TIDMMNC
RNS Number : 2601J
Metminco Limited
08 September 2016
ASX ANNOUNCEMENT 8 September 2016
UNDERGROUND MINE DEVELOPMENT OPTION AT MIRAFLORES DEMONSTRATES
ROBUST ECONOMICS
Metminco Limited (Metminco or the Company) (ASX: MNC; AIM: MNC)
announces results for the scoping level work completed by SRK
Consulting (USA) Inc. (SRK) on an underground only mining study at
the Miraflores Project in Colombia, in which the Company has a 100%
interest. Based on the updated capital and operating costs for this
option, and the associated financial returns, the Project is
considered to be financially robust and hence represents a viable
development option.
The Miraflores Project has a Measured and Indicated Mineral
Resource of 9.19 million tonnes at 2.81g/t gold and 2.76g/t silver
(containing 832,000oz Au and 817,000oz Ag) at cut-off grade of
1.2g/t Au, as announced on 21 July 2016, which has formed the basis
of the mining study.
SRK have refined the prior underground mine design and
associated mining schedule, in addition to updating operating and
capital costs to Q3 2016 US dollars. The mining schedule produces
4.03 million tonnes at a mined grade of 3.51g/t Au and 2.84g/t Ag
(including a low grade stockpile material feed) over a mine life of
9 years, producing approximately 50,000oz of recovered gold per
annum at steady state.
All SRK work completed and referenced here does not provide the
detail required to meet NI 43-101 or JORC 2012 compliant Ore
Reserves.
Life of Mine capital
Initial Capital US$81 million (incl. US$14 million in contingencies)
Sustaining Capital US$17 million
Total US$98 million
Operating costs
Life of Mine C1 cash costs US$555/oz
Life of Mine AISC costs US$648/oz
Financials
EBITDA US$31.7 million per annum over 9 years
NPV (after tax) US$73.4 million @ 8% discount rate (US$96
million @ 5% discount rate)
IRR 26%
Payback 2.8 years
Gold price US$1,300/oz
Due to the favourable outcome of the study, the underground only
mining option will now be the focus of the planned feasibility
study.
Mr William Howe, Managing Director, commented: "The technical
assessment and financial modelling of the underground mining option
at Miraflores has clearly demonstrated that this option is
technically and financially robust and has significant advantages
over previous studies conducted at the Project. The potential to
reduce capital costs significantly, as indicated by this study,
together with the social and environmental advantages relating to
the smaller footprint for the Project, make this development option
an achievable target for the Company."
Metminco Limited ABN Level 6, 122 Walker Street,
43 119 759 349 North Sydney, NSW, 2060
ASX Code: MNC.AX; AIM Tel: +61 (0) 2 9460 1856;
Code: MNC.L Fax: +61 (0) 2 9460 1857
www.metminco.com.au
1 Introduction
SRK was retained by Metminco to complete an update to a previous
scoping level study of the Miraflores Project (Miraflores or the
Project) located in Colombia. The purpose of the study is to
summarize and publicly document previous work, and to refresh past
work to present an underground mining only scenario utilizing
filtered tailings as backfill material, with a dry stack tailings
facility. The study was completed by SRK with contributions from
Metal Mining Consultants (MMC), GR Engineering Services Limited
(GRES), and Dynami Geoconsulting (DG).
The Project has had two Preliminary Economic Assessments (PEA's)
completed and publicly filed April 27, 2012 (SRK, 2012), and August
2, 2013 (SRK, 2013a) by Seafield Resources Ltd (Seafield). A
feasibility effort was undertaken but not completed in 2013. The
feasibility work was suspended in September 2013 as further
optimization was required, specifically with relation to tailings
handling. A study was then requested by RMB, to provide an
alternative higher grade scenario with an alternative tailings
location to that used in the August 2013 PEA, as well to include
the feasibility level work previously completed, but not made
public or fully documented. The RMB study was an internal document
and was not published in the public domain. The goal of the RMB
work was to improve open pit and underground mill feed gold grade
while reducing the impact of tailings on Project operating and
capital costs by relocating the tailings to the Tesorito site. The
RMB work was completed and a technical report was issued to RMB on
February 24, 2015 (RMB 2015 Report).
The main changes from the August 2013 PEA (SRK, 2013a) to the
RMB scenario were as follows:
-- Modified tailings location, design, and cost estimate;
-- Modified underground mine design, production schedule,
productivities and cost estimate;
-- Modified open pit production schedule and cost estimate;
-- Metallurgical recoveries updated to most current testwork information;
-- Costs updated to Q4 2014 dollars; and
-- Updated prices of gold, silver, labor, diesel, power and
consumables for all costing areas.
Work directed by Metminco resulted in additional optimization
from the RMB 2015 Report work. The Metminco scenario presented in
this Announcement includes the following changes/optimizations:
-- Updated metals pricing;
-- Reduced plant throughput to 1,300 tonnes per day (t/d) as compared to 1,750 t/d;
-- Updated mine plan to an underground-only scenario which
includes the material, previously planned to be mined as open pit,
into the underground mine plan;
-- Updated the mine backfill scenario volumes and costing based
on the use of rock backfill/filtered tailings (non-structural) and
filtered tailings with cement (structural) that are placed
underground in open stopes;
-- Included using a filtered dry-stack tailings system for
tailings management. The design and capital/operating costs for the
tailings systems were provided by DG (tailings management facility)
(TMF) and GRES (tailings filters);
-- Updated the mine equipment fleet numbers and labor associated
with underground mine equipment fleet to be consistent with the
updated mine plan;
-- Adjusted General and Administrative costs consistent with the Project throughput;
-- Added a mining equipment sustaining capital line item to the model;
-- Modified portions of the operating costs (labor, fuel,
reagent cost, and electricity) and capital costs for underground
mobile equipment, tailings management facility, and tailings
filters;
-- Added land purchase costs previously not included;
-- Adjusted the royalty rate for consistency with current Colombian regulations;
-- Adjusted the depreciation schedule consistent with current practice in Columbia;
-- Adjusted the NSR estimate to include a gold and silver
payability factor consistent with current market contracts; and
-- Added contingency to the capital estimates (RMB requested no
contingency in their study).
Whereas the two PEA's and incomplete feasibility study conducted
previously by SRK all evaluated Miraflores as a combined open pit
and underground mining operation, the focus of the Metminco work
was on an underground mining operation following after several
other mining projects in Colombia which have resorted to
underground mining to facilitate greater community acceptance and
permitting.
1.1 Engineering Design and Confidence
SRK considers the work at Scoping Level Preliminary Economic
Analysis (PEA) level with an accuracy of +/- 30%. The following
table is provided to indicate to the reader, the items which were
completed to a feasibility study level in 2013. Portions of this
work are still applicable to the current Metminco scenario and the
work forms a basis for further optimization.
Table 1--1 outlines the level of study work currently included
in this document for each discipline. Additional work required to
move the Project to higher level accuracy is noted.
Table 1--1: Level of Study by Discipline
Discipline Item Level Comments
------------------ -------------------------------------------- ------ --------------------------------------------
Geology All FS MMC scope of work. Appears all work
completed to FS with exception of final
rock type characterization.
------------------ -------------------------------------------- ------ --------------------------------------------
Underground Mine Design PEA Re-optimization of stope design based on
Mining tailings backfill testing/costing work.
