the cities of Manaus and Belem, which have
International Airports that connect to other major cities in North
and South America, and Europe.
Power Supply
Power to the São Jorge project is available through the regional
electrical utility company CELPA (Centrais Elétricas do Pará).
Preliminary discussions with CELPA indicate they could supply power
to the project at a contract cost of $0.0907 per kWh based on a
demand of 9,000 kW for a milling operation of 2.5 Mtpa as
contemplated in the PEA.
Power line connects the project and Novo Progresso, however it
will require an upgrade to 138 kV capacity along with a local
substation at the plant site at an estimated cost of $7.59 million.
Capital costs associated with upgrading of the power line and
installation of the substation are recoverable from the cost of
power over the first three years of production resulting in a power
cost of $0.058 per kWh.
Potential savings may be achieved by purchasing power on the
spot market as a result of several new hydro electrical power
plants that are planned to come on stream and an abundance of power
in Pará state.
Water Supply
The project has an abundance of water with adequate water
storage for all mining and processing needs from a dammed stream
adjacent to the proposed mine and processing facility. The Jamanxim
River is located 9 km due west of the deposit if additional water
is necessary.
Camp
The São Jorge camp currently has accommodation for exploration
personnel (20), office with satellite internet and telephone lines,
core storage facility, fuel storage tanks (10,000 litres) and a
number of buildings suitable for warehousing of mining supplies.
New office, warehouse and equipment maintenance buildings have been
budgeted at US$2.1 million.
IV.
OPERATING COSTS
The operating costs for the mine and plant have
been derived from known mining costs and factored mill processing
costs based on the preliminary plant design (Table 4). The LOM
average mining and processing costs are US$3.11/t mined and
US$6.92/t processed, respectively.
Table 4: São Jorge operating cost
estimates.
Category $/t Mining -
oxide 2.00 Mining - sulphide 3.25 Processing oxide
4.94 Processing sulphide 7.37 G&A 0.89
V.
CAPITAL COSTS
The PEA has assumed contract mining costs based on a bid
received from a local Brazilian contractor. The capital
requirements for the São Jorge mine, operating at a steady state of
2.5 Mtpa throughput rate, have been tallied by cost centre: process
plant equipment, factored construction commodities and
infrastructure (Table 5). In addition, contingency (25 %), indirect
costs, and owner costs have been included to determine the total
funding requirements of $125.5 million.
Table 5: São Jorge capital cost
estimates.
Category $(000s) Process
plant 25,032 Factored construction commodities 28,286
Infrastructure 23,513 Contingency (25%) 19,208
Indirect costs 24,049 Owners costs 5,395
Total
125,482
Owner mining would increase the funding requirements by US$57
million, decrease the operating cost ($536/oz) and return similar
economics (IRR of 45.2% and NPV5% of US$430.4 million) as the base
case scenario at US$1,500/oz gold.
VI.
TAXATION
Projects located within the Amazon region are eligible for an
income tax incentive by SUDAM (Amazon Development Superintendence)
that provides for a 75% reduction in the regular corporate income
tax (25%) for a 10-year period. São Jorge being located within this
region would qualify for this incentive and it has been used in
determining the project economics.
The social welfare tax (CSLL) of 9% has been assumed to apply
for the duration of the project life.
Other tax incentives are available and include RECAP, which is a
special tax regime for the acquisition of goods by export companies
and applies to the exemption of PIS and COFINS (Brazilian social
contribution taxes) on purchases of imported machinery and
equipment. However at this time, no application has been made and
project economics have not considered the potential benefits that
the incentive may bring to the project.
VII.
FINANCIAL ANALYSIS
Cost estimates for the construction and operation of the project
have been made in the fourth quarter of 2012 in US dollars. The
estimates do not include allowances for escalations or currency
exchange fluctuations. It has been assumed that all equipment will
be purchased new from competitive bids. Cost estimates have been
derived from:
- Mechanical equipment lists
- Process design criteria
- Process flow sheet
- Current labour and material costs
- Preliminary general arrangement
drawings
- First principles
The financial model for the São Jorge gold project that has been
generated by Coffey is based on the mine production and processing
schedule, associated gold grades, metallurgical recoveries, and
capital and operating costs summarized in Tables 1 to 5. The
economic analysis assumes the gold will be delivered in the form of
gold doré and exported.
