Auriga Gold Announces Positive Updated Preliminary Economic Assessment for Open Pit and Underground Mining and On-Site Millin...
05 Gennaio 2012 - 11:00AM
Marketwired Canada
Auriga Gold Corp. (TSX VENTURE:AIA) ("Auriga Gold" or the "Company") is pleased
to report that it has received a positive Updated Preliminary Economic
Assessment ("PEA") for a proposed open pit and underground mining and milling
operation at its wholly-owned Maverick Gold Project located 65 km northeast of
Flin Flon, Manitoba. The combined open pit and underground mine plan and on-site
processing rate were selected to improve the economics of the project.
The proposed operation includes the open pit mining of 530,000 tonnes of
potentially economic mineralization; the dewatering of the historic Puffy Lake
underground gold mine; and test stoping followed by underground mining. The
existing Puffy Lake mill would be refurbished as part of the program. The PEA
was conducted by ACA Howe International Limited (Howe) based on the mineral
resource estimate (see August 4, 2011 news release) prepared by P&E Mining
Consultants Inc. Currencies reported below are in Canadian dollars unless
otherwise specified.
Highlights:
-- A total of approximately 2,039,000 tonnes of mill feed would be produced
from five open pits and the underground mine and processed at the to-be-
refurbished existing mill at a rate of 750 tpd. The project would
operate for 7.5 years and produce a total of about 348,000 oz Au for
sale. The existing mill and infrastructure would be refurbished
concurrently with the development of the initial open pit.
-- The Base Case is based on a gold price of US$1,400/Au oz (at Dec 31/11
the 12 and 24 month trailing averages were US$1,568/oz and US$1,396/oz
respectively). The projected pre-tax NPV(8%) is $79.6M; pre-tax IRR is
84%; with pre-tax payback reached in 20 months of processing. It is
projected that 50,000 tonnes of mill feed would be processed during mill
ramp-up in the pre-production year.
-- The capital costs amount to $18.1M and include a 20% capital cost
contingency. The projected life of mine sustaining capital costs
including closure costs amount to $26.6M.
-- The projected average production cash cost is $950/oz Au. This cost
includes $873/oz Au for operating costs and $77/oz Au for sustaining
capital costs.
Dr. Richard Sutcliffe, Auriga Gold's President and CEO commented, "We are
pleased with the updated PEA on a proposed open pit and underground mining
operation. The combined mine plan is the result of a substantial amount of mine
engineering and evaluation and provides the Company with the opportunity to
refurbish the existing mill, confirm its performance and significantly expand
the mine life. Cash flow from the combined operation results in payback within
20 months and a pre-tax NPV with an 8% discount of $79.6 million. This is a
significant improvement to the positive open pit PEA released in October. We
will continue to explore and develop known gold mineralization at the Puffy Lake
and Nokomis deposits with the intent of further extending the Maverick Gold mine
life."
This PEA is an update to the previous PEA (see October 31, 2011 news release)
for a proposed open pit and milling operation at the Maverick Gold Project,
Puffy Lake Gold property. The follow-up PEA utilizes re-optimized open pits,
test stoping and an underground mining program, a mill processing rate of 750
tpd and 90% mill gold recovery. The economic analyses in the previous PEA and
follow-up PEA use the same gold price and US:CAD exchange rate. In the follow-up
PEA, the open pits are mined out in year 3. These pits are scheduled to produce
750 tpd of mill feed in Year 1 and 375 tpd in years 2 and 3. The existing
underground mine decline ramp and workings would be dewatered, rehabilitated and
used to service the test stope in Year 1. The test stoping program would be
carried out in Year 1 to demonstrate the stoping method and productivity and
refine the underground mining costs. It is assumed that sustained underground
mining operations would commence in Year 2 and be completed in Year 8. The
underground mine is scheduled to produce 375 tpd of mill feed in Year 2; 496 tpd
in Year 3, and 750 tpd in Years 4 to 8.
The mineral resources contained in the proposed open pits and underground mining
operation are summarized in Table 1. Approximately 30% of those resources are
classified Indicated, with the remaining 70% classified as Inferred. The mineral
resources disclosed on Aug 4, 2011 are summarized in Table 2. Mineral Resources
which are not mineral reserves do not have demonstrated economic viability.