Additional detail/optimization of
development such as ramps, ventilation,
etc.
Developing stope detail to ensure
mineability.
------------------ -------------------------------------------- ------ --------------------------------------------
Infrastructure PEA Ventilation models should be completed
simulating the underground production
schedule to ensure
adequate airflows to all parts of the mine.
Electrical loads need to be further
evaluated and an adequate system should be
designed.
Additional dewatering confirmation work.
------------------ -------------------------------------------- ------ --------------------------------------------
Production Schedule PEA More complete productivity estimates which
are used in the schedule. More detailed
stope and
backfill sequencing.
-------------------------------------------- ------ --------------------------------------------
Underground Operating Cost PFS Further refinement of first principle
costing and tie back to production
schedule.
Updated cost quotes to 2016.
-------------------------------------------- ------ --------------------------------------------
Underground Capital Cost PFS Could refine auxiliary equipment and
utility costs.
------------------ -------------------------------------------- ------ --------------------------------------------
Geomechanical Characterization FS Unless additional resources are identified
outside the current volume then the
conducted characterization
programs to date should be at a Feasibility
Study level.
------------------ -------------------------------------------- ------ --------------------------------------------
Underground Stability FS Unless the cut-off grade significantly
changes mineable vein widths or infill
drilling identifies
additional high grade areas that could be
mined early in the sequence then the
stability analyses
conducted to date should be at a
Feasibility Study level. The crown pillar
should be redefined
with the latest Metminco mine plan.
------------------ -------------------------------------------- ------ --------------------------------------------
Backfill PEA Quantity of cement in the cemented backfill
requires testing. Further develop
characterization
of backfill using filtered tailings.
------------------ -------------------------------------------- ------ --------------------------------------------
Environmental Permitting (incl. Environmental Impact PFS PFS requires a comprehensive overview and
Study - EIS) listing of required permits, as well as the
initiation
of the impact analysis for the EIS, but not
necessarily submission of the EIS to the
regulatory
authorities.
------------------ -------------------------------------------- ------ --------------------------------------------
Baseline Data PFS PFS requires the collection and review of
available environmental data from existing
databases
for environmental studies, assessments or
audits; regulatory inspections, waste
handling practices;
management plans.
------------------ -------------------------------------------- ------ --------------------------------------------
Geochemistry FS Unless there are significant changes in the
beneficiation process, or the cut-off grade
has
changed, then the geochemical evaluations
conducted to date should be at a
Feasibility Study
level. Characterization of the filtered
tailings and specifically the leach
filtered tailings
proposed to be used in backfill will need
to be developed.
-------------------------------------------- ------ --------------------------------------------
Hydrogeology PFS Hydrogeology baseline is very close to
Feasibility Study level, but would need
some additional
analysis given the new location of the
tailings impoundment and potential impacts
associated
with co-disposal of reactive tailings in
the underground workings as backfill.
-------------------------------------------- ------ --------------------------------------------
Management Plans PFS PFS requires preparation of generalized
environmental plans and monitoring
programs; preliminary
sediment and erosion control plan;
conceptual reclamation plan; evaluation of
acid rock drainage;
geotechnical stability review of waste
dumps and tailings dam; preliminary impact
mitigation
plan; preliminary spill and emergency
response plan.
-------------------------------------------- ------ --------------------------------------------
Socioeconomics PFS PFS generally requires the initiation of
social baseline data collection,
preliminary stakeholder
engagement activities; some community
outreach and training, and general
definition of health
/safety programs.
------------------ -------------------------------------------- ------ --------------------------------------------
Process Design Design PEA Lyntek scope of work. Substantial drawings
exist. Would need additional design work
for the
smaller capacity plant now being
considered.
------------------ -------------------------------------------- ------ --------------------------------------------
Capital Cost PEA Lyntek scope of work. Capital equipment was
updated with quotes however installation
and other
costs were not updated. A complete capital
cost estimate was not compiled by Lyntek.
SRK confirms
the process capital cost with contingencies
included at PEA level.
------------------ -------------------------------------------- ------ --------------------------------------------
Operating Cost PEA Lyntek scope of work. An operating cost was
not provided by Lyntek. The PEA cost was
used
with adjustments by SRK to account for
labor, power, and inflation.
------------------ -------------------------------------------- ------ --------------------------------------------
Tailings Facility Design PEA The majority of previous work will need to
be updated as the type and location for the
tailings
impoundment presented herein is at a PEA
level. Field characterization and more
detailed design
is required to advance all areas of
tailings design.
------------------ -------------------------------------------- ------ --------------------------------------------
Capital/Operating Cost PEA All costs area at PEA level. Previous work
is not applicable.
------------------ -------------------------------------------- ------ --------------------------------------------
Metallurgy All FS A Feasibility Study level metallurgical
report was completed. A review of the
impact of the
higher grade underground mine only mill
feed and reconfirmation of the rock type
and consistency
with the previous metallurgical test
program will need to take place.
------------------ -------------------------------------------- ------ --------------------------------------------
Source: SRK
(Where PEA = Preliminary Economic Assessment; PFS =
Pre-Feasibility Study and FS = Feasibility Study)
SRK notes that this document does not provide for Ore Reserves
due to the preliminary nature of the work.
1.2 Property Description and Location
The Miraflores property consists of a 124 hectare mineral
exploitation contract granted by the Colombian Ministry of Mines to
the Asociación de Mineros de Miraflores ("Miraflores Miners
Association", AMM). Geographically, the mineral contract is located
within the Municipality of QuinchÃa, Department of Risaralda,
Republic of Colombia, some 190 km WNW of the Colombian capital of
Bogota and 55 km to the north of Pereira, the capital of the
Department of Risaralda.
2 Geology and Mineral Resource
The following is an excerpt from the ASX Metminco press release
dated July 21, 2016 "Miraflores Mine Development - JORC 2012
Mineral Resource Statement":
2.1 Mineral Resource
As of 02 April, 2013, MMC estimated a Measured and Indicated
Mineral Resource of 72.6 Mt at a gold and silver grade of 0.78 g/t
and 1.52 g/t respectively using a cut-off grade of 0.27 g/t gold in
accordance with NI 43-101. The mineral resource was based on 25,884
m of drilling in 73 diamond drill holes and 236 meters of
underground channel samples. The mineral resource estimate provided
for both an open pit and an underground mining operation.
More recently, MMC was retained by Metminco to produce a mineral
resource that is estimated in accordance with the guidelines of the
JORC Code (2012 Edition), but which only provided for the
exploitation of the Miraflores deposit via an underground mining
operation, and hence a higher cut-off grade of 1.2 g/t gold. The
revised mineral resource estimate is summarized in Table 2--1 and
Table 2--2.
Table 2--1: Mineral Resource Estimate - Miraflores Gold Project
(MMC July 2016)
Classification Tonnes Au (g/t) Ag (g/t) Oz Au Oz Ag
(000's) (000's) (000's)
--------------------- --------- --------- --------- --------- ---------
Measured 2,948 2.98 2.50 282 237
Indicated 6,245 2.74 2.89 549 580
Measured &Indicated 9,193 2.81 2.76 832 817
Inferred 180 1.44 5.49 8 32
--------------------- --------- --------- --------- --------- ---------
Based on a gold cut-off grade of 1.2 g/t.
Rounding-off of numbers may result in minor computational
errors, which are not deemed to be significant.
