TORONTO,
July 29, 2013 /CNW/ - Moss Lake Gold
Mines Ltd. (TSX-V: MOK) is pleased to announce receipt of results
from an independent 43-101 Preliminary Economic Analysis (PEA) on
its 100%-owned Moss Lake property, located 100 kilometres due west
of Thunder Bay, Ontario. The
information presented below summarizes results of a conceptual
mining and milling scenario based on mineral resource estimates
presented in a recent 43-101 Technical Report dated April 4, 2013.
It is very important to highlight that the
PEA is preliminary in nature; it includes Inferred Mineral
Resources that are too speculative geologically to have economic
conditions applied to them that would enable them to be
characterized as mineral reserves, and there is no certainty that
the PEA will be realized.
The purpose of the study is to provide a
reasonably informed investor with the technical disclosure
required, in prescribed and regulated format, to make
decisions.
PRESIDENT'S MESSAGE
George Mannard,
President, commented "This analysis provides a reasonable basis to
assess the potential economic viability of the Moss Lake gold
deposit. The base case selected was determined on the basis
of optimizing discounted cash flow scenarios in terms of NPV and
IRR. These exercises, regardless of their stage from PEA
through final feasibility, require the projection of commodity
pricing and financial conditions well into the future - the future
has not been written yet. We believe strongly that the future
holds higher gold prices. This is why we are in the
business.
This scenario provides a 15% IRR at a gold price
of $1,629 Cdn per ounce. The
Moss deposit has considerable potential to grow with further
drilling. It is a vast resource in a politically-stable
jurisdiction, close to town and road accessible. The
Wawa-Abitibi Terrain is arguably the second largest historic gold
producing metallotect in the world. We believe establishment
of mining infrastructure in this region, particularly a mill, could
provide the catalyst for camp-scale development of the region's
many known resources and occurrences. All could benefit from
regional development within this vision."
HIGHLIGHTS
Mining/Processing
- Open pit mining and CIL Processing at 40,000 tonnes per
day
- Life-of-mine waste:ore stripping ratio of 2.5:1
- Four-year permitting/pre-production period
- Ten-year minelife averaging 244,000 ounces per year
-
- Years 1 - 5 average 296,000 ounces per year
- Years 6 - 10 average 192,000 ounces per year
- Pre-Production Capital Costs of $543
million
- Operating Costs of $17.56 Cdn per
tonne or $922 Cdn per ounce
- Payback period - 2 years
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Key Assumptions
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- Milling recoveries of 79.2% and 84.2%
- Low grade stockpiles with marginal or mill cut-off grades of
0.32 to 0.38 gAu/tonne to be processed
- Expected accuracy of capital cost estimates of ± 35%
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Economics
- After Tax Cumulative Cash Flow: $440 million
- After Tax Net Present Value (NPV): $196 million at 5% discount rate
- After Tax Internal Rate of Return (IRR): 12%
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Key Assumptions
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- Average gold price of US$ 1,546/oz and exchange rate of 1.0033
$Cdn/1.0 $US (3-year trailing average as at May 31, 2013)
- Royalty of 8.75% of Net Profit paid
- Ontario Mining Tax rate 10%
Income Tax rate 26.5% (15% federal and 11.5% provincial)
|
Sensitivity Analysis
After Tax
Cumulative Cash Flow (million$)
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-20% |
-15% |
-10% |
-5% |
Base Case
Scenario |
+5% |
+10% |
+15% |
20% |
PRODUCTION
PARAMETERS |
Gold price (CAN$/oz) |
1 241 |
1 318 |
1 396 |
1 473 |
1 551 |
1 629 |
1 706 |
1 784 |
1 861 |
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Gold Price |
-98.17 |
39.49 |
185.40 |
315.42 |
440.13 |
561.07 |
681.81 |
802.21 |
910.00 |
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|
Change (%) |
-122% |
-91% |
-58% |
-28% |
|
27% |
55% |
82% |
107% |
ECONOMIC
PARAMETERS |
|
OPEX |
732.30 |
659.63 |
586.53 |
513.43 |
440.13 |
365.02 |
285.24 |
204.46 |
120.78 |
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|
Change (%) |
66% |
50% |
33% |
17% |
|
-17% |
-35% |
-54% |
-73% |
|
CAPEX |
546.14 |
519.67 |
493.21 |
466.67 |
440.13 |
412.42 |
384.51 |
356.14 |
327.48 |
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|
Change (%) |
24% |
18% |
12% |
6% |
|
-6% |
-13% |
-19% |
-26% |
After Tax NPV at
5% (million$)
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-20% |
-15% |
-10% |
-5% |
Base Case
Scenario |
+5% |
+10% |
+15% |
20% |
PRODUCTION
PARAMETERS |
Gold price (CAN$/oz) |
1 241 |
1 318 |
1 396 |
1 473 |
1 551 |
1 629 |
1 706 |
1 784 |
1 861 |
|
Gold Price |
-158.18 |
-69.03 |
