Mr. Steven Dean reports
ATLANTIC GOLD CONFIRMS ECONOMICS OF THE MRC PROJECT IN NOVA SCOTA IN FEASIBILITY STUDY WITH AFTER TAX NPV OF $168 MILLION AND AFTER TAX IRR OF 30%
Atlantic Gold Corp. has released the results of a feasibility study, led and prepared by Ausenco Engineering Canada Inc. in accordance with National Instrument 43-101, in respect of the company's Moose River consolidated gold project (MRC project), located in Nova Scotia, Canada.
The MRC project comprises two of the company's four deposits in Nova Scotia. The study considers the co-development of its Touquoy mine, which has all major permits in place, as well as the company's Beaver Dam mine, located approximately 37 kilometres by road from Touquoy.
HIGHLIGHTS OF THE MRC PROJECT FEASIBILITY STUDY
Gold price: US$1,200/oz Amount(i)
Pretax NPV (5%) $236-million
Posttax NPV (5%) $168-million
Pretax IRR 34.9%
Posttax IRR 30.0%
Posttax payback 2.0 years
Initial capital cost $137-million
LOM cash operating cost $626/oz
LOM all-in sustaining cost $690/oz
Total LOM gold production 714,000 oz
Average annual gold production 87,000 oz
LOM waste/ore ratio 3.73
Average grade 1.44 g/t
(i) All dollar figures assume $1 equals 80 U.S.
cents.
Steven Dean, chairman and chief executive officer, noted: "Since the acquisition of the Nova Scotian gold properties in 2014, we have fast-tracked the development of the MRC project through to the project financing stage with the delivery today of a strong feasibility study. The study includes the design of a central processing facility at Touquoy, which was first designed in 2010, and now completed on a co-development basis of the Touquoy and Beaver Dam deposits. As such, the company believes the design is well optimized and is confident in its estimates to support the economic analysis within the study. The results of the feasibility study serve to reinforce the project's viability in a mining-friendly jurisdiction, with continued support from local stakeholders and government. These economics, together with the potential production upside from its wholly owned nearby deposits of Cochrane Hill and Fifteen Mile Stream, make the MRC project the premier gold-mining project in the modern era of mining in the province."
Feasibility study
The company engaged a team of specialized consultants, led by Ausenco, with the assistance of Moose Mountain Technical Services (MMTS) in respect of mine design and pit optimization, as well as compiling the economic results for the project. The company also engaged Stantec Consulting Ltd. in respect of the design of the tailings management facility, Neil Schofield, a principal of FSSI Consultants (Australia) Pty. Ltd. (FSSI), in respect of the resource modelling, and Conestoga-Rovers & Associates (CRA) in respect of environmental and permitting aspects of the feasibility study.
Production profile
The table sets out gold production from the MRC project over the life of mine.
MRC PROJECT LIFE OF MINE PRODUCTION
Ore Gold
Waste processed production
Description (000 tonnes) (000 tonnes) (000 oz)
Preproduction 2,639 0 0
Year 1 5,616 1,800 74
Year 2 4,897 2,000 96
Year 3 4,174 2,000 94
Year 4 3,274 2,000 92
Year 5 14,384 2,000 77
Year 6 14,368 2,000 90
Year 7 9,170 2,000 90
Year 8 2,686 2,000 85
Year 9 99 652 16
Total LoM production 61,307 16,452 714
Overall strip
ratio 3.73
The study is based on the deposits being developed as conventional surface open-pit mining operations with drill/blast/load/haul activities utilizing a leased production fleet operated by company employees. Initial production commences at Touquoy where the relatively low strip ratio and short haul to external waste dumps translates to a smaller production fleet, minimizing production costs in the process.
Beaver Dam, as a satellite operation, will require minimal infrastructure to supply basic office facilities and equipment maintenance requirements. The mining fleet at Touquoy will be transitioned to Beaver Dam and expanded due to the higher rate of material movement. Ore will be crushed at a location adjacent to the Beaver Dam pit near Highway 224 and then loaded onto highway trucks which will transport it along a combination of private logging and public roads to the Touquoy processing facility. Beaver Dam waste rock will be placed as close to the pit as practical to minimize waste haulage costs. Other than primary crushing, there will be no treatment of material at Beaver Dam and therefore no plant or tailings management facility is required there. A preliminary economic assessment prepared for the MRC project released in October, 2014, estimated a total of 294,000 ounces of gold to be recovered at Beaver Dam. As a result of the resource drilling program conducted at Beaver Dam to raise the majority of the resource to measured and indicated classifications following the PEA, the recovered gold at Beaver Dam has increased to 315,000 ounces, with a related increase in tonnes processed as well as waste tonnes mined.