Table 2--2: Sensitivity of Mineral Resource to Varying Gold
Cut-off Grades
Measured and Indicated Mineral Resource
(Breccia and Veins)
---------------------------------------------------------------
Cut-off K Tonnes Au (g/t) Au (Koz) Ag (g/t) Ag (Koz)
(Au
g/t)
-------- --------- --------- --------- --------- ---------
0.60 23,455 1.61 1,211 2.13 1,606
0.70 18,983 1.83 1,114 2.27 1,383
0.80 15,868 2.04 1,041 2.39 1,222
0.90 13,571 2.24 978 2.52 1,098
1.00 11,761 2.44 923 2.62 991
1.10 10,361 2.63 875 2.71 903
1.20 9,193 2.81 832 2.76 817
1.30 8,342 2.97 797 2.83 759
1.40 7,614 3.14 767 2.89 708
1.50 6,966 3.29 737 2.96 663
-------- --------- --------- --------- --------- ---------
Inferred Mineral Resource (Breccia
only)
---------------------------------------------------------------
Cut-off K Tonnes Au (g/t Au (Koz) Ag (g/t) Ag (Koz)
(Au
g/t)
-------- --------- --------- --------- --------- ---------
0.60 1,461 0.77 36 3.45 162
0.70 342 1.14 13 3.79 42
0.80 260 1.27 11 4.25 36
0.90 212 1.37 9 4.97 34
1.00 182 1.43 8 5.45 32
1.10 181 1.44 8 5.47 32
1.20 180 1.44 8 5.49 32
1.30 178 1.44 8 5.53 32
1.40 77 1.54 4 2.59 6
1.50 35 1.67 2 0.93 1
-------- --------- --------- --------- --------- ---------
Source: MMC, 2016
3 Metallurgy and Process Design
3.1 Metallurgy
SRK designed and supervised a feasibility-level metallurgical
development program for the Miraflores Project located in the
QuinchÃa District, Colombia. Metallurgical studies were conducted
on master composites, variability composites and confirmatory
composites representing different rock types in both the open pit
and underground mine designs (SRK, 2013b). The Feasibility Study
metallurgical was completed and a report was prepared for Seafield;
however, it was not made public. The information presented here
summarizes the Feasibility Study metallurgical work performed.
The Feasibility Study metallurgical program was conducted by
Inspectorate Exploration and Mining Services (Inspectorate), a
subsidiary of Bureau Veritas, and was designed to evaluate a
process flowsheet that included:
-- Three-stage crushing;
-- Ball mill grinding;
-- Gravity concentration of the coarse gold;
-- Gold flotation from the gravity tailing;
-- Cyanide leaching of the gold flotation concentrate;
-- Cyanide detoxification of the cyanidation residue; and
-- Tailing thickening.
The average overall gold recovery is estimated at 91% and is
based on the weighted contribution of each of the mineralized rock
types in both the underground and open pit designs. The gold
recovery estimate includes a 2% gold recovery reduction to allow
for gold losses due to plant inefficiencies. The average overall
silver recovery is estimated at 54% and is based on the weighted
contribution of each of the mineralized rock types in both the
underground and open pit designs. The silver recovery estimate
includes a 2% silver recovery reduction to allow for silver losses
due to plant inefficiencies.
The current Metminco scenario presented in this press release
uses underground mining only resulting in a higher average grade
(3-4g/t Au) to the process facility than the previous PEA's. It can
reasonably be expected that processing of material from the higher
grade underground scenario would result in similar, if not somewhat
better, overall metallurgical performance, however, recovery
estimates, based on rock types and underground mining grades,
should be checked during the next phase of study.
3.2 Process
The design of the process facility for the updated PEA (2013a)
and the Feasibility Study effort were undertaken by Lyntek. The
Feasibility Study work was not completed. Process design presented
in this section represent process designs completed as part of the
updated PEA (SRK 2013a). Although operating costs have been updated
from the PEA, the process plant capital cost estimate for a 1,750
t/d process plant is unchanged from the updated 2013 PEA. SRK notes
that the mining scenario presented here is based on a 1,300 t/d
facility. The Lyntek work and previous PEA's were based on process
facilities with throughputs of 1,750 t/d. Process facility and mine
production should be optimized in future studies.
Metallurgical studies have demonstrated that the Miraflores
material can be effectively processed by a flowsheet that includes
gravity concentration followed by cyanidation of the gravity
tailing or by a flowsheet that includes gravity concentration
followed by flotation and cyanidation of the flotation concentrate.
SRK has selected the latter flowsheet concept as this has the
advantages of slightly better overall gold recovery and a much
smaller footprint for the cyanidation circuit, which offers
significant advantages with respect to capital cost and disposal of
cyanide leach residues. A conceptual flowsheet for the Miraflores
process plant is shown in Figure 3-1.
Figure 3-1: Process Flow Diagram
To view this diagram, please refer to the full copy of this
document located on the Company website ....www.metminco.com.au
Source: SRK
Run of Mine (RoM) material would be hauled to the crushing plant
and either dumped directly into the crushing plant feed hopper, or
stockpiled and fed to the crusher with a front-end loader. The
crushing circuit would consist of a primary jaw crusher followed by
secondary and tertiary cone crushers, with the tertiary crushers
operated in closed circuit with a vibrating screen to produce a
P(80) -9 mm final crushed product, which would be conveyed to the
fine mill feed bin ahead of the grinding circuit.
Crushed mill feed would be fed from the fine mill feed bin feed
the grinding circuit, which would consist of a ball mill operated
in closed circuit with hydrocyclones. The cyclone overflow would
advance to the flotation circuit at a grind size of P(80) -106
microns. Coarse free gold would be recovered from a portion of the
cyclone underflow in a gravity concentration circuit that would
include two centrifugal gravity concentrators. The resulting
rougher gravity concentrate would then be upgraded on a series of
shaking tables to produce a gravity concentrate of sufficient grade
that it could be mixed with the necessary fluxes and smelted to
produce a final doré product or subjected to intensive cyanide
leaching. Shaking table tailings would be combined with the cyclone
overflow and be advanced to the flotation circuit.
The combined cyclone overflow and gravity cleaner tailings would
be conditioned with the collectors PAX (potassium amyl xanthate)
and Aerofloat 208 (dialkyl dithiophosphate) at the natural pH of
8-9, and then advanced to the rougher/scavenger flotation circuit.
The resulting rougher flotation concentrate would be then upgraded
with one stage of cleaner flotation. The upgraded gold-bearing
cleaner flotation concentrate would then be thickened to about 45%
solids prior to being advanced to the carbon-in-leach (CIL)
cyanidation circuit.
The CIL circuit would consist of agitated leach tanks operated
in series to provide approximately 48 hours of leach retention
time. The thickened cleaner concentrate would be pumped to the
first CIL leach tank and flow by gravity to each succeeding leach
tank in the train. Each tank will be provided with a carbon screen
to retain carbon within each CIL leach tank. Activated carbon,
which serves to adsorb dissolved gold from the leach slurry, would
be added to the last tank in the CIL circuit. Carbon would be
pumped counter-currently up the leach train to each preceding tank
and would gradually increase in gold tenor by the time it reaches
the first CIL tank. Loaded carbon, which is anticipated to grade at
about 4,000 g of gold per tonne of carbon (a typical gold loading
value), will be pumped from the first CIL leach tank, screened and
washed and then pumped to the gold recovery circuit.