The base case economic analysis assumes a gold price of
$1,500/oz (3-year trailing average at Jan. 31, 2013 is
US$1,503.30). The gross gold revenue is US$1.5 billion over the
10-year LOM or an average of US$147 million per year. The average
annual free cash flow after accounting for taxes and sustaining
capital expenditures is estimated to be approx. US$71.3
million.
Figure 1 summarizes the sensitivity of the undiscounted NPV of
the project base case (contract mining and gold price of
US$1,500/oz) to variations in gold price, operating cost and
capital expenditures. The sensitivity analysis indicates the
project is most sensitive to gold price followed by operating
cost.
To view Figure 1, click onto the following
link:http://www.usetdas.com/maps/braziliangold/BrazilianGoldFigure1.pdf
VIII.
SÃO JORGE NI43-101 PRELIMINARY ECONOMIC
ASSESSMENT TECHNICAL REPORT
Coffey Mining Pty Ltd (Coffey Mining) under
its Canadian office, completed the study of the PEA and prepared
the updated NI43-101 Technical Report for the São Jorge gold
project, in Pará State, Brazil. The NI43-101 Technical Report on
the São Jorge Project will be filed on SEDAR and Brazilian Gold’s
website within 45 days of this news release.
All principal technical personnel participating in the
preparation and review of this Technical Report have extensive
relevant experience. Hebert Oliveira B.Sc. (Geo.), MAusIMM, MAIG
(Mineral resource estimation), Porfirio Cabaleiro B.Sc. (Eng.),
MAIG (Mineral resource estimation), Reinis Sipols B.Sc. (Mine Eng.)
P.Eng. (NY, NJ, PA), MMSA (QP) (Mining methods), Dan Peldiak
Met.Eng., P.Eng. (Ontario) (Recovery methods) and Curtis Clarke
B.Sc. (Mine Eng.), MMSA (QP), MSME, AIME (overall project manager),
are all Qualified Persons in their respective fields as defined by
NI43-101. Porfirio Cabaleiro completed a site visit to the São
Jorge gold project on July 13 and 14, 2012 and Curtis Clarke and
Porfirio Cabaleiro previously visited the project on March 1, 2011.
Garnet Dawson, M.Sc., P.Geo. (British Columbia), Vice President,
Exploration for the Company and a Qualified Person, as defined by
National Instrument 43-101, has reviewed and approved the technical
disclosure contained in this News Release.
About Brazilian Gold Corporation
Brazilian Gold has a resource inventory of 715,000 ounces of
gold grading 1.54 g/t gold in the indicated category and 1,921,000
ounces of gold grading 1.00 g/t gold in the inferred category at a
0.3 g/t cut-off that is hosted in three deposits (Table 5).
Table 6: Brazilian Gold 2013 global
resource at a 0.3 g/t gold cut-off.
Project Deposit
Classification Cut-off Grade (g/t)
Tonnage Grade (g/t)
Ounces São Jorge São Jorge
Indicated 0.3 14,420,000 1.54 715,000
Inferred 0.3 28,190,000
1.14 1,035,000
Surubim Jau Inferred 0.3
19,440,000 0.81 503,000
Boa Vista VG1 Inferred 0.3
12,130,000 0.98 383,000
All deposits Indicated
14,420,000 1.54
715,000 All deposits
Inferred 59,760,000
1.00 1,921,000
Brazilian Gold is a Canadian-based public company with a focus
on the acquisition, exploration and development of mineral
properties in northern Brazil. The Company has title to one of the
largest land packages (3,753 km2) in the Tapajós and adjacent Alta
Floresta gold provinces. The land package contains green fields to
more advance stage projects including the Company’s flagship São
Jorge project. Rapid improvements to regional infrastructure
continue to provide underlying support to Brazilian Gold’s
activities in northern Brazil.
For further information:
Brazilian Gold Corporation Ian (John) Stalker, CEO and
Director Joanne Yan, President and Director Tel: +1 604 602-8188
Some statements in this news release contain forward-looking
information, including without limitation statements as to planned
expenditures and exploration programs. These statements address
future events and conditions and, as such, involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the statements. Such factors include
without limitation the completion of planned expenditures, the
ability to complete exploration programs on schedule and the
success of exploration programs.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or the
accuracy of this news release.
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