TIDMAYM
11th January 2021 LSE:AYM
Parys Mountain - Preliminary Economic Assessment
Major Increase in Mineable Tonnages
PEA Projects Strong Financial Results
Anglesey Mining plc ("Anglesey") is pleased to report the positive results of
the Preliminary Economic Assessment (PEA) on its Parys Mountain
copper-zinc-lead-gold-silver project on the island of Anglesey in North Wales
prepared by Micon International Limited ("Micon") an independent consulting
firm.
Highlights
* Updated Resource Estimate of 5.2 million tonnes of Indicated together with
11.7 million tonnes of Inferred
* Financial model for Expanded Case shows pre-tax NPV10 of $US120 million, (GBP
96 million), 26% IRR and 12 year mine life
Bill Hooley, Chief Executive stated: "This Preliminary Economic Assessment
demonstrates that a major mining operation can be established at Parys
Mountain, with robust economics at a reasonable capital cost, and can produce
copper, zinc, lead and gold concentrates at competitive operating costs able to
withstand the cycles that occur within our industry, over a meaningful mine
life of 10 to 12 years."
Summary
This PEA includes an updated mineral resource statement showing 5.2 million
tonnes of Indicated Resources at a combined base metal grade of 4.3%, together
with 11.7 million tonnes of Inferred Resources at a combined base metals grade
of 2.8%, based on the revised estimated cut-off cost of $US48 per tonne.
Three separate development alternatives were evaluated, utilising planned mine
tonnages ranging from 5.5 million tonnes at 1,500 tonnes per day in Case A to
11.4 million tonnes at 3,000 tonnes per day in Case C. Highlights are shown in
the table below.
Parameter Case A Case B Case C
(US$ 000) (US$ 000) (US$ 000)
Life of Mine (Years) 12 11 12
Tonnes Mined (Mt) 5.9 5.5 11.4
Total Net Smelter Returns 478,078 445,973 1,014,970
Total Operating Costs 252,176 227,134 503,454
Operating Cash Flow (EBITDA) 225,903 218,839 511,516
Pre-production Capital Expenditure 70,438 57,519 99,015
Net Present Value Before Tax (Disc. 36,123 41,843 120,321
10%)
Net Present Value After Tax (Disc. 25,991 30,370 92,144
10%)
Internal Rate of Return (Before Tax) 19.6% 26.4% 26.0%
Internal Rate of Return (After Tax) 17.5% 22.7% 23.6%
Each case has a detailed financial analysis utilising three-year trailing
average metal prices of $US1.20 per pound for zinc, $US2.81 per pound for
copper, $US0.95 per pound for lead, $US16.67 per ounce for silver and $US1,459
per ounce for gold, an exchange rate of GBP1.00=$US1.25.
In summary, the most attractive option is the expanded Case C, which, with some
$99 million of pre-production capital expenditure, generates a total cumulative
cash operating surplus over a 12 year mine life of more than $510 million (GBP408
million), which translates to a pre-tax Net Present Value discounted at 10% pa
of over $120 million (GBP96 million), with an attractive IRR of 26%.
Using the higher current January 2021 metal prices and exchange rate would
double this Case C NPV10 to $238 million (GBP176 million) and applying a more
conservative 12% discount rate to this would result in an NPV12 of $195 million
(GBP144 million).
"We are very encouraged with these financial results, particularly for the
expanded scenario. The PEA clearly demonstrates that Parys Mountain has the
potential to be developed as a serious mining project producing an average
7,300 tonnes of copper, 8,000 tonnes of zinc, 7,600 tonnes of lead, 6,000 kg of
silver and 160 kg of gold, in concentrates, per year in Case C and become a
major contributor to the UK economy." added Bill Hooley.
Background
In 2017 Micon produced a Scoping Study on Parys Mountain. This followed
previous work by Micon in 2006 and particularly a JORC resource estimate in
2012. The 2017 Scoping Study included major input by Fairport Engineering
Limited ("FEL") on the process plant design and costing. The 2017 study was
based on only the Indicated Resources in the Engine and White Rock zones.
These amounted to 2.45 million tonnes and at a planned production rate of 1,000
tonnes per day gave a mine life of approximately 8 years.