27.90 |
113.53 |
196.18 |
276.07 |
356.01 |
434.90 |
505.38 |
|
|
Change (%) |
-181% |
-135% |
-86% |
-42% |
|
41% |
81% |
122% |
158% |
ECONOMIC
PARAMETERS |
|
OPEX |
382.57 |
336.22 |
289.63 |
243.04 |
196.18 |
148.13 |
97.59 |
46.44 |
-6.36 |
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Change (%) |
95% |
71% |
48% |
24% |
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-24% |
-50% |
-76% |
-103% |
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CAPEX |
288.69 |
265.59 |
242.50 |
219.37 |
196.18 |
171.93 |
147.53 |
122.75 |
97.74 |
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Change (%) |
47% |
35% |
24% |
12% |
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-12% |
-25% |
-37% |
-50% |
After Tax IRR
(million$)
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-20% |
-15% |
-10% |
-5% |
Base Case
Scenario |
+5% |
+10% |
+15% |
20% |
PRODUCTION
PARAMETERS |
Gold price
(CAN$/oz) |
1 241 |
1 318 |
1 396 |
1 473 |
1 551 |
1 629 |
1 706 |
1 784 |
1 861 |
|
Gold Price |
-5% |
2% |
6% |
10% |
12% |
15% |
17% |
19% |
21% |
|
|
Change (%) |
-140% |
-84% |
-48% |
-20% |
|
20% |
36% |
52% |
68% |
ECONOMIC
PARAMETERS |
|
OPEX |
18% |
16% |
15% |
14% |
12% |
11% |
9% |
7% |
5% |
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Change (%) |
41% |
31% |
22% |
11% |
|
-12% |
-27% |
-43% |
-63% |
|
CAPEX |
18% |
16% |
15% |
14% |
12% |
11% |
10% |
9% |
8% |
|
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Change (%) |
41% |
29% |
19% |
9% |
|
-9% |
-17% |
-26% |
-33% |
Potential Upside
- Gold price appreciation - longterm
- High potential to increase resources with further drilling
- First mover infrastructure advantage in the highly prospective
Shebandowan greenstone belt
- Decrease in $Cdn/$US exchange rates to more longterm historic
levels
Potential Risks
- Hydrology and surface water treatment strategies require more
study, the results of which could impact cost estimates
- Gold price deterioration - longterm
- Public support - by all concerned parties and stakeholders -
for responsible economic development in this region
Independence and Expertise
This study was led by independent consulting
company InnovExplo of Val d'Or,
Quebec. Mining engineering input was from principal
author Sylvie Poirier, Ing (OIQ
No.112196, PEO No.100156918 of InnovExplo. Geology and
resource estimates were performed by Pierre-Luc Richard, MSc, PGeo (APGO No.1714, OGQ
No.1119) also of InnovExplo. Julie
Palich, MSc, PGeo (APGO No.1880, AusIMM No.301564) of
Caracle Creek Consulting provided Environmental Studies, permitting
and Social and Community Impact inputs. All metallurgical and
mineral processing expertise was provided by Gary Patrick, BSc (AusIMM No.108090) Consulting
Metallurgist of Metallurg Pty Ltd., Perth, Australia. These contributors are
all independent of the issuer and "Qualified Persons" as defined by
Regulation 43-101, National Instrument 43-101 and Form
43-101F1.
More Details
To provide more detail, the "Summary" section of
the Preliminary Economic Analysis report follows in its
entirety. The complete report will be filed on SEDAR
(www.sedar.com) within 45 days.
SUMMARY
On August 12,
2012, InnovExplo Inc. ("InnovExplo") was contracted by Mr.
George Mannard, M.Sc, P.Geo,
president of Moss Lake Gold Mines Ltd ("Moss Lake Gold Mines" or
"the issuer"), to complete a Preliminary Economic Assessment
("PEA") and Technical Report ("the report") for the Moss Lake
Project ("the project" or "the property") in compliance with
Regulation 43-101/NI 43-101 and Form 43-101F1. Moss Lake Gold Mines
is a Canadian mineral exploration company trading publicly on the
TSX Venture Exchange in Canada
(TSX-V: MOK). InnovExplo is an independent mining and exploration
consulting firm based in Val-d'Or
(Québec).
This report presents the results of the PEA for
the Moss Lake Project. The PEA is based on a Mineral Resource
Estimate produced by InnovExplo in an earlier report prepared for
the issuer titled "Technical Report and Mineral Resource Estimate
for the Moss Lake Project (compliant with Regulation 43-101 / NI
43-101 and Form 43-101F1)", dated April 4,
2013. The Mineral Resource Estimate is compliant with the
Canadian Securities Administrators National Instrument 43-101
Standards of Disclosure for Mineral Properties (NI 43-101) and Form
43-101F1 Technical Report.
In addition to the principal author,
Sylvie Poirier, Ing (OIQ No. 112196,
PEO No. 100156918), of InnovExplo, the other qualified persons
responsible for the preparation of this report were: Pierre-Luc Richard, MSc, PGeo (APGO No. 1714,
OGQ No. 1119), Julie Palich Msc (APGO No. 1880; APEG of BC #37646;
AUSIMM No. 301564), Gary Patrick BSc
(AusIMM No. 108090). In addition, Alain Tremblay, Eng, formerly of
InnovExplo, and Marie-Claire Dagenais, Jr Eng, of InnovExplo,
helped prepare this report under the supervision of Sylvie Poirier.