Metallurgical testing indicates that Beaver Dam ore will have treatment characteristics similar to the Touquoy ore and will therefore be processed in the same manner as the Touquoy ore. Tailings generated from treating the Beaver Dam ore is planned to be placed in the mined-out Touquoy open pit. After all mining is complete, the Touquoy pit will continue to fill with water and the tailings will be settled well below the expected final maximum water surface level. Permanently sealing tailings below water is globally considered a preferred method for long-term tailings disposal.
Processing and metallurgy
The processing of Touquoy ore has been extensively tested and the flow sheet to be constructed has been defined. The plant will have a capacity of two million tonnes per year with an expected gold recovery of 94 per cent.
The flow sheet is conventional and consists of three-stage crushing, ball milling to a grind of 80 per cent passing 150 microns, with cyclones being used to close the grinding circuit. A centrifugal concentrator will be used to treat a portion of the cyclone underflow to recover coarse gold, with gold being recovered from the gravity concentrate by intensive cyanidation. The cyclone overflow will be screened to remove organic particles and then leached in a carbon-in-leach circuit with a two stage preleach. Loaded carbon will be treated in a pressure zadra circuit with the electrowinning sludge smelted to dore. The tailings from leaching will be treated for cyanide destruction using sulphur dioxide/air with a copper catalyst.
As previously mentioned, material from the Beaver Dam pit will be crushed and transported to the Touquoy plant. The metallurgical characteristics at Beaver Dam are very similar to the material from the Touquoy pit and as such, no modifications of the plant will be necessary. A similar recovery of 94 per cent is expected.
Geology and mineralization
Touquoy and Beaver Dam are geologically similar, being located about 20 kilometres apart within the same sedimentary stratigraphy of the Meguma terrane and along the same structural corridor -- the Moose River-Beaver Dam-Fifteen Mile Stream anticline. In both deposits, gold is disseminated throughout the host rocks-quartz-veined grey argillites (shales), though with a lower work index (approximately 10) at Touquoy than Beaver Dam (approximately 15) owing to a lower proportion of quartz veining at Touquoy. Both deposits extend to the near-surface glacial till boundary and are amenable to open-pit mining with relatively low strip ratios (2.4 to 1 at Touquoy and 5.5 to 1 at Beaver Dam). At Touquoy, most mineralization is disposed around the anticlinal hinge, and at Beaver Dam, mineralization is disposed in a tabular zone within one limb of the anticline.
Infrastructure and power
The infrastructure requirements for Touquoy are relatively modest, with minor public road realignment required and electrical power required to be accessed from a substation at Caribou mines, a total distance of 13 km, with a large part of the line using existing poles. The power line will be provided by Nova Scotia Power, which has provided a cost estimate for this installation.
No accommodation will be required as the labour force will come from surrounding communities.
The tailings management facility will be constructed from mine waste rock and low permeability till from the mine area, avoiding importation of materials from more distant locations. The tailings management facility will have a positive water balance and therefore will provide process water requirements, but extraction from nearby Scraggy Lake will provide water for start-up and in case of dry periods.
As all ore mined from Beaver Dam will be trucked to the Touquoy plant for treatment, a significant investment in forestry road upgrades (approximately 20 km in all) will be required. Three bridges and a number of culverts will need upgrading. These improvements will enhance the quality of the existing water crossings for the community and will also provide benefits from an environmental standpoint. Costs will be reduced by using crushed mine waste rock for the majority of the road bed and running surfaces. Road upgrading will be carried out during the fourth year of operation at Touquoy. As only primary crushing will be carried out at Beaver Dam, the electrical power demand at Beaver Dam is relatively small. As there is no appropriate power supply close to the facility, temporary diesel generators will be utilized. Tailings from the treatment of Beaver Dam ore will be stored in the Touquoy pit and no significant cost will be associated with their management. The buildings at Touquoy will remain in use, and only temporary workshop, office and change room facilities will be built at Beaver Dam.
Environmental and permitting
All major environmental permits are in place for mining and processing operations at Touquoy, and background environmental information has been collected at Beaver Dam since the late summer and fall of 2014. Discussions on permitting at Beaver Dam are under way with the relevant authorities.
Mineral reserve estimate
The mineral reserve estimate for the Touquoy portion of the MRC project is based on a mineral resource estimate contained within the company's PEA reported in a company news release dated Sept. 29, 2014, and filed on SEDAR on Oct. 14, 2014, prepared by MMTS with an effective date of Aug. 1, 2014.
The mineral reserve estimate for the Beaver Dam portion of the MRC project is based on a mineral resource estimate reported in a company news release dated March 3, 2015, and filed on SEDAR on April 16, 2015, prepared by Neil Schofield of FSSI with an effective date of March 2, 2015.