Anglesey concluded that utilising the Indicated Resources only did not properly
reflect the potential of the Parys Mountain property. In 2018 Anglesey entered
into an agreement with Quarry and Mining Equipment Limited ("QME") to carry out
an Optimisation Study to review expected mining capital and operating costs and
potential mining tonnages and to include the additional Inferred Resources
previously identified by Micon in 2012. The QME Optimisation Study was
completed in 2020.
Micon utilised the results of the QME Optimisation Study, as it felt
appropriate, into the Preliminary Economic Assessment. This PEA therefore
builds on Micon's previous work, including its 2012 resource estimate, the 2017
Scoping Study, including FEL's processing and infrastructure capital and
operating costs, and QME's 2020 Optimisation Study on current mining capital
and operating costs and mineable tonnages.
This PEA includes Inferred Resources and therefore the tonnages indicated as
available for mining cannot be extrapolated to Reserve status, and consequently
the financial results cannot be considered as reaching Feasibility Study basis.
QME Optimisation Study
QME is an Irish based contracting and consulting company and has been supplying
complete solutions to the mining industry since 1985. It is currently
intimately involved in a number of developing and operating mines in Ireland
and elsewhere and employs a team of qualified and highly experienced
engineering and support staff. QME utilised these skills and project and
mining experience to develop the enhanced mining plans for Parys Mountain and
to provide current and relevant knowledge to the development of capital and
operating cost estimates for these revised plans.
An important initial aspect of the QME work was an estimate of overall costs
based on its own experience and it derived mining capital and operating costs
from the ground up. Given QME's current hands-on operating experience, these
cost estimates can be regarded as the best estimates currently available. QME
then utilised the cost estimates for the non-mining, ie processing and
infrastructure, aspects of the project from the 2017 study which had been
largely produced by FEL with additional input from Micon. QME estimated that
at a 1,000tpd operating level, total operating costs would be approximately
$US48 per tonne of ore milled.
QME then carried out a detailed mine planning exercise utilising this $48 per
tonne as a cut-off cost. They applied this to each of the mineralised zones at
Parys Mountain as identified by Micon in 2012 including both Indicated as well
as Inferred material to estimate tonnages into stoping blocks that would be
available for mining. Some of these cases were based only on the White Rock
and Engine Zones that lie adjacent to the existing infrastructure at Parys
Mountain including the Morris Shaft, whilst one particular case looked at the
greater tonnages available in the more distant Lower Engine, Garth Daniel and
Northern Copper zones.
Having identified these stoping blocks, QME produced detailed mining schedules
for a number of cases. These schedules include all the necessary access and
production development required as well as production by tonnage and grade for
the relevant timing periods. As a result, a number of differing production
rates were selected based on the overall tonnages to ensure that the optimum
overall mine life for each case. QME then applied its expected development and
production cost estimates to each work unit to generate overall time and cost
forecasts by period for each of the cases developed.
Micon Preliminary Economic Assessment
Resource Estimate
As part of the development of the PEA, Micon reviewed the work carried out by
QME including the mine planning and the capital and operating cost estimates.
In general, Micon concurred with the QME work but did make some amendments when
considered necessary. Having accepted the $US48 per tonne cut-off level, Micon
produced a revised resource estimate at this value. This estimate used the
same parameters including metal prices utilised in its 2012 estimate. While
there has been some movement in the prices in the intervening period Micon
concluded that using current prices would not significantly amend this
estimate.
Parys Mountain Mineral Resources Estimate.
Zone Category Tonnes Cu Pb Zn Ag Au
(%) (%) (%) (g/t) (g/t)
Engine Indicated 496,000 1.36 2.59 4.94 91.8 0.5
Inferred 121,000 1.73 3.42 6.73 69.9 0.5
Deep Engine Inferred 620,000 1.95 1.90 4.21 22.6 0.2
White Rock Indicated 4,712,000 0.25 1.23 2.30 23.1 0.3
Inferred 1,258,000 0.28 1.26 2.56 27.5 0.3
Garth Daniel Inferred 340,000 1.89 2.76 5.78 66.3 0.1
Northern Copper Inferred 9,375,000 1.27 0.24 0.38 5.0 0.1
Total Indicated 5,208,000 0.36 1.36 2.55 29.7 0.3
Inferred 11,714,000 1.22 0.54 1.04 10.8 0.2
1. Dr Robin Bernau, employee of Micon International Co Ltd, is a competent
person for the Mineral Resource Estimate. The effective date of the
estimate is 15th December 2020.