Table 1: Proposed open pits and underground mine
----------------------------------------------------------------------------
Diluted potentially Estimated diluted head
economic mineralization grade
Resource Category (kt) (g/t)
----------------------------------------------------------------------------
Indicated Resource
Open pit 380 4.8
Underground 270 6.2
----------------------------------------------------------------------------
Inferred Resource
Open pit 150 4.9
Underground 1,240 6.3
----------------------------------------------------------------------------
Estimated open pit
stripping ratio
(t waste: t milled) 13:1
----------------------------------------------------------------------------
Notes:
1. The proposed project assessed in the updated PEA is preliminary in
nature and includes both Indicated and Inferred Mineral Resources.
Inferred Mineral Resources are considered too speculative geologically
to have economic considerations applied to them that would enable them
to be categorized as Mineral Reserves. There is no certainty that the
preliminary economic assessment will be realized.
2. The projected open pit tonnages are based on conceptual pit shells.
3. Surface dilution was 375% (40 cm avg. vein width, 150 cm diluted width.
Underground, planned dilution was 375%, unplanned 20%.
4. CIM definitions were followed for the Mineral Resources.
5. Mineral Resources for the open pit mining operation proposed in the PEA
were selected using an internal cut-off value of $22.75/t milled, and a
gold price of US$1,400/Au troy oz.
Table 2: Maverick Project, Puffy Lake Deposit, Mineral Resource Estimate
(Aug 4, 2011 News Release)
----------------------------------------------------------------------------
Resource Category Tonnes Gold (g/t) Gold (oz)
----------------------------------------------------------------------------
In Pit Indicated 242,000 4.16 32,000
--------------------------------------------------------
Au 0.6 g/t cut-off Inferred 78,000 3.81 10,000
----------------------------------------------------------------------------
Underground Indicated 702,000 6.29 142,000
--------------------------------------------------------
Au 2.5 g/t cut-off Inferred 3,018,000 5.65 548,000
----------------------------------------------------------------------------
Total Indicated 944,000 5.73 174,000
--------------------------------------------------------
Inferred 3,096,000 5.61 558,000
----------------------------------------------------------------------------
Notes:
1. See Auriga Gold's Aug 4, 2011 news release including relevant
assumptions.
2. Mineral Resources which are not mineral reserves do not have
demonstrated economic viability. The estimate of mineral resources may
be materially affected environmental, permitting, legal, title,
taxation, socio-political, marketing, or other relevant issues.
Table 3: Updated PEA BASE CASE Economic Analysis Results
Open pit mining method and costs by Conventional open pit mining
contractor Mining - $5.50/ tonne potentially
economic mineralization
Definition drilling and grade
control - $1.41 / tonne of
potentially economic mineralization
Waste rock stripping - $4.50/ tonne
waste rock
Underground mining method and costs Room and pillar (Slush blasted muck
by Company personnel down 30 degrees dip to sill drift)
Ramp and ventilation raises - $3,000
/ metre
Mining and transport to mill - $106/
tonne milled
Definition drilling and grade
control - $2.97/ tonne milled
Other costs Processing - $25/ t milled
Tailings and water management - $1/t
milled
General and Administration - $11.06
/ t milled
Underground mine indirect costs -
$4.40 / t milled
Mine closure - $1.3 M
Total mineralization milled 2,039,000 t
Mining dilution Surface: Average 375% (Typical Vein
Width 40 cm, Min. Mining Width 150
cm)
Underground: Planned Avg. 375% + Un-
Planned 20%;
Mining recovery Surface 90%; Underground 88%;
Average diluted head grade 5.8 g Au/t
Mill throughput 750 tpd
Mill recovery 90%
Total estimated gold recovered 348,000 troy oz Au
Gold price US$1,400/oz Au
US$:CAD$ exchange rate US$1 = CAD$1.014
Gold royalty 3%
Total gross revenue from gold sales $478M
Dore bar transport and refining costs. Not included.
Pre-tax undiscounted cashflow $130M
Pre-tax NPV(5%) $95M
Pre-tax NPV(8%) $79M
Pre-tax IRR 84%
Pre-tax Payback 2.5 yrs after the start of the
project.
(Projected in 20th month of mill
feed processing)
The updated PEA has assessed the potential economic viability and practicality
of the combined open pit and underground mining and on-site milling program, and
determined that the project is economically attractive. The PEA incorporates
aspects that are intended to help improve the underground mine meet its
production targets such as an improved stoping method; an underground production
rate that would ramp up from 375 tpd to 750 tpd over 1.5 years (versus the 1,000
tpd production rate used when the Puffy Lake underground was in operation in the
late 1980's); the introduction of an underground definition diamond drilling and
a grade control sampling and assaying program; the development of a second mine
portal and access ramp; and additional ventilation raises to surface.