MRC mineral reserves, shown in the table, have been developed by Moose Mountain Technical Services with an effective date of July 2, 2015. The mineral reserve is contained within the mineral resource and is based on the following assumptions:
-
Only measured and indicated resource class materials are included in the
reserves.
- A cut-off gold grade of 0.40 gram per tonne is applied.
- In addition to the modelled in-block dilution, a further dilution factor
of 1.6 per cent at 0.28 g/t gold grade has been applied to account for mining
face dilution.
- Additional tonnes from mining dilution are assumed balanced with lost
tonnes due to an estimated mining recovery of 98.4 per cent at the average
diluted reserve grades.
- Mining recovery is reduced to 40 per cent for material between 0.40 g/t and 0.50
g/t gold cut-off grades.
SUMMARY OF ESTIMATED MRC MINERAL RESERVES
(Cut-off grade: 0.4 g/t Au)
Diluted grade Mined Au
Classification Mt (g/t Au) (000 oz)
Touquoy
Proven reserves 2.62 1.41 119
Probable reserves 6.58 1.45 306
Total proven and probable reserves 9.2 1.44 425
Beaver Dam
Proven reserves 4.03 1.47 191
Probable reserves 3.22 1.39 144
Total proven and probable reserves 7.25 1.44 335
Moose River consolidated
Proven reserves 6.65 1.45 310
Probable reserves 9.80 1.43 450
Total proven and probable reserves 16.45 1.44 760
1. Mineral reserves are classified in accordance with the Canadian
Institute of Mining, Metallurgy and Petroleum definition standards on
mineral resources and mineral reserves, which definitions are incorporated
by reference into National Instrument 43-101.
2. CIM standards on mineral resources and reserves definitions and
guidelines define a proven mineral reserve as the economically minable
part of a measured mineral resource demonstrated by at least a preliminary
feasibility study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that eventual economic extraction
is justified.
3. CIM standards on mineral resources and reserves definitions and
guidelines define a probable mineral reserve as the economically minable
part of an indicated and in some circumstances a measured mineral resource
demonstrated by at least a preliminary feasibility study. This study must
include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of
reporting, that eventual economic extraction can be justified.
4. Mineral reserves are mined tonnes and grade; the reference point is
mill feed at the crusher.
5. Diluted grades refer to mining dilution factors applied to the in situ
resource grade estimates.
6. The mineral reserves information is based on estimates prepared as of
July 2, 2015, by independent qualified person Marc Schulte, PEng, who has
the appropriate relevant qualifications and experience in mining and
reserves estimation practices.
There are no known legal, political, environmental or other risks that could materially affect the potential development of the mineral reserve.
The feasibility study mine schedule and economic analysis do not include inferred resources at MRC of approximately 1.10 million tonnes at 1.40 grams per tonne gold. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Feasibility study metrics
The table lists the key feasibility study economic metrics for the MRC project. The economics take into account the fact that the company's effective ownership in Touquoy is 63.5 per cent, and that the company will recover all operational, overhead, financing and sunk costs prior to any distributions to its privately owned partner in Touquoy. As of March 31, 2015, the total estimated cost to be recovered under the agreement is approximately $20-million. The company holds 100 per cent of Beaver Dam.
HIGHLIGHTS OF THE MRC PROJECT STUDY
Gold price: US$1,200/oz MRC project
Pretax NPV (5%) $236-million
Posttax NPV (5%) $168-million
Pretax IRR 34.9%
Posttax IRR 30.0%
Posttax payback 2.0 years
The economics have been calculated on an unlevered basis, based on a gold price of $1,200 (U.S.)/ounce and a foreign exchange rate of $1 equals 80 U.S. cents. The company has estimated its capital and operating costs, which are detailed in the table. Substantially all operating costs are Canadian dollar denominated. Given the exchange rate used in the PEA was $1 equals 90 U.S. cents, the company has seen a corresponding increase in the capital expenditures of the project for those components quoted in U.S. dollars, but is more than offset by the benefit realized through the conversion of the U.S.-dollar gold price to Canadian-dollar gross revenues. The tables show the sensitivity of aftertax net present value and internal rate of return to changes in the U.S.-dollar gold price and the Canadian-dollar/U.S.-dollar exchange rate.