This Preliminary Economic Assessment (PEA) is
preliminary in nature as it includes Inferred Mineral Resources
that are 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
PEA will be realized.
Moss Lake Property
The Moss Lake property is located in Moss
Township, approximately 100 km west of the city of Thunder Bay, in the province of Ontario, Canada. The nearest settlement is
Kashabowie, located 24 km to the northeast on provincial Highway 11
(part of the TransCanada highway system). The property lies within
NTS map sheet 52B/10. Most of the property lies within Moss
Township and the remainder in the Burchell Lake area. The property
consists of one block of land comprised of 105 unpatented mining
claims and two 21-year mining leases comprising 15 patented claims.
The mining claims and leases are of irregular shapes and sizes
aggregating a total of 3,224.09 ha. All the unpatented mining
claims and mining leases are registered 100% in the name of Moss
Lake Gold Mines Ltd.
Geology, Mineralization and Exploration
Model
The property lies about 2 to 3 km southeast of
the boundary between the Quetico and Wawa subprovinces, in the westernmost Ontarian
part of the Wawa Subprovince. A considerable portion of the Moss
Lake property is underlain by intermediate to felsic volcaniclastic
rocks of the northeast-trending, fault-bounded Central Felsic to
Intermediate Metavolcanic Belt (Osmani, 1997), a subunit of the
Shebandowan Greenstone Belt,
itself part of the Wawa Subprovince of the Superior Province.
Gold mineralization in the Moss Lake deposit,
between Snodgrass Lake and Span
Lake, occurs in sheared intermediate to felsic metavolcanic rocks
and in sheared and fractured diorite to gabbro or feldspar and
quartz-feldspar porphyry bodies emplaced within intermediate to
felsic metavolcanic rocks of the CFB. Gold mineralization in the
Snodgrass Lake area has been described in detail by Chorlton (1987)
and Harris (1970). At the Moss Lake deposit, the diorite to gabbro
bodies, the quartz-feldspar and feldspar porphyries, and the felsic
metavolcanics are all cut by the Snodgrass Shear Zone, a steeply
dipping ductile shear zone up to 4.5 metres wide and striking NE
(N040) to ENE (N060-N075).
Other anomalous gold values were also obtained
from fractured diorite, sheared feldspar porphyry, and a moderately
deformed, pink-weathering quartz-amphibole-phyric intrusion. This
relatively late porphyry dyke or sill intrudes the diorite and
felsic schist. In hand specimen, the quartz-amphibole-phyric
intrusion is said to show a strong resemblance to the syenogranitic
rocks of the Moss Lake Stock, suggesting both may be related to the
same magmatic event.
Previous reports agreed that a model for the
Moss Lake gold deposit most certainly implies an "intrusion-related
gold deposit". Although some authors have favoured a porphyry-style
deposit, others have thought of it as a hybrid model between
porphyry and more classical orogenic models.
During their site visit, authors examined
numerous mineralized intersections that collectively suggest gold
grades may occur within sheared rocks, although not exclusively.
Mineralization appears as disseminated sulphides, quartz-albite
veining and flooding, as well as late faulting. Alteration minerals
related to mineralization consist mainly of silica, albite,
sericite, carbonates, and sulphides (pyrite and minor
chalcopyrite). Other alteration minerals not necessarily associated
with mineralization are chlorite, hematite and epidote.
2013 Mineral Resource Estimate
Based on the density of the processed data, the
search ellipse criteria, and the specific interpolation parameters,
the authors are of the opinion that the current Mineral Resource
Estimate can be classified as Indicated and Inferred resources. The
estimate follows CIM standards and guidelines for reporting mineral
resources and reserves. A minimum mining width of 5 metres (true
width) and a cut-off grade of 0.5 g/t (open pit potential) and 2.0
g/t Au (underground potential) were used for the Mineral Resource
Estimate.
InnovExplo received a Gems / MS Access diamond
drill hole database for the Moss Lake Project. Following adequate
verifications and updates, the database used for the resource
estimate contains 320 surface diamond drill holes and 32
underground diamond drill holes with conventional analytical gold
assay results, as well as coded lithologies from the drill core
logs descriptions. The 352 drill holes cover the strike-length of
the project at a drill spacing varying from 15 metres to 50
metres.
The Mineral Resource Estimate detailed in this
report was made using 3D block modelling and the inverse distance
square interpolation (ID2) method for a corridor of the Moss Lake
Project with a strike-length of 3.2 km and a width of approximately
1.2 km, down to a vertical depth of 750 metres below surface. The
result of the study is a single Mineral Resource Estimate for
eighteen (18) mineralized zones and one (1) envelope zone
containing the remaining isolated gold intercepts, with Indicated
and Inferred Resources, for both a Whittle-optimized in-pit volume
and a complementary underground volume. The effective date of this
Mineral Resource Estimate is February 8,
2013.
InnovExplo estimates that the Moss Lake deposit
has Indicated Resources of 39,797,000 tonnes grading 1.1 g/t Au
(1,377,300 ounces of gold) and Inferred Resources of 50,364,000
tonnes grading 1.1 g/t Au (1,751,600 ounces of gold).