In the gold recovery circuit, the carbon would first be acid
washed to remove scale and other materials that could potentially
foul the carbon. The acid washed carbon would then be loaded into a
carbon strip vessel in which a hot caustic/cyanide solution is
circulated to desorb (elute) the gold that had been adsorbed on the
carbon. The eluted gold would be circulated through a series of
electrolytic cells where the gold-cyanide complexes are reduced to
metallic gold, which precipitates onto stainless steel cathodes.
The precipitated gold would be washed from the cathodes, filtered
and then mixed with the necessary fluxing agents and then melted in
a furnace to produce a final doré product.
Tailings discharging from the final CIL tank would be screened
to recover residual carbon fines and then thickened prior to being
pumped to the tailings detoxification circuit. The detoxification
circuit would consist of two agitated tanks in which sodium
metabisulfite, lime, air and copper sulfate are added to destroy
the residual cyanide prior to being discharged to the tailing
storage facility.
The capital cost of the process facility is estimated to be
US$48 million inclusive of a 25% contingency (US$ 38 million before
contingency). The process operating costs are estimated to be
US$15.41/t milled.
4 Tailings Storage Facility
Tailings material from the concentrator mill will be filtered to
generate two distinct tailings streams consisting of flotation and
leached residue tailings. The larger fraction of flotation tailings
will be stored in dry stack Tailings Management Facility (TMF) and
used for mine backfill. All of the smaller fraction of leach
residue tailings is assumed to be completely used as mine backfill
and will immediately be placed underground.
The location and type of tailings (now dry stack tailings) has
been modified from previous reports to accommodate a smaller
required storage capacity, reduce environmental impact, and
minimize costs. Field characterization, testwork, and more detailed
design are required to advance the design from the current scoping
level. The TMF will be located near to the processing facility in
the Tesorito basin. The Tesorito catchment (Figure 4--1 red
outline) is a 319,650 m(2) basin located south-west of the plant
area and south of the portal site. It is bounded to the north and
east by an existing unpaved road which sets the maximum elevation
as this existing road will serve as hauling road and base for
construction of runoff management during mine operations. The
design provides two options in the basin shown in Figure 4--1.
Option 1 considers an approximately 40 m high compacted tailings
deposit just south of the plant area. The capacity of Option 1 is
sufficient for the full expected tailings production. Option 2
considers another sub-basin within the Tesorito catchment which
could be used as a future expansion and/or topsoil deposit, waste
rock pile or sub-grade stockpile area.
Figure 4--1: Primary TMF Options - Tesorito Basin
To view this diagram, please refer to the full copy of this
document located on the Company website ....www.metminco.com.au
Source: DN, 2016
The TMF design is summarized in Table 4--1.
Table 4--1: Tailings Management Facilities Design Criteria and
Capacity
Option Option Option
Phase Item Units 1 2 1+2
-------------------- ------------------- -------- ------- ------- -------
Starter Embankment Crest width m 10 10 10
-------------------- ------------------- -------- ------- ------- -------
Crest elevation masl 1,210 1,210 1,210
------------------- ----------------------------- ------- ------- -------
Minimum toe
elevation masl 1,190 1,186 NA
------------------- ----------------------------- ------- ------- -------
Upstream slope ratio 2.5:1 2.5:1 2.5:1
------------------- ----------------------------- ------- ------- -------
Downstream
slope ratio 2.5:1 2.5:1 2.5:1
------------------- ----------------------------- ------- ------- -------
Embankment
volume k(m(3) 22 36 58
------------------- ----------------------------- ------- ------- -------
Ultimate TMF Face Slope ratio 3.0:1 3.0:1 3.0:1
-------------------- ------------------- -------- ------- ------- -------
Maximum elevation masl 1,270 1,270 1,270
------------------- ----------------------------- ------- ------- -------
Elevation between
berms m 10 10 10
------------------- ----------------------------- ------- ------- -------
Berm width m 10 10 10
------------------- ----------------------------- ------- ------- -------
M(m(3)
Volume ) 1.4 1.8 3.2
------------------- ----------------------------- ------- ------- -------
Source: SRK (modified DN), 2016
Operating costs were developed based on the use of a contracted
rental fleet of trucks operating on day shift only and hauling from
the concentrator approximately 1km to the TMF. The tailings
material is spread by dozer and compacted with small compactors.
The compacted density of the filtered tailings for the design is
1.6 t/m(3) .
The TMF designs include area just downstream of the embankment
for management of contact and non-contact water management
structures which include a seepage collection pond for catchment of
all contacted water from the TMF and a sediment control pond to
assure all non-contacted water complies with minimum parameters for
discharge to the environment. The design includes allowances for
road construction and upgrades associated with the TMF.
The tailings quantities are summarized in Table 4--2.
Table 4--2: Tailings Quantities
Description Quantity Units
------------------------- --------- --------
Total Mill Feed Tailings 4.0 Mt
------------------------- --------- --------
2.5 M (m(3)
)
------------------------- --------- --------
Tailings Required for 0.7 M (m(3)
Non-Structural Backfill )
Tailings Required for 0.4 M (m(3)
Structural Backfill )
------------------------- --------- --------
Total Tailings Volume 1.1 M (m(3)
to Backfill )
------------------------- --------- --------
Tailings to TMF 1.4 M (m(3)
)
Tailings to TMF 2.3 Mt
------------------------- --------- --------
Source: SRK, 2016
The waste rock available for embankment construction is limited
to a small portion of the development rock and the majority of the
material for the embankment is expected to come from an alternative
borrow site or excess material, if available from the processing
site construction. This study prices borrow from an off-site
location.
For the scoping level study, the Option 1 TMF was selected and
included in the economic analysis. A small deficit in capacity
exists between the Option 1 volume and tailings to TMF quantities,
but this can be managed over the last two years of production by
backfilling the unused underground development driftwork. This
balancing of volumes will be further developed in more detail in
future work.
The capital cost for the filter presses is estimated to be
US$7.5 million including a 10% contingency. The tailings storage
facility capital cost is estimated to be US$2.1 million including a
15% contingency. Operating costs for the filtering and placement of
tailings are estimated at US$1.84 per tonne milled.
5 Mining
Mining is accomplished through underground longhole stope mining
with structural (cemented) and non-structural (uncemented) backfill
utilizing development rock and filtered tailings. Initial
development of the mine will occur in approximately 9 months with
some production during this period and full production in Year
1.
An elevated cut-off grade of 2.2 g/t Au was determined to be
optimal, with the addition of 2.0 g/t Au stope areas which are
immediately adjacent to the 2.2 g/t Au areas and require limited
additional development. Actual calculated cut-off grade, based on
estimated costs, is 1.52 g/t Au. The stope optimization shapes were
used as a basis for the mine design. These optimized stope shapes
were viewed on screen and those that were low grade, geographically
isolated, or otherwise sub-economic when considering development
costs, were eliminated from the design. Typically, a crown pillar
of 25 m or greater is used; however, there is one instance where an
up-stope is mined to within 5 m of the surface.
Dilution, recovery, and an allowance for development not
included in the design were applied to the mine design and are
summarized in Table 5--1. Development not included in the design
includes passing bays, muck bays, power bays, and additional
cut-outs utilities and pumping.