SENSITIVITY ANALYSIS ON AFTERTAX NPV5
CAD/USD rate US$ gold price
$ 1,000 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500
0.75 $ 121,644 $ 159,007 $ 195,961 $ 232,870 $ 269,627 $ 306,338
0.80 $ 98,248 $ 133,306 $ 168,263 $ 202,873 $ 237,465 $ 271,924
0.85 $ 77,643 $ 110,651 $ 143,596 $ 176,431 $ 208,972 $ 241,519
0.90 $ 59,142 $ 90,469 $ 121,644 $ 152,751 $ 183,672 $ 214,393
0.95 $ 42,310 $ 72,354 $ 101,932 $ 131,465 $ 160,956 $ 190,140
SENSITIVITY ANALYSIS ON AFTERTAX IRR
CAD/USD rate US$ gold price
$ 1,000 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500
0.75 24% 29% 33% 37% 40% 43%
0.80 21% 26% 30% 34% 37% 40%
0.85 19% 23% 27% 31% 34% 37%
0.90 16% 20% 24% 28% 32% 35%
0.95 13% 18% 22% 26% 29% 32%
The feasibility study economics take into account a 1-per-cent royalty payable to the Nova Scotia government (no other mining taxes apply), in addition to the following net-smelter-returns royalty:
- 1 per cent relating to production from Touquoy, after exercise of buyback options;
- 0.6 per cent relating to production from Beaver Dam.
Income taxes are also accounted for using a 15-per-cent federal and 16-per-cent provincial income tax rate.
Capital costs
SUMMARY OF MRC PROJECT CAPITAL COSTS
(In thousands)
Total initial Total sustaining Total capital
Description capital cost capital cost(iii) cost
Mine development $16,948 $ 2,041 $18,989
Processing 51,045 3,948 54,993
Tailings management
facility 9,158 8,572 17,730
Infrastructure 15,447 10,600 26,047
EPCM 9,955 500 10,455
Indirect and other
costs(i) 21,523 (4,787) 16,736
Contingency(ii) 13,260 1,903 15,163
Total 137,336 22,777 160,113
(i) Sustaining indirect and other costs include a credit representing the
principal balance of a reclamation bond being returned to the company.
(ii) Contingencies are applied according to the degree of certainty of the
relevant line item.
(iii) Total sustaining capital costs includes construction capital
expenditures at Beaver Dam.
The initial capital cost for the MRC project for the feasibility study is estimated to be approximately $137.3-million versus $130.5-million in the company's PEA released in October, 2014. The majority of the increases in initial capital expenditure at Touquoy from the PEA can be attributed to the acknowledgement of a depreciating Canadian dollar versus the U.S. dollar in which a significant portion of the capital expenditures is sourced as well as a shift in strategy by management to engage EPCM contractors to manage the construction of the MRC project as opposed to an owner-performed construction process, which serves to mitigate both construction risk as well as financing risk with potential project financiers. Furthermore, in full recognition of seasonal conditions and given the anomalous conditions in Nova Scotia this past winter, a covered crushed ore stockpile has also been added to the initial capital expenditures at Touquoy.
Operating costs
SUMMARY OF MRC PROJECT OPERATING COSTS
Unit cost/ Unit cost/
Description tonne oz
Mining(i) 2.89 304
Processing 11.94 275
Site G&A 2.03 47
Total cash operating costs 626
Total all-in sustaining
costs(ii) 690
(i) Excludes preproduction mining, which is captured under
initial capital.
(ii) All-in sustaining costs exclude corporate general and
administrative expenses.
Next steps
Over the coming months, the company will be focused on:
-
Environmental impact assessment and permitting for Beaver Dam;
- Securing project financing;
- Agreement on a mutual benefits agreement with the Nova Scotia Mi'kmaq
community.
Report filing
A complete technical report prepared in accordance with National Instrument 43-101 containing the feasibility study will be filed on SEDAR and the company's website within 45 days of the date of this news release.
Qualified persons
Each of the qualified persons below has reviewed and approved the technical information contained in the feasibility study and in this press release, and is independent of the company. The qualified persons are:
Kevin C. Scott, PEng, of Ausenco, is the qualified person responsible for the metallurgy, recovery methods, infrastructure, capital cost and operating cost estimates, and the overall preparation of the report.
Marc Schulte, PEng, of MMTS is the qualified person responsible for the mining and mineral reserve estimates.
Tracey Meintjes, PEng, of MMTS is the qualified person responsible for the economic analysis.
Jeffrey Barrett, MScE, PEng, of Stantec is the qualified person responsible for the tailings management facility design.
Neil Schofield, MS -- applied earth sciences, MAusIMM, MAIG, of FSSI, is the qualified person responsible for the mineral resource estimates.
Conference call details
Conference call date:
July 7, 2015
Start time: 9 a.m. PT/12 p.m. ET
Call-in number: 1-800-616-4018
Participants are asked to dial in 10 minutes in advance of the commencement of the conference call.
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