The results of the PEA indicate that it would be beneficial to increase the
tonnage of mill feed obtained from open pits and extend the time line over which
open pit and underground mining are conducted concurrently. Howe recommends that
Auriga Gold conduct a program of in-fill diamond drilling to delineate as well
as upgrade Inferred Resources to the Indicated category or better for the
potential open pit resources; a similar program of further delineating and
upgrading of the shallow (less than 100 m) resources that could potentially be
exploited using open pits; a program of step-out exploration diamond drilling to
seek to expand the known resource and test other targets on the property. This
may increase the tonnes of potentially economic mineralization that could be
open pit mined concurrent with the underground operation.
The historic Puffy Lake underground mine and mill was placed on care and
maintenance in 1989. The open pit operations that are proposed to be conducted
concurrent with the modified underground mining program could help feed the mill
in the event of a temporary shortfall in underground production. Howe recommends
that the modified stoping method and productivity proposed in the follow-up PEA
be tested before the Company fully commits to the underground mining program.
Howe also modified the Base Case cashflow model and assessed the economics of
mining the five re-optimized pits as a standalone open pit and on-site milling
project. The results of this scenario are also of interest where the estimated
pre-tax NPV(8%) is $20.5M, pre-tax IRR is 106%, and payback is projected to
occur in the 12th month of mill feed processing. Howe also assessed a scenario
in which the five re-optimized open pits were mined and underground mine work
was limited to mine dewatering and test stoping. This scenario offers payback in
the 16th month of mill feed processing, a pre-tax NPV(8%) of $13.4M and pre-tax
IRR of 69%.
Environmental and social:
The Company is in the process of obtaining input from environmental regulatory
authorities in regard to environmental permitting requirements and is in the
early stages of community engagement. The Company is not aware of any
environmental, permitting, legal title, taxation, socio-political, marketing or
other issue that could materially affect the proposed operation. The
projections, forecasts, and estimates in the PEA constitute forward-looking
statements, and readers are urged not to place undue reliance on such
statements. Additional cautionary and forward-looking statement information is
provided at the end of this news release.
Qualified Persons:
The updated PEA for the proposed combined open pit and underground mining and
milling operation summarized here will be posted on SEDAR with 45 days of this
news release.
The Qualified Persons for the purposes of National Instrument 43-101 "Standards
of Disclosure for Mineral Projects" for the PEA are listed in Table 4.
Table 4: Qualified Persons
Section Company Qualified Person
Mineral Resources P&E Mining Consultants Eugene Puritch,
Inc. P.Eng.
Dr. Wayne Ewert,
P. Geo.
Fred Brown, CPG
Open pit optimization and ACA Howe International Doug Roy,
scheduling Limited M.A.Sc., P.Eng.
Mine operating and capital ACA Howe International David Orava,
costs, Environmental and Limited M.Eng., P.Eng.
social & economic analysis
Milling processing costs ACA Howe International Al Hayden, P.Eng.
Limited
Project conclusions ACA Howe International Felix Lee,
Limited MBA, P.Geo.
Doug Roy,
M.A.Sc., P.Eng.
David Orava,
M.Eng., P.Eng.
All of the Qualified Persons for the PEA have reviewed this news release and
consented to the inclusion of the data and the form and context in which it
appears insofar as their individual contributions are concerned.
About Auriga Gold
Auriga Gold Corp. is a Canadian mining company focused on developing the Puffy
Lake Mine and expanding gold resources on its Puffy Lake and Nokomis properties
(the "Maverick Gold Project"). The Company plans to upgrade and expand the
resources at the Maverick Gold Project and bring the Puffy Lake Mine back into
production in 2012. The Puffy Lake Mine includes a 1,000 tpd flotation mill, a
developed underground ramp to 135 metres depth, is fully road accessible and
close to existing mining infrastructure. The Maverick Gold Project is located in
the Flin Flon Greenstone Belt of Central Manitoba.
Certain information regarding the Company including management's assessment of
future plans and operations, may constitute forward looking statements under
applicable securities laws and necessarily involve risks associated with mining
exploration and development, volatility of prices, currency fluctuations,
imprecision of resource estimates, environmental and permitting risks, access to
labour and services, competition from other companies and ability to access
sufficient capital. As a consequence, actual results may differ materially from
those anticipated in the forward-looking statements. A feasibility study has not
been completed and there is no certainty the disclosed targets will be achieved
nor that the proposed operations will be economically viable. This press release
is not and is not to be construed as an offer to buy or sell securities in the
United States.
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