Table 5--1: Mine Dilution, Recovery, and Development
Allowance
Location Additional Unplanned Mining
Development Dilution Recovery
Allowance
----------- ------------- ---------- ----------
4 m x 5 m
Drifts 10% 0% 100%
3 m x 5 m
Drifts 5% 0% 100%
Stopes* 0% 3% 95%
----------- ------------- ---------- ----------
*Stopes already include a 0.25 m dilution on each side of the
stope wall (0.5 m total/stope) included in the stope optimization
shape (10% planned dilution). This planned dilution is included in
the 3-D shape and received grade information based on the block
model.
Source: SRK, 2016
A production rate of approximately 1,300 t/d was targeted from
the underground with an objective of producing approximately 50,000
oz of Au per year. The mine will meet the 1,300 t/d plant feed with
a 365 days per year, 24-hour schedule with two shifts of 12 hours
each. Productivities have been adjusted for maintenance,
operations, and efficiency delays. The yearly production schedule
was generated using iGantt scheduling software and is summarized in
Table 5--2. The mine plan includes some low-grade marginal material
that is stockpiled and then fed into the plant at the end of the
life of mine. The mine plan includes only Measured and Indicated
Mineral Resources. Mineralized tonnage >1.2 g/t Au consists of
61% Measured Resources and 39% Indicated Resources. All inferred
material has been treated as waste with zero grade where mined in
the development process or adjacent to a stope.
Access to the mine is through two portals with 4 m x 5 m drifts
used for the main ramps and primary haulage drifts. The veins and
mineralized zones between veins will be accessed via a two ramp
system and all material will be truck hauled to surface. The
overhand mining sequence will advance in each stope block by mining
from lower to upper levels. An initial development drift, the
undercut mucking drive, will be constructed below the stoping area
proceeding longitudinally along the stope in mineralized material.
Temporary brow support may be required where the LHD enters the
stope depending on rock quality and stope width. A second
development drift, the overcut drill drive, is a drift along the
top of the stope proceeding longitudinally along the stope in
mineralized material where longhole drilling will take place to
drill out the stope. These drifts will be 5 m high x 3 m wide.
The stope will be drilled and blasted and the shot mineralized
material will stack at the bottom of the stope. The stope is mucked
out through access at the stope bottom, in the undercut mucking
drive. Once a stope is mucked, backfilling commences filling the
stope up to the floor level of the overcut drive that was on the
top of the stope.
The sequence is then repeated with a new drift, the new overcut
drive, driven in the un-mined vein mineralized material above the
initial stope. The overcut drive for the lower stope becomes the
undercut for the new upper stope and the sequence repeats with
drilling, blasting, and mucking of each of the higher level stopes
being conducted on the fill of the stope below. The sequence
continues to the top of the underground mining zone at a
geotechnically designed level that allows an appropriate off-set to
the open pit mine for safety and stability. Figure 5--1 shows the
mine configuration colored by grade and by time period.
Figure 5--1: Underground Mine Configuration (August 2016)
To view this diagram, please refer to the full copy of this
document located on the Company website ....www.metminco.com.au
Source: SRK, 2016
Ventilation raises have been included between the levels and two
boreholes to the surface allow a full ventilation circuit.
The mine requires backfill to meet the required geotechnical
stability of the stopes to maximize recovery and minimize losses,
as well as to use as much filtered tailings as possible to minimize
the TMF size and cost, and to use all development rock for
backfill. Additionally, efforts were considered to minimize the use
of cement.
The backfill method incorporates two different types of fill.
The first is non-structural and gives no substantial support but
provides a working surface for equipment. The second is structural
fill assumed to have strengths in the 200 to 400 kPa UCS range.
Over the life of mine, approximately 64% of the backfill is
non-structural with the remainder being structural.
Non-structural fill is typically used in stopes that have a
substantial pillar remaining in place after mining. The
non-structural material proposed will be filtered tailings with a 2
m cap of waste rock. The non-structural material provides a base
for mining the stope above. The non-structural material also allows
for use of the filtered backfill material and reduces the need for
additional TMF capacity on the surface.
Structural fill is used in stopes that have a narrow pillar
remaining next to the stope after mining to increase extraction or
minimize dilution. SRK assumed 70% of the structural fill to be 4%
cement (by weight) and the remainder at 8% (by weight). As no test
work is available on the characterization of the tailings at this
time, these assumptions were made to allow for costing. Future work
will need to test both the tailings and backfill to confirm these
assumptions, and to develop an optimum case for the Project
balancing extraction and cement costs.
Table 5--2: 2016 Mine Plan
Yr Yr Yr Yr Yr Yr Yr Yr Yr
Item 1 2 3 4 5 6 7 8 9 Totals
-------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Mineralization
t/d (t/d) 462 1,298 1,302 1,302 1,302 1,298 1,302 1,301 1,020
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Total Tonnes
(mineralization
+ waste+
stockpiles) (t) 283,992 575,314 651,584 540,140 487,446 493,468 493,657 479,222 378,939 4,383,762
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Waste Tonnes (Au
<
0.6 g/t) (t) 129,655 55,873 133,867 21,924 4,758 5,183 4,047 616 355,923
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Mineralized
Tonnes
(Au > 1.2 g/t) (t) 126,113 475,091 475,302 475,160 475,104 475,179 475,241 475,014 372,223 3,824,428
Mineralization
Au (g/t) 3.03 3.31 3.63 3.33 3.62 4.27 3.72 3.98 3.54 3.66
Mineralization
Ag (g/t) 2.85 3.30 3.43 2.22 2.44 2.79 3.26 3.27 2.53 2.91
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
0.60 to 0.80
(Stockpile) (t) 6,288 31,960 18,558 15,753 4,407 5,594 8,715 1,607 4,766 97,648
0.60 to 0.80 Au (g/t) 0.65 0.69 0.72 0.73 0.74 0.65 0.66 0.72 0.78 0.70
0.60 to 0.80 Ag (g/t) 1.79 1.46 1.35 1.22 1.28 1.30 1.17 1.41 1.45 1.38
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
0.80 to 1.0
(Stockpile) (t) 14,275 4,639 17,990 12,974 1,238 6,347 1,288 508 59,260
0.80 to 1.0 Au (g/t) 0.88 0.90 0.90 0.90 0.80 0.90 0.84 0.83 0.89
0.80 to 1.0 Ag (g/t) 1.45 1.76 2.24 1.25 1.94 1.31 1.55 1.34 1.67
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
1.0 to 1.2
(Stockpile) (t) 7,661 7,750 5,869 14,329 1,940 1,164 4,365 2,601 825 46,504
1.0 to 1.2 Au (g/t) 1.06 1.14 1.11 1.10 1.16 1.16 1.09 1.05 1.10 1.10
1.0 to 1.2 Ag (g/t) 2.03 1.78 1.51 1.89 1.36 1.11 2.00 2.14 1.53 1.82
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
(m(3)
Backfill Volume ) 7,222 139,352 140,541 139,220 127,421 168,923 169,977 197,464 150,325 1,240,444
Non-structural
Backfill (m(3)
Volume ) 7,222 133,602 137,128 139,220 87,713 68,873 49,474 69,873 104,045 797,150
Structural
Cement (m(3)
Backfill Volume ) 5,750 3,413 - 39,708 100,050 120,503 127,591 46,280 443,294
Main Ramp
Development
Length (4 m x 5
m) (m) 2,816 1,378 2,884 904 210 277 240 29 99 8,838
Surface Raise
meters (m) 171 171
Internal Raise
meters (m) 97 35 162 294
Stope (t) 17,829 302,333 358,381 286,140 276,902 344,088 370,700 414,492 335,352 2,706,218
Level
Development
(3 m x 5 m) (t) 118,259 198,876 137,358 208,631 200,056 135,501 110,940 63,300 38,621 1,211,542
----------------- ------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Material tonnages and grades reflected in Table 5-2 do not
represent Ore Reserves.
