Avanti Mining Inc. (TSX VENTURE:AVT)(PINKSHEETS:AVNMF) ("Avanti") is pleased to
provide the results of the most recent study to further optimize the February
2013 Feasibility Study Update ("FSU") prepared by AMEC on its 100% owned
Kitsault Molybdenum-Silver property in northwest British Columbia, Canada. The
optimization started with a new mine plan including new capital and operating
cost estimates intended to bring cash flow forward thereby improving the project
economics. This optimized FSU will become the basis for discussions with
financial institutions regarding the projects debt and equity financing needs.
"We are pleased to present an optimized version of our 2013 Feasibility Study
Update by AMEC and other contributors on the Kitsault Molybdenum Project,"
stated Mark G. Premo, Avanti's President and CEO. "Kitsault's projected cash
costs are in the lowest quartile of primary molybdenum producers worldwide."
Because there were no material changes to mineral reserves or mineral resources,
the technical report summarizing this update will be filed with Avanti's Annual
Information Form on SEDAR and Avanti's web site, www.avantimining.com in the
second quarter of 2014. All economic figures contained in this press release are
expressed in Canadian dollars except where noted (USD exchange rate varies in
the model between 0.95 to 0.93 per CAD$, details are provided in table 4).
Highlights of the project include:
-- Initial capital costs including working capital have been revised and
are estimated at $812 million and the life of mine (LOM) sustaining
capital at $132 million (+/- 15% accuracy). This represents a reduction
of $126 million for initial capital and an overall reduction to total
capital of $67 million over the LOM.
-- Cash operating cost at the mine site are estimated at $6.58 per pound of
molybdenum (Mo) produced. It drops to $5.60 (US$ 5.21), when a Silver
by-product credit of $0.98 per pound of Mo is realized. Total cash cost
including