2. There are reasonable prospects for eventual economic extraction under
assumptions of a gold price US$1,275/oz, a silver price of US$17.50/oz, a
zinc price of US$1.25/lb, a copper price of US$2.5/lb and a lead price of
US$1.0/lb employing underground mining techniques.
3. Micon reported the mineral resources by category following the guidelines
of JORC (2012)
4. An operating cut-off of US$48/t has been applied and no allowance has been
made for dilution or loss.
5. Rounding as required by reporting guidelines may result in apparent
summation differences between tonnes, grade and contained metal content.
Mine Development Cases
As part of the Optimisation Study, QME evaluated a number of differing
development scenarios. On review of the QME Study, Micon selected three of
these scenarios to best describe the potential for the Parys Mountain
deposits. Each case utilised both Indicated as well as Inferred resources and,
on the basis of the increased tonnage available for mining, selected higher
planned production rates than the 1,000 tonnes per day ("tpd"), used in the
2017 study.
These three cases selected by Micon are summarised as:
Case A - Utilising only the White Rock and Upper Engine zones (as in the 2017
study) with Inferred material included at a planned production rate of
1,500tpd.
Case B - As Case A but with some initial production coming from a proposed
small open cut, again at a production rate of 1,500tpd.
Case C - Utilising all the reported resources in the White Rock and Upper
Engine Zones but also including the inferred resources in the Lower Engine
Zone, the Garth Daniel Zone and the Northern Copper Zone. In this Case C with
the increased mineable tonnage, the planned production rate was increased to
3,000tpd.
Mine Planning
Micon reviewed the mine layout and the stope planning produced by QME and
generally were in accord. In Case B, Micon carried out its own design,
planning and costing for the suggested small open pit and utilised these
results rather than the estimates made by QME given Micon's experience in open
pits compared to the underground speciality of QME.
Micon agreed with QME's conclusions that the existing Morris Shaft would be
used only for ventilation in Cases A and B but would be fully utilised as a
hoisting shaft in Case C and agreed with the QME cost estimates to put the
shaft back into service.
Micon therefore accepted the majority of the detailed production timing and
cost estimates and timing produced by QME and adopted them into the financial
review.
The total tonnages from each of cases that were then included in the financial
review are shown below.
These tonnages include material derived from both Indicated and Inferred
resources as well internal dilution at zero grade of material outside of these
resources necessarily included within stoping blocks.
Stope Tonnages and Grades
Tonnage Copper Zinc Lead Silver Gold Copper
(Mt) (Cu%) (Zn%) (Pb%) (g/t Ag) (g/t Au) Equivalent %
Case A 5.87 0.34 2.42 1.27 27.27 0.28 2.25
Case B 5.45 0.36 2.49 1.30 28.40 0.29 2.33
Case C 11.42 0.84 1.82 0.97 18.63 0.24 2.29
The comparable figures in the 2017 study were:
Tonnage Copper Zinc Lead Silver Gold Copper
(Mt) (Cu%) (Zn%) (Pb%) (g/t Ag) (g/t Au) Equivalent %
Base Case 2.23 0.54 3.66 1.89 40.78 0.35 3.36
The Copper Equivalent figures shown in both tables above are determined using
the metal prices utilised in the PEA.
There is a significant increase in the tonnage available for mining and
processing beyond the tonnages in the 2017 study. This is as a result of using
the new estimated cut-off cost and the inclusion of Inferred resources in the
selection of mining blocks. Although this results in some reduction in overall
grades but as demonstrated in the PEA this does have a very significant
beneficial effect on the total project financial outcome.
Processing and Infrastructure
The Micon 2017 Scoping Study included extensive work by Fairport Engineering
regarding the process plant design, efficiencies and costs. This study
recommended a Dense Media Separation ("DMS") facility ahead of the main
processing plant and this continues to be utilised for all three of the current
cases. Similarly, FEL reviewed and costed the site infrastructure
requirements.
Micon incorporated all of FEL's recommendations from 2017 into the current PEA
but with some additions and modifications as now deemed appropriate.
Project Costing and Financial Results
Micon produced a detailed financial model incorporating its own inputs as well
as those from QME and FEL. The model is constructed on yearly periods using
the QME mine production forecasts and the FEL processing characteristics. The
model assumes that the mine will produce three base metal concentrates namely
copper, zinc and lead. In addition, some gold will be produced in concentrate
from the free gold that has been identified in the mineral resource. Relevant
concentrate transport and treatment and refining costs have been applied
individually to each concentrate.