Source: SRK
The backfill will be backhauled from the processing plant
location by the mine trucks and then deposited in the stopes. The
cement will be added by a screw conveyor at the processing plant,
or by mixing at the mine using simple methodologies.
Mine equipment will include top hammer longhole drills, two boom
jumbos, 3 m(3) LHD's, 20 t haul trucks, and auxiliary equipment
including scissor lifts, explosive loaders, maintenance and lube
trucks, grader, and personnel carriers.
Underground services including ventilation, mine dewatering,
ground control, and power systems were considered in the design and
are included in the costing.
Mining capital was estimated at US$6.5 million during
preproduction with US$20.7 million required over the Life of Mine.
Mining capital has no contingency included. Mine mobile equipment
is not included in the capital cost as it estimated as a lease and
included in the operating costs. Mine operating costs were
estimated to be US$34.6/t milled.
6 Geotechnical
Geotechnical investigations were conducted by SRK to provide
feasibility-level geotechnical design parameters for the open pit
and underground designs (SRK, 2013c). The objective of the
investigation was to provide suitable design parameters for mining
the Miraflores deposit, through simultaneous operations of open pit
and underground mining.
The 2013 investigation program consisted of geotechnical core
logging of eight oriented HQ3 diamond drillholes. A total of 2,145
m of core was logged. Detailed face mapping of the existing
exploration tunnel was also conducted as part of the 2013 field
program. This new data has been used in conjunction with data
previously gathered in 2012 support of the scoping-level design
(SRK, 2012). The geotechnical information was used to develop
underground design parameters including stope sizes, pillar sizes,
dip pillar sizes, and a crown pillar size (work will be further
developed in future designs as open pit was eliminated in this
study), ground support, backfill, infrastructure off-set, dilution
and recovery. It is anticipated that final stope dimensions will be
established just prior to mining and will be based on geotechnical
characterization from local delineation drilling.
Table 5-3: Underground Mine Design Parameters
Design Parameters Strong Rock Weak Rock
-------------------------------------------- ------------ ----------
Stope Dimensions Stope Height (m) 20 20
------------------
Stope Length (m) 90 30
Max Stope Width (m) 15 15
Minimum Stope Width
(m) 1.5 1.5
------------------------------------------- ------------ ----------
Crown Height (s1)
Crown Pillars (m) 83 83
------------------
Crown Width (vertical
dimension) (m) 25 25
------------------------------------------- ------------ ----------
Sill Height (<SIGMA>1)
Sill Pillars (m) 15 15
------------------
Sill Width (vert.)
(m) 5 5
HW Height (<SIGMA>1)
(m) 25 25
HW Width (between
stopes) (m) 5 5
Rib Height (<SIGMA>1)
(m) 15 15
Rib Width (strike)
(m) 3 3
------------------------------------------- ------------ ----------
Source: SRK
7 Project Infrastructure
The Miraflores deposit is located in a populated part of
Colombia and is approximately four-hours driving on paved roads
from the Antioquian capital of Medellin. The economy of the
Municipality of QuinchÃa is rural. Agricultural activities
dominated by coffee and mixed-crop farming are the principal
sources of land use and income. Small-scale, artisanal gold mining
is important in various areas such as Miraflores, El Chuscal and
QuinchÃa.
The town of Rio Sucio has basic hotel, restaurant, and shopping
facilities and is located approximately 30 km from the Project.
Power is readily available with a major transmission line for
power in the region that runs 5 to 10 km from the Miraflores site
running parallel to the Cauca River. The site capital budget
includes US$1 million for a site substation at the process plant
site and an allowance of US$450,000 for site distribution including
distribution to the mine site. Underground distribution capital is
including in the mine capital budget.
Preliminary water sources identified by SRK include the QuinchÃa
and Cauca Rivers and tributaries that flow on the Miraflores
property as well as water from underground dewatering. Metminco has
access to approximately 7 liters per second of water rights
available in the area. The water source for the process plant will
be a combination of supply from the underground dewatering and site
collection draining to the flotation tailings pond. Water will be
available primarily from recycled tailings pond water.
SRK has identified and evaluated suitable sites for a future
plant location. The area identified as the primary target is the
flatter ridge area south of the mineralized area. Site works for a
three borehole drill program, totaling 147 m of drilling and ten
test pit geotechnical program, is complete. Additional detailed
work will be conducted in the next phases of work. The road system
will include upgrades to the access road from QuinchÃa to the
Project property and construction of new access and haul roads to
the TSF facilities, underground portals, and process plant.
Other on-site infrastructure items include sewage treatment
facilities, waste storage areas, explosives storage, security,
administration and maintenance facilities, warehouse facility, and
an assay laboratory. Costing for these items have been included
within the capital estimate.
8 Market Studies and Contracts
8.1 Markets
Gold markets are mature and with reputable smelters and refiners
located throughout the world. The BMO Street Commodity Consensus
Outlook provides a median outlook for gold in 2018 of US$1,317/oz
gold and a long term outlook of US$1,300/oz gold.
Silver is a minor contributor to the overall economics of the
Project. The BMO Street Commodity Consensus Outlook provides a
median outlook of US$18.52/oz silver. The long term outlook is
US$19/oz.
For the purposes of this report, US$1,300/oz Au has been assumed
for gold and US$18.00/oz Ag for silver.
8.2 Contracts
Miraflores is not currently in production and has no operational
sales contracts in place at the time of this report.
9 Environmental Studies, Permitting and Social or Community Impact
The area around the Miraflores Project (and the region as a
whole) had been heavily disturbed through the anthropogenic
conversion of native forest to principally coffee plantation. This
land use change has sensitized the local population, and
Non-Governmental Organizations (NGOs) to additional disturbance
activities, especially those associated with natural resource
extraction and beneficiation (i.e., mining). Appropriate and
effective stakeholder engagement and community relations is
essential for the success of the Project, and Metminco has
re-established communications with the local municipalities and
indigenous Embera Chami and Karamba communities.
Baseline data collection and preliminary impact analyses were
initiated in 2010, expanded in 2012, but suspended in 2013 when
Seafield entered in to receivership. Metminco has recently
reinitialized these programs in order to meet the requirements of
the (EIS based on the latest mine plan. Surface water baseline
monitoring and mitigation will be critical for the Project given
the municipal discharges of untreated waste waters in the region
and the presence of illegal artisanal miners who are releasing
regulated pollutants (including mercury and cyanide) into local
surface waters. In addition, while the deposit has low sulfidation
(<0.6% S), the absence of neutralizing capacity in the rock
could lead to an elevated risk of acid rock drainage.