Mineral Resource Estimate Results for the Moss
Lake Project
Moss Lake - 2013 MINERAL RESOURCE ESTIMATE
|
Open Pit Potential - Mineral Resource > 0.5 g/t Au (within
Pit Shell) |
Zone |
Indicated
Resource |
Inferred
Resource |
Tonnes |
g/t Au |
Ounces |
Tonnes |
g/t Au |
Ounces |
101 |
7 655 000 |
1.1 |
268 800 |
2 684 000 |
1.4 |
120 100 |
102 |
32 140 000 |
1.1 |
1 108 500 |
9 984 000 |
1.1 |
360 000 |
Other |
|
|
|
36 235 000 |
1.0 |
1 136 200 |
Sub-Total |
39 795 000 |
1.1 |
1 377 300 |
48 904 000 |
1.0 |
1 616 300 |
Underground Potential - Mineral Resource > 2.0 g/t Au
(outside Pit Shell) |
Zone |
Indicated
Resource |
Inferred
Resource |
Tonnes |
g/t Au |
Ounces |
Tonnes |
g/t Au |
Ounces |
101 |
|
|
|
223 000 |
3.2 |
22 700 |
102 |
|
|
|
290 000 |
2.4 |
22 600 |
Other |
|
|
|
949 000 |
3.0 |
90 100 |
Sub-Total |
|
|
|
1 461 000 |
2.9 |
135 400 |
Mineral Resource Total (Open Pit and Underground Potential
combined) |
Zone |
Indicated
Resource |
Inferred
Resource |
Tonnes |
g/t Au |
Ounces |
Tonnes |
g/t Au |
Ounces |
101 |
7 655 000 |
1.1 |
268 800 |
2 907 000 |
1.5 |
142 800 |
102 |
32 140 000 |
1.1 |
1 108 500 |
10 274 000 |
1.2 |
382 600 |
Other |
|
|
|
37 184 000 |
1.0 |
1 226 300 |
Total |
39 795 000 |
1.1 |
1 377 300 |
50 364 000 |
1.1 |
1 751 600 |
- The Independent and Qualified Persons for the Mineral Resource
Estimate, as defined by Regulation 43-101, are Pierre-Luc Richard, MSc, PGeo (InnovExplo Inc),
and Carl Pelletier, BSc, PGeo
(InnovExplo Inc), and the effective date of the estimate is
February 8, 2013.
- These Mineral Resources are not Mineral Reserves as they do not
have demonstrated economic viability.
- In-Pit results are presented undiluted and in situ, within
Whittle-optimized pit shells. Underground results are presented
undiluted and in situ, outside Whittle-optimized pit shells. The
estimate includes 18 gold-bearing zones and 1 envelope containing
isolated gold intercepts.
- In-Pit and Underground resources were compiled at cut-off
grades from 0.3 to 5.0 g/t Au (for sensitivity characterization). A
cut-off grade of 0.5 g/t Au was selected as the official in-pit
cut-off grade and a cut-off grade of 2.0 g/t Au was selected as the
official underground cut-off grade.
- Whittle parameters: mining cost = C$2.28; pit slope angle = 50.0 degrees;
production cost = C$9.55; mining
Dilution = 5%; mining recovery = 95%; processing recovery = 80% to
85%; gold price = C$1,500.
- Cut-off grades must be re-evaluated in light of prevailing
market conditions (gold price, exchange rate and mining cost).
- The estimate is based on 352 diamond drill holes (90,978 m)
drilled from 1983 and 2008.
- A fixed density of 2.78 g/cm3 was used.
- A minimum true thickness of 5.0 m was applied, using the grade
of the adjacent material when assayed or a value of zero when not
assayed.
- Capping was established at 35 g/t Au, supported by statistical
analysis and the high grade distribution within the
deposit.
- Compositing was done on drill hole sections falling within the
mineralized zone solids (composite = 1 m).
- Resources were evaluated from drill hole samples using the ID2
interpolation method in a multi-folder percent block model using
Gems version 6.4. Based on geostatistics, the ellipse range for
interpolation was 75m x 67.5m x 40m.
- The Indicated category is defined by combining the blocks
within the two main zones (101 and 102) and various statistical
criteria, such as average distance to composites, distance to
closest composite, quantity of drill holes within the search
area.
- Ounce (troy) = metric tons x grade / 31.10348. Calculations
used metric units (metres, tonnes and g/t).
- The number of metric tons was rounded to the nearest thousand.
Any discrepancies in the totals are due to rounding effects;
rounding followed the recommendations in Regulation 43-101.
- The pitshell used for the resource estimate extends slightly
beyond the property limits in its northeastern portion. Although
the entire resource lies within the property limits, some waste
material outside the property limits will need to be removed to
access some of the resource. Consequently, this portion of the pit
may need to be re-considered in a future economic study.
- InnovExplo is not aware of any known environmental, permitting,
legal, title-related, taxation, socio-political or marketing issues
or any other relevant issue that could materially affect the
Mineral Resource Estimate.