Costs within the model are defined as mid-2020 costs to match the estimates
produced by QME. Processing infrastructure costs produced by FEL in 2017 have
been escalated to a mid-2020 equivalent.
Mining costs for each case were determined directly by QME. Processing and
Infrastructure capital and operating costs were based on the 2017 production
rate of 1,000tpd and these were factored by Micon to reflect the higher
1,500tpd or 3,000tpd production rates as appropriate.
In addition to the mining costs generated by QME, Micon included additional
initial exploration costs for $1.6 million for Cases A and B and $7.5 million
for Case C.
Within the financial model Micon incorporated all known and relevant project
charges including licences, fees and royalties. All values are based on
constant 2020 prices and no allowance has been made for any escalation in
either costs or commodity prices. No allowance has been made for corporate
costs or for any interest charges of any project financing. The financial
results derived are therefore to be read at a project level basis. Micon
calculated financial results on both a pre-tax and a post-tax basis after
incorporating appropriate carry forward expenses and utilising current UK tax
rates.
Micon considered it appropriate to utilise three-year trailing metal prices in
the financial evaluation. These were determined to the end of the September
2020 quarter and amounted to $US1.20 per pound for zinc, $US2.81 per pound for
copper, $US0.95 per pound for lead, $US16.67 per ounce for silver and $US1,459
per ounce for gold. A fixed exchange rate of GBP1.00 = $US1.25 was used.
Anglesey believes that these metal prices used are conservative and notes that
current prices are $1.29/lb for zinc, $3.64/lb for copper, $0.93/lb for lead,
$27.21/oz for silver and $1930/lb for gold. With the exchange rate at GBP1.00 =
$US1.35.
Micon reviewed the appropriate discount rate to utilise and after considering
the Weighted Average Cost of Capital and applying this through a Capital Asset
Pricing Model elected to apply a discount a rate of 10% per annum for all
cases.
The operating and financial results for each case are shown in the table
below.
Life of Mine Operating and Cash Flow Summary
Parameter Case A Case B Case C
(US$ 000) (US$ 000) (US$ 000)
Life of Mine (Years) 12 11 12
Throughput Capacity (Tonnes per Day) 1,500 1,500 3,000
Total Tonnes Mined and Processed (Mt) 5.9 5.5 11.4
Net Smelter Returns
Zinc Concentrate 235,173 217,593 341,131
Copper Concentrate 87,294 83,676 433,577
Lead Concentrate 129,602 120,319 189,024
Gold Concentrate 26,010 24,384 51,238
Total Net Smelter Returns 478,078 445,973 1,014,970
Operating Expenses
Mining 110,611 100,396 240,374
Processing (including Tailings 123,587 110,328 230,885
Disposal)
G&A 8,402 7,702 8,402
Sub-Total Cash Operating Costs 242,600 218,426 479,661
Royalties and Production Taxes 9,575 8,708 23,792
Total Operating Costs 252,176 227,134 503,454
Operating Cash Flow (EBITDA) 225,903 218,839 511,516
Pre-Production Capital 70,438 57,519 99,015
Expenditure
Ongoing Capital Expenditure 33,809 52,983 76,034
Total Capital Expenditures Life of 104,247 110,502 175,049
Mine
Net Cash Flow Before Tax 121,655 108,337 336,467
Corporation Tax 23,796 22,521 67,375
Net Cash Flow After Tax 97,859 85,816 269,092
Net Present Value Before Tax (Disc. 36,123 41,843 120,321
10%)
Net Present Value After Tax (Disc. 25,991 30,370 92,144
10%)
Internal Rate of Return (Before Tax) 19.6% 26.4% 26.0%
Internal Rate of Return (After Tax) 17.5% 22.7% 23.6%
Payback Period - Undiscounted (Years) 5.5 4.5 5.1
Payback Period - Discounted at 10% 7.2 6.1 6.2
(Years)
In summary the most attractive option is Case C. Including some $99 million of
pre-production capital expenditure this shows a total cash operating surplus
over the 12 year mine life of more than $510 million, which translates to a Net
Present Value discounted at 10% pa of over $120 million (GBP96 million) with an
IRR of 26%.
Using January 2021 metal prices and exchange rate would increase this NPV10 to
$238 million (GBP176 million) and at a more conservative 12% discount rate this
would result in an NPV12 of $195 million (GBP144 million).