The new mine plan will require modifications to the EIS, and
will include the appropriate environmental and social management
plans based on the identified impacts. These will include the
necessary environmental measures for the proper closure and
abandonment of the operation. To ensure that these activities are
carried out, an Environmental Insurance Policy shall remain in
effect for three years from the date of termination of the
contract. SRK prepared a conceptual closure plan for the Miraflores
Project in 2013 as part of the original EIS effort. This plan (and
the projected closure cost estimate) will need to be updated based
on the modification to the mine plan presented herein.
10 Capital and Operating Costs
Costing of the Project has been completed to various levels of
detail. Table 10--1 outlines the various degrees of detail for both
capital and operating costs by discipline. The scoping level study
should be considered to be an accuracy of +/- 30% including
contingencies.
Table 10--1: Capital and Operating Cost Level of Study by
Discipline
Discipline Item Level Comments
---------------- --------------------------- ------ ---------------------------------------------------------------
Mine Underground Operating Cost PFS To confirm PFS level:
Further refinement of first principle costing and tie back to
production schedule.
An up to date labor salary study is still required for a PFS
level.
Updated cost quotes to 2016
---------------- --------------------------- ------ ---------------------------------------------------------------
Underground Capital Cost PFS Could refine auxiliary equipment and utility costs.
---------------- --------------------------- ------ ---------------------------------------------------------------
Process Design Capital Cost PEA Lyntek scope of work. Capital equipment was updated with
quotes however installation and other
costs were not updated. A complete capital cost estimate was
not compiled by Lyntek.
---------------- --------------------------- ------ ---------------------------------------------------------------
Operating Cost PEA Previous FS work by Lyntek and not confirmed by SRK. Operating
costs from previous PEA cost
was used with adjustments by SRK to account for labor, power,
and inflation.
---------------- --------------------------- ------ ---------------------------------------------------------------
Tailings Capital/Operating Cost PEA Flotation tailings costs needs to be re-estimated based on
Facility quantities of a PFS level design.
Leachate costs need to be re-estimated based on quantities in
the current Feasibility Study
level design.
---------------- --------------------------- ------ ---------------------------------------------------------------
Infrastructure Capital Cost PEA Update designs and estimates to be consistent with current
Project parameters with refined
power supply, access, and support facility data to increase
accuracy.
---------------- --------------------------- ------ ---------------------------------------------------------------
Owner's Cost Capital Cost PEA Update construction schedule, confirm adjustments to Project
size and changes to plant and
tailings facility, optimize and refine closure costs.
---------------- --------------------------- ------ ---------------------------------------------------------------
General & Operating Cost PEA To develop to next level of study: Create detailed cost
Administrative estimate with acceptable detail for
the next level of study
---------------- --------------------------- ------ ---------------------------------------------------------------
Source: SRK
10.1 Capital Cost Estimates
The capital cost estimate for the Miraflores PEA LoM totals
US$98 million, including contingency, and is summarized in Table
10--2. The capital is broken down by initial capital, required to
start and develop the mine, and sustaining capital used to continue
operations.
Table 10--2: LoM Capital Costs (US$ millions)
Description Initial Sustaining LoM
--------------------- -------- ----------- ------
Underground Mining 6.5 14.2 20.7
Processing 38.0 0 38.0
Tailings 8.6 0 8.6
Infrastructure 5.0 0 5.0
Owner's Cost 9.0 6.0 15.0
Investment on Water
Monitoring 0.1 0 0.1
Equipment Salvage 0 (3.4) (3.4)
--------------------- -------- ----------- ------
Sub-total 67.2 16.8 84.0
--------------------- -------- ----------- ------
Contingency 14.0 0 14.0
--------------------- -------- ----------- ------
Total Capital 81.2 16.8 98.0
--------------------- -------- ----------- ------
The capital cost estimate developed for this study includes the
costs associated with the engineering, procurement, preliminary
estimates of taxes, duties, and freight, construction,
commissioning and pre-operation required for all Project
facilities. The cost estimate was based on preliminary estimates
developed for the Project by SRK for mining, processing, owner's
cost, investment of water monitoring, equipment salvage, and
sustaining costs. GRES contributed the tailings filter cost. DN
developed the dry stack tailings costs. The capital cost estimated
includes direct and indirect costs. Estimates are based on
preliminary designs and costs from other similar projects combined
with first principles estimates.
Contingency is in the capital cost estimate for processing
(25%), tailings (15%), infrastructure (25%), and owner's costs
(25%). The overall contingency initial front capital is 17%.
10.2 Operating Cost Estimates
Operating costs are based on underground mining, process,
tailings and G&A estimates. All costs are in Q3 2016 US
dollars. The mining operating costs do not include capitalized
development costs. LoM operating costs by cost center are shown in
Table 10--3. Over the life of the Project, operating costs are
estimated at US$57.17/t milled.
Table 10--3: LoM Operating Costs
Description US$/t milled LoM (US$ millions)
------------- ------------- -------------------
Mining $34.67 139.7
Processing $15.41 62.1
Tailings $1.84 7.4
G&A $5.25 21.1
------------- ------------- -------------------
Total $57.17 230.3
------------- ------------- -------------------
The financial results are derived from annual inputs provided by
SRK, Metminco, GRES, and DN. SRK developed the economic model. Cash
flows are reported on a yearly basis. The basis is considered to be
2016 Q3 US dollars.
11 Economic Analysis
11.1 Principal Assumptions
A financial model was prepared on an unleveraged, post-tax
basis. The model includes a pre-tax summary for completeness. The
basis and results are presented in this section. Key criteria used
in this analysis are summarized in Table 11--1.
Table 11--1: Project Main Assumptions
Description Value Units
---------------------- ------ -------
Project Schedule
Pre-Production
Period 18 months
Mine Life 9 years
Plant Feed Rate 1,300 t/d
---------------------- ------ -------
Gold/Silver Circuit
Average Gold Recovery 91 %
Average Silver
Recovery 54 %
Gold Price 1,300 US$/oz
Silver Price 18 US$/oz
---------------------- ------ -------
An 18-month pre-production period allows for the post permitting
activities through to commercial production, including all
construction activities and surface rights settlement,
pre-production mine development, process plant and facilities
construction and infrastructure development.
Mill feed is planned at 1,300 t/d with varying grades that
provide average LoM plant feed grades of 3.51 g/t Au and 2.84 g/t
silver (including low grade stockpile feed material).
A flat 33% income tax has been used. This is the result of
combining the Colombian corporate income tax at 25% and the CREE
tax at a rate of 8%.
Working capital changes are based on accounts receivable paid 30
days after a sale is reported, accounts payable are due 30 days
following delivery of service, 16% VAT (IVA) tax over capital is
recovered after a period of 30 days and operations net inventories
of 30 days.
The financial inputs to the economic model are provided in Table
11--2.
Table 11--2: Financial Inputs
Description Value Unit
--------------------- ---------------------- -----------------
Project Equity 100% Percent
Working Capital Receivables/Payables,
Requirement IVA 30 days
Depreciation 5 year accelerated
Discount Rate 8%
Effective Corporate Colombian Income
Tax Rate 33% Tax
Governmental 4.0% effective Percent over
Royalty rate gross sales
--------------------- ---------------------- -----------------
The following exchange rates and consumables were used:
-- US$1.00 = COP$3,000;
-- Diesel: US$0.70/L; and
-- Power: US$0.11/kWh.