Mining Method
Mining of the Moss Lake deposit has been
designed as an open pit with a planned production of 13,400,000
tonnes per year (13.4M tpy), or 40,000 tpd of mineralized material
processed at the mill for an average of 335 days per year of mill
operation and 350 days per year of mine operation.
The mineral resource block model developed by
InnovExplo has been imported into Whittle™ software from Dassault
Systèmes GEOVIA (formerly Gemcom Software International). Design
parameters such as operating costs, mine recovery, dilution and
gold price were used to generate an optimal pit shell.
The mine design parameters are:
- Maximum capacity of 225 metric tonnes for off-road haul
trucks
- 10 metre high mining bench
- Double bench at final walls
- Ramp gradient of 10%
- 30 metre wide ramp - double-lane traffic
- 20 metre wide ramp - single-lane traffic
- One-way ramp for the last two (2) permanent benches on the east
side of the pit
- Temporary ramp for the last two (2) benches
Metallurgy and Processing
The proposed Moss Lake Process Plant design is
based on well known and established Gravity/CIL technology, which
consists of single stage crushing, SAG milling, ball milling,
gravity recovery of free gold followed by leaching/adsorption of
gravity tailings, detoxification of tailings, elution & gold
smelting and tailings disposal. Services to the process plant will
include reagent mixing, storage and distribution, water, and
compressed air services.
The plant will treat 14.0 million tonnes per
annum of mineralized material. The plant design accommodates the
sequential and combined processing of the different types of
mineralized material while keeping the design as simple as
possible.
Environment
Environmental baseline studies (EBS) have
predominantly not been undertaken by Moss Lake Gold Mines or past
operators. Baseline studies will need to be initiated prior to, or
concurrent with, the start of the prefeasibility study to identify
existing site conditions and environmental sensitivities associated
with the Moss Lake Project (the "Project"). In accordance with
regulatory expectations, environmental baseline studies will need
to address potentially sensitive physical, biological and human
components including, but not necessarily limited to: physiography
and climate, hydrology and surface water quality, hydrogeology and
groundwater quality, acid rock drainage and metal leaching, soils,
fisheries and aquatic environments, terrestrial wildlife,
vegetation and wetlands, air quality, noise, archaeology and
heritage, socio-economic and land use, traditional use/traditional
knowledge. The comprehensive EBS study will be designed in
consultation with regulatory authorities and First
Nations/community stakeholders.
There are no Protected Areas within the Project
area; the nearest Protected Area is the Quetico Provincial Park
located 20 km west of the Property. According to regional land
cover mapping, the Property is predominantly covered by wooded
areas and lakes. Several low-lying areas have been mapped as
wetlands around Snodgrass and Kawawiagamak Lakes and may require
special consideration in any permitting and planning activities.
Towards the southern property boundary the ground cover trends more
predominantly to wetlands and "herbs".
The Property comprises three named lake systems:
Moss Lake, Snodgrass Lake, and
Kawawiagamak Lake and several smaller open water bodies. Drainage
is south into Quetico Provincial Park through a series of
stream/creek and lake systems. Development of the open pit will
necessitate diverting Wawiag River, which drains an upstream
watershed of 143 km2, and drainage of Snodgrass Lake,
which is only 2-4 metres deep. A fish habitat replacement area,
comprising 51 ha, has been incorporated into the initial Project
design immediately downstream of the open pit. Detailed evaluation
of the hydrology, fish habitat and aquatic environment in this area
will be necessary to facilitate permitting of these activities.
Proposed Surface Infrastructure
New infrastructure for the Moss Lake operations
will be required. Following is a list of the proposed new
infrastructure:
- Crusher and mill complex;
- Office, garage, camp and associated services buildings;
- New electrical main line, site substation and site electrical
distribution installations;
- Pit dewatering system, surface water management and water
treatment plant;
- Access roads to the site and on the site.
The waste stockpile will be large, covering a
surface area of approximately 2.68M m2. The
overburden stockpile will be smaller than the waste stockpile. Its
surface area will be approximately 1.07M m2. Low-grade
mineralized material will be transported to the stockpile to
eventually be milled. The proposed stockpile will have a capacity
of 15M tonnes.
Capital and Operating Costs
The PEA study is based on capital pricing as of
the first quarter 2013. The capital costs include various added
contingencies depending on the sector. The pre-production costs are
estimated at $542,503,252, including
$35,997,057 of capitalized operating
costs. Sustaining capital is estimated at $315,216,116, excluding $28.4M for final closure costs.
The total capital expenditure of $857.72M for the Moss Lake Project is estimated
in eight (8) components: Capitalized operating cost, overburden
removal cost, owners cost, site development and preparation,
surface installation and equipment, electricity and communication,
water management, environmental cost.