Future Work
Micon has outlined a series of recommendations for future work including some
extra exploration drilling to bring some Inferred Resources into the Indicated
category. The timing of this will be dependent upon the way forward for the
project. The majority of this additional drilling for Case C would be carried
out from an underground drill drive from the area around the bottom of the
shaft and would not be commenced until some years into the project. Some
limited surface drilling has been recommended to increase the confidence in
some parts of the White Rock zone ahead of first underground development.
The Parys Mountain property has a high potential for the discovery of
additional mineral resources There are drill intercepts outside of the
planned mining blocks indicating mineralisation may extend into other areas of
sparse drilling immediately adjacent to the reported Mineral Resources.
Micon also made recommendations regarding other technical studies to better
quantify some aspects of the mining and processing operations and trade-off
studies to determine the best overall mining schedules, metallurgical
flow-sheet and infrastructure design to further optimise the project which
should led to improved economics to be included in the eventual feasibility
study. In addition, Micon noted that further environmental base-line studies
will be required ahead of any formal decision to commence operations.
Conclusions
Anglesey is incredibly pleased with the results of the QME Optimisation Studies
and the Micon PEA. This PEA demonstrates that Anglesey Mining's Parys Mountain
project is much more substantial than previously considered; that it has a
larger mineable resource base; can support a longer mine life and can generate
significantly enhanced financial returns even at metal prices well below
today's levels.
Several areas for further improvement have been identified as we continue to
evaluate and optimise the alternative cases and initiate the necessary work to
move towards completing a Preliminary or a Definitive Feasibility Study.
About Micon
Micon is an independent consulting firm of geologists, mining engineers,
metallurgists and environmental consultants, all of whom have extensive
experience in the mining industry. The firm has offices in Norwich (United
Kingdom), Toronto and Vancouver (Canada). Micon is internally owned and is
entirely independent of Anglesey Mining plc and its affiliated companies.
Micon offers a broad range of consulting services to clients involved in the
mining industry. The firm maintains a substantial practice in the geological
assessment of prospective properties, the independent estimation of resources
and reserves, the compilation and review of feasibility studies, the economic
evaluation of mineral properties, due diligence reviews and the monitoring of
mineral projects on behalf of financing agencies.
Micon's practice is worldwide and covers all of the precious and base metals,
the energy minerals and industrial minerals. The firm's clients include major
mining companies, most of the major United Kingdom and Canadian banks and
investment houses, and a large number of financial institutions in other parts
of the world. Micon's technical, due diligence and valuation reports are
typically accepted by regulatory agencies such as the London Stock Exchange,
the US Securities and Exchange Commission, the Ontario Securities Commission,
the Toronto Stock Exchange, and the Australian Stock Exchange.
Cautionary Statement:
The Preliminary Economic Assessment summarised in this news release is
preliminary in nature and is intended to provide an assessment of the project's
economic potential and design options. The PEA mine plans and economic models
include numerous assumptions and the use of Inferred Resources. Inferred
Resources are considered to be too speculative geologically to have economic
considerations applied to them that would enable them to be categorised as
mineable reserves. Mineral resources that are not mineral reserves do not have
demonstrated economic viability. There is no assurance that the results
projects in the PEA will be realised.
About Anglesey Mining plc
Anglesey Mining is listed on the London Stock Exchange and currently has
211,975,732 ordinary shares in issue.
Anglesey is developing its 100% owned Parys Mountain copper-zinc-lead deposit
in North Wales, UK with a 2020 reported resource of 5.2 million tonnes at 4.3%
combined base metals in the Indicated category and 11.7 million tonnes at 2.8%
combined base metals in the Inferred category.
Anglesey holds a 20% interest, and management rights to the Grangesberg Iron
project in Sweden, together with a right of first refusal to increase its
interest by a further 50.1%. Anglesey also holds 12% of Labrador Iron Mines
Holdings Limited which holds direct shipping iron ore deposits in Labrador and
Quebec.
Anglesey is also currently and actively reviewing other compatible base metal
projects at advanced stages suitable for incorporation into the Anglesey Group.
For further information, please contact:
Bill Hooley, Chief Executive +44 (0)7785 572517
billhooley@angleseymining.co.uk
Danesh Varma, Finance Director +44 (0)7740 932766
danesh@angleseymining.co.uk
END
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