11.2 Economic Results
After-tax NPV is US$73 million, using an 8% discount rate (NPV
8%) with an IRR of 26%. These and other economic results are
summarized in Table 11--3.
Table 11--3: After-Tax Technical Economic Model Results
Description Units Value Unit Cost
(US$/t-RoM)
-------------------------- ----------- ------- -------------
Mineralization Processed kt 4,028
Gold Recovered koz 414
Silver Recovered koz 199
Gold Market Price US$/oz $1,300
Silver Market Price US$/oz $18
Gross Revenue US$M 539.2
-------------------------- ----------- ------- -------------
Refinery
Gold Refinery US$M (0.2) ($0.05)
Doré Transportation
& Insurance US$M (1.5) ($0.38)
Silver Refinery US$M (0.1) ($0.02)
-------------------------- ----------- ------- -------------
Subtotal US$M (1.8) ($0.45)
-------------------------- ----------- ------- -------------
NSR US$M 537.4 $133.43
-------------------------- ----------- ------- -------------
Gold Royalty US$M (21.4) ($5.30)
Silver Royalty US$M (0.1) ($0.03)
Net Revenue US$M 515.9 $128.09
-------------------------- ----------- ------- -------------
Operating Costs
Mining US$M 139.7 $34.67
Processing US$M 62.1 $15.41
Tailings US$M 7.4 $1.84
G&A US$M 21.1 $5.25
-------------------------- ----------- ------- -------------
Subtotal US$M 230.3 $57.17
-------------------------- ----------- ------- -------------
LoM Cash Cost US$/oz-Au 607 -
First 8 Years Cash 599
Cost US$/oz-Au -
Operating Margin
(EBITDA) US$M 286 $70.93
-------------------------- ----------- ------- -------------
Capital Costs
Underground Mining US$M 20.7
Processing US$M 47.5
Tailings Facility US$M 9.6
Infrastructure US$M 6.3
Owner Costs US$M 17.2
Investment on Water
Monitoring US$M 0.1
Salvage US$M (3.4)
-------------------------- ----------- ------- -------------
Subtotal US$M 98.0
-------------------------- ----------- ------- -------------
Income Tax US$M (41.2)
After-Tax Free Cash
Flow US$M 146.4
After-Tax NPV@8% US$M 73.4
After-Tax IRR % 26%
-------------------------- ----------- ------- -------------
The Project cash costs are summarized in Table 11--4.
Table 11--4: Cash Cost Breakdown
Description US$/oz
------------------------ -------
Underground Mining 339
Processing 151
Tailings 18
G&A 51
Selling/Refining 4
By-Product (Silver)
Credits (9)
-------
Direct Cash Costs $555
------------------------ -------
Governmental Royalties 52
Indirect Cash Costs $52
------------------------ -------
Direct + Indirect
Costs $607
------------------------ -------
Sustaining Capex 41
All-In Sustaining
Costs $648
------------------------ -------
Initial Capex 197
All-In Costs $845
------------------------ -------
Cash costs do note include: Private royalties, depreciation and
amortization, ARO provisions, inventory allowances, corporate
overheads, debt, employee adjustments, finished goods/by-product
adjustments, exploration and study costs, permitting costs, or
community related costs.
11.3 Sensitivity Analysis
The Project sensitivity analysis on an after-tax basis is
summarized in Table 11--5 and in
Figure 11--1. As presented, the Project is most sensitive to
market price followed by operating costs and capital costs,
respectively.
Table 11--5: Project Sensitivity (After-tax)
NPV@8% (US$ Millions) -20% -15% -10% -5% Base 5% 10% 15% 20%
----------------------- ----- ----- ----- ---- ----- --- ---- ---- ----
Revenue 25 37 50 62 73 85 97 108 120
Operating Costs 94 89 84 79 73 68 63 57 52
Capital Costs 87 84 80 77 73 70 66 63 59
----------------------- ----- ----- ----- ---- ----- --- ---- ---- ----
Figure 11--1: Project Sensitivity Analysis (After-tax)
To view this diagram, please refer to the full copy of this
document located on the Company website ....www.metminco.com.au
On an after-tax basis and using variable gold prices, Table
11--6 shows the sensitivity of the Project with regards to payback
period, NPV discount rate and IRR.
Table 11--6: Base-Case Gold Price Sensitivity Analysis
(After-Tax)
Gold Price NPV (5%) NPV (8%) IRR Payback
(US$) US$ Millions US$ Millions (years)
----------- -------------- -------------- ---- ---------
Base 96 73 26% 2.8
$1,300 96 73 26% 2.8
$1,400 117 91 29% 2.5
$1,500 137 109 33% 2.3
$1,600 158 127 36% 2.1
----------- -------------- -------------- ---- ---------
Funding
Based on the results of the underground only mining study at the
Miraflores Project in Colombia, the Company plans to raise the
funds required to complete a Bankable Feasibility Study. On
completion of the Feasibility Study, and the decision to develop
the Miraflores Project, a combination of debt and equity
instruments will be used to progress the Project into
production.
William Howe
Managing Director
For further information,
please contact:
METMINCO LIMITED
Stephen Tainton / Phil Killen Office: +61 (0) 2
9460 1856
NOMINATED ADVISOR AND BROKER
RFC Ambrian
Australia
Will Souter / Nathan Forsyth Office: +61 (0) 2
9250 0000
United Kingdom
Charlie Cryer Office: +44 (0) 20
3440 6800
JOINT BROKER
SP Angel Corporate Finance
LLP UK)
Ewan Leggat Office: +44 (0) 20
3470 0470
UK FINANCIAL PR
Camarco
Gordon Poole / Tom Huddart Office: + 44 (0) 20
3757 4997
------------------------------ --------------------
Competent Persons Statement
Mr Jeff Osborn, BEng Mining, MMSAQP, on behalf of SRK, refers to
the issue and publication by Metminco of the mining study
undertaken by SRK in this announcement dated 8 September, 2016
(Announcement). We consent to be named in the Announcement and to
the inclusion of all statements by SRK included in said
Announcement that Metminco says are based on a statement by us, in
the form and context in which these statements are included.
Forward Looking Statement
All statements other than statements of historical fact included
in this announcement including, without limitation, statements
regarding future plans and objectives of Metminco are
forward-looking statements. When used in this announcement,
forward-looking statements can be identified by words such as
"anticipate", "believe", "could", "estimate", "expect", "future",
"intend", "may", "opportunity", "plan", "potential", "project",
"seek", "will" and other similar words that involve risks and
uncertainties.
These statements are based on an assessment of present economic
and operating conditions, and on a number of assumptions regarding
future events and actions that, as at the date of this
announcement, are expected to take place. Such forward-looking
statements are not guarantees of future performance and involve
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are beyond the control of the
Company, its directors and management of Metminco that could cause
Metminco's actual results to differ materially from the results
expressed or anticipated in these statements.
The Company cannot and does not give any assurance that the
results, performance or achievements expressed or implied by the
forward-looking statements contained in this announcement will
actually occur and investors are cautioned not to place undue
reliance on these forward-looking statements. Metminco does not
undertake to update or revise forward-looking statements, or to
publish prospective financial information in the future, regardless
of whether new information, future events or any other factors
affect the information contained in this announcement, except where
required by applicable law and stock exchange listing
requirements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCEALNPEAAKEEF
(END) Dow Jones Newswires
September 08, 2016 02:00 ET (06:00 GMT)
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