Breakdown of the Capital Cost
Description |
Pre-production |
Sustaining |
Total cost |
Capitalized operating cost |
$ 35,997,057 |
|
$ 35,997,057 |
Overburden removal cost |
$ 4,484,987 |
$ 106,695,767 |
$ 111,180,754 |
Owners cost |
$ 14,636,420 |
|
$ 14,636,420 |
Site development &
preparation |
$ 7,014,184 |
|
$ 7,014,184 |
Surface installation &
equipment |
$ 424,876,684 |
$ 183,597,549 |
$ 608,474,233 |
Electricity and communication |
$ 25,889,000 |
|
$ 25,889,000 |
Water management |
$ 11,737,600 |
|
$ 11,737,600 |
Environmental |
$ 17,867,320 |
$ 24,922,800 |
$ 42,790,120 |
Total capital
expenditures |
$ 542,503,251 |
$ 315,216,116 |
$ 857,719,367 |
The following assumptions were made in the
capital cost estimation:
- The expected accuracy range of the capital cost estimates for
this PEA Study is ± 35%.
- Currency is expressed in Canadian dollars (C$ or CAD) unless
stated otherwise.
- Most of the item costs were derived from CostMine 2011.
- The principal equipment costs were given by Toromont.
- The pumping system was provided by Pompaction.
- The surface water management costs were provided by
Stavibel.
- The environmental costs study has been prepared by Caracle
Creek.
- The modular camp cost was provided by ATCO Structures &
Logistics Ltd.
- The mill capital cost was provided by Metallurg Pty Ltd.
- All remaining costs were estimated using in-house cost data
from recent projects or preliminary budget prices from
suppliers.
Operating costs for the Moss Lake Project are
estimated in 2013 Canadian dollars
with no allowance for escalation. InnovExplo estimated mine
operating costs using data from similar operations and from budget
quotes supplied by contractors and suppliers.
Operating Costs Summary
Description |
Total cost |
Unit cost |
General & Administration |
$ 162,357,221 |
1.27 $/t milled |
67 US$/oz |
Milling and transportation |
$ 993,072,544 |
7.75 $/t milled |
407 US$/oz |
Mining costs |
$ 1,089,302,935 |
8.50 $/t milled |
446 US$/oz |
Environmental monitoring |
$ 5,557,500 |
0.04 $/t milled |
2 US$/oz |
Total |
$ 2,250,290,200 |
17.56 $/t milled |
922 US$/oz |
Financial analysis
An after-tax model was developed for the Moss
Lake Project. All costs are in 2013 Canadian
dollars with no allowance for inflation or escalation.
The Moss Lake Project is subject to the
following taxes:
- Ontario mining tax rate of 10%
(2013 rate);
- Income tax rate of 26.5% (15% federal and 11.5%
provincial);
The Moss Lake property is subject to a royalty
equal to 8.75% of the net profit.
The economic evaluation of both project
scenarios was performed using the Internal Rate of Return (IRR) and
the Net Present Value (NPV) methods. The IRR on an investment is
defined as the rate of interest earned on the unrecovered balance
of an investment. The discount rate makes the NPV of all cash flows
equal to zero. The NPV method converts all cash flows for
investments and revenues occurring throughout the planning horizon
of a project to an equivalent single sum at present time at a
specific discount rate. The discount rate used in the analysis is
5%.
According to the NPV method, a positive NPV
represents a profitable investment where the initial investment
plus any financing interest are recovered.
The following parameters were considered in the
financial analyses:
- An average gold price of US$1546/oz and an exchange rate of 1.0033CAD/1USD
(3-yr trailing average as at May 31,
2013).
- Milling recovery of 79.2% in the southern portion of the
deposit and 84.2% in the northern portion of the deposit.
- Royal Mint Fees of $3/oz.
- Royalty of 8.75% of Net Profit.
This Preliminary Economic Assessment (PEA) is
preliminary in nature as it includes Inferred Mineral Resources
that are 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
PEA will be realized.
The financial analysis for the Base Case (gold
at US$1546/oz) indicates an after-tax
NPV at a 5% discount rate of $196
million, with an IRR of 12% and a payback period of 1.75
years.
A 10% reduction in gold price, which corresponds
to C$1396/oz, reduces the NPV to
$27.9M and drops the IRR from 12% to
6%.
The resulting main parameters and cash flow
analysis are presented in the following Table.
Cash Flow Analysis Summary
Parameters |
Results |
Potentially Mineable resources |
128,154,775 tonnes @
0.73 g/t |
Total contained gold input |
3,000,684 ounces |
Total contained gold output |
2,439,678 ounces |
Total waste |
314,662,647 tonnes |
Total OVB |
64,056,410 tonnes |
Total moved |
506,873,832 tonnes |
Mine life (excluding
4 years of pre-production) |
10 years |
Daily mine production |
40,000 tpd |
Metal recovery |
79.2% and 84.2% |
Average operating cash cost |
17.56 CAN$/t. milled |
|
922 CAN$/oz |
Pre-production capital |
$542,503,252 |
Sustaining capital |
$315,216,115 |
Total gross revenue |
$3,784,428,468 |
Total operating cost |
$2,250,290,200 |
Total project cost |
$3,108,009,568 |
Closure cost estimate |
$28,430,000 |
Selling cost (3$/oz) |
$7,319,034 |
Royalty (8.75% net profits
after-tax) |
$43,959,565 |
Net cash flow (including closure
cost) |
$705,457,624 |
Pre-tax NPV (5%) excluding
royalty |
$353,451,548 |
Pre-tax IRR excluding royalty |
17% |
After-tax NPV (5%) |
$196,176,417 |
After-tax IRR |
12% |
Payback period |
1.75 years |
Sensitivity analyses were performed on parameters for their
potential impact on the outcome of the economic evaluation. The
following parameters were analyzed:
Production parameters:
Economic parameters:
- Operating expenditure (OPEX)
- Capital expenditure (CAPEX)
Sensitivity calculations were performed on the
project's NPV and IRR, applying a range of variation (± 20%) to the
parameter values. The sensitivity analysis demonstrates that the
Moss Lake Project is highly sensitive to changes in gold price. It
is moderately sensitive to changes in OPEX and CAPEX.
Interpretation and Conclusions
The Moss Lake deposit is at an advanced stage of
exploration and hosts significant gold mineralization.
InnovExplo developed a new interpretation for
the Moss Lake deposit using section and plan views. Eighteen (18)
mineralized zones enclosed within a gold mineralized envelop
characterize the Moss Lake deposit. InnovExplo considers a
structural study and surface mapping would greatly improve the
understanding of key geological parameters controlling gold
mineralization within the project area. Re-logging is also proposed
prior to any new drilling program.
After conducting a detailed review of all
pertinent information and completing the present Mineral Resource
Estimate, InnovExplo concludes the following:
- The geological and grade continuities of the gold mineralized
zones of the Moss Lake Project were demonstrated;
- The Moss Lake Project contains at least eighteen (18)
continuous mineralized zones;
- The lenses have strike lengths ranging up to 2,500 m;
- In spite of the current drill spacing, geological continuity
seems steady throughout the mineralized zones;
- The zones encountered at the Moss Lake deposit have significant
possibility to expand as all the extensions are open. The only
limitation is the property boundary to the NE that is close to the
deposit;
- The potential is high for upgrading Inferred Resources to
Indicated Resources with more diamond drilling in all of the
zones;
- The potential is high for adding new resources in the
extensions of known zones with additional diamond drilling;
- The potential is high for identifying new parallel zones with
additional diamond drilling;
The reader should know that the pitshell used
for the resource estimate extends slightly beyond the property
limits in its northeastern portion. The entire resource lies within
the property limits, and this PEA pit optimization constrained pit
limits to the property boundaries.
The property is strategically positioned in an
area known to be associated with gold mineralization. InnovExplo
considers the present Mineral Resource Estimate to be reliable,
thorough, based on quality data, reasonable hypotheses, and
parameters compliant with Regulation 43-101 and CIM standards
regarding mineral resource estimations. InnovExplo believes that
the Moss Lake Project Mineral Resources are sufficiently advanced
for a preliminary economic assessment study.
The open-pit mining plan resulted in 2.44
million ounces of recoverable gold. The mine plan was designed for
a nominal 40,000 tonne-per-day operation, with an average stripping
ratio of 2.96:1 when including overburden, and 2.46:1 without
overburden. The life of mine (LOM) is estimated at ten (10) years.
Average yearly gold production for the first five (5) years is
295,825 ounces, and the average for the last five (5) years is
192,111 ounces. A yearly average of 243,968 gold ounces is
predicted over the LOM.
The estimated mill cut-off grade is 0.38 g/t Au
in the northern portion of the deposit (formerly known as the Main
Zone) and 0.32 g/t Au in the southern portion (formerly known as
the QES Zone). The mill cut-off grade was calculated by WHITTLE™
and is based on the input parameters.
InnovExplo concludes that this PEA demonstrates
the potential viability of the Moss Lake Project and has upside
that could improve the economics of the project such as:
- The possibility of increasing the potentially mineable resource
by eliminating the property constraint on the northeast side of the
property.
- Increasing the resource within the pit shell through additional
drilling in areas identified by geologists.
- Defining pit slopes based on a geotechnical study.
Water management represents a potential risk to
the viability of the project and will have to be studied fully in
order to develop a safe and feasible option.
The PEA presents a base case scenario that
recovers only runoff from the pit and the TMF. In the case that all
water would need to be collected and treated, this would
significantly affect the required infrastructure elements and
increase the treatment costs, thereby representing a potential risk
to the viability of the project.
InnovExplo believes that definition drilling and
more advanced engineering work are mandatory for the Moss Lake
Project to eventually advance to the pre-feasibility study
stage.
InnovExplo considers the present PEA to be
reliable, thorough, based on quality data, reasonable hypotheses,
and parameters compliant with Regulation 43-101 (NI 43-101) and CIM
standards regarding mineral resource estimations.
Recommendations
InnovExplo recommends additional work to confirm
the economic potential of the Moss Lake deposit and the rest of
Moss Lake property.
Despite the fact that the PEA demonstrates a
marginally economic result for the project, InnovExplo recommends
additional study to further advance the project. The project has
sufficient potential to increase its value by eliminating the
current boundary constraint on the northeast side, by increasing
resources within the current pit limit, and by better defining the
water management scenario. A geotechnical study would be required
to better define the pit wall slope configuration.
Caracle Creek recommends that environmental and
socio-economic studies and public consultation proceed with the
objective of gaining provincial and federal environmental approvals
for the project in line with the feasibility timing.
The information gained from the environmental
studies should be integrated into all infrastructure layout and
design options under study for the next phase of development.
Estimated reclamation costs and bonding
requirements should be reassessed in the next phase of
development.
It is recommended that further grind size
optimisation testwork be carried out to determine the potential
increase in gold leach recoveries arising from increased particle
liberation ahead of cyanidation leaching. Additionally
further ore characterisation testwork including SAG mill
amenability tests needs to be carried out on the different ore
zones.
The peak discharge for the Wawiag diversion
channel between the open pit and the TMF should be better estimated
by constructing a complete hydrological model for the Wawiag River
upstream from the mine site. This hydrological model should be
calibrated using data from surrounding gaged watersheds with
similar characteristics, like the Whitefish River watershed for
Water Survey Canada gage number 01AB017.
InnovExplo recommends additional test work on
rock samples to define the characteristics and risks related to the
water runoff from all the industrial and piling areas on the
property. At this time, there is no evidence of acid mine drainage
associated with the historical underground exploration program and
from the acid base accounting test work. However, additional test
work should evaluate whether other deleterious elements would
suggest the need to collect and treat these waters.
The pit considered in the PEA is limited to the
northeast by the property boundary. Even though the current
resources are within the property, this limit is a restriction on
the pit size if deeper resources are defined and need to be
reached. It is recommended that the issuer examine the possibility
of acquiring additional mining titles and surface rights to the
north.
If the exploration work outcome is positive,
InnovExplo recommends an engineering study, a resource update, and
a prefeasibility study in order to further advance the project.
InnovExplo is of the opinion that the character
of the Moss Lake property is of sufficient merit to warrant the
recommended exploration program and the work described below. The
program is divided into two (2) phases. Expenditures for Phase I of
the work program are estimated at C$
6,325,000 (including 15% for contingencies). Expenditures
for Phase II of the work program are estimated at C$ 7,164,500 (including 15% for
contingencies). The grand total is C$$ 13,489,500 (including 15%
for contingencies). Phase II of the program is contingent upon the
success of Phase I.
Table 26.1 presents the estimated costs for the
various phases of the recommended work program.
Estimated Costs for the Recommended Work Program
(in Canadian dollars)
|
|
|
|
Budget for Phase 1 - Exploration work |
|
|
Cost Estimate |
Compilation, re-logging, surface mapping and
structural study |
|
|
$ 250,000 |
In-fill drilling |
|
|
$ 3,000,000 |
Drilling extensions of mineralized zones |
|
|
$ 1,500,000 |
Drilling targets generated from compilation work,
re-logging, surface mapping and structural study. |
|
|
$ 750,000 |
Contingency (15%) |
|
|
$
825,000 |
Total phase 1 |
|
|
$
6,325,000 |
|
|
|
|
Budget for Phase 2 - Resources estimate,
engineering and environmental study |
|
|
|
|
|
|
|
Geotechnical study |
|
|
$ 1,500,000 |
Hydrogeological and water management study |
|
|
$ 500,000 |
Metallurgical test work and process
engineering |
|
|
$ 1,100,000 |
Resources update & pre-feasibility report |
|
|
$ 450,000 |
Environmental baseline study |
|
|
$ 1,480,000 |
Community consultation |
|
|
$ 200,000 |
Environmental assessment application |
|
|
$ 600,000 |
Permitting application |
|
|
$
400,000 |
Contingency (15%) |
|
|
$
934,500 |
Total Phase 2 |
|
|
$ 7,164,500 |
|
|
|
|
TOTAL Phase 1 and Phase 2 |
|
|
$ 13,489,500 |
ABOUT MOSS LAKE GOLD MINES LTD.
Moss Lake Gold Mines Ltd. was created in 1994 to
consolidate ownership of the Moss Lake gold deposit. It is a
57.6%-owned subsidiary of Wesdome Gold Mines Ltd. which currently
owns and operates the Eagle River Gold Mine, the Mishi Gold Mine
and the Kiena Gold Mine.
Moss Lake trades on the TSX Venture Exchange
under the symbol "MOK" and currently has 47 million common shares
issued and outstanding.
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 accuracy of this release.
This news release includes certain
forward-looking statements concerning the future performance of
Moss Lake's business, operations and financial performance and
condition, as well as management's objectives, strategies, beliefs
and intentions. Such statements include, but are not limited
to, statements concerning the intention of Wesdome to convert the
Note. Forward-looking statements are frequently identified by
such words as "may", "will", "plan", "expect", "anticipate",
"estimate", "intend" and similar words referring to future events
and results. Forward-looking statements are based on the current
opinions and expectations of management. All forward-looking
information is inherently uncertain and subject to a variety of
assumptions, risks and uncertainties, including the speculative
nature of mineral exploration and development, fluctuating
commodity prices, competitive risks and the availability of
financing, as described in more detail in recent securities filings
available at www.sedar.com. Actual events or results may differ
materially from those projected in the forward-looking statements
and Moss Lake cautions against placing undue reliance
thereon. Moss Lake and its management assume no obligation to
revise or update these forward looking statements.
SOURCE Moss Lake Gold Mines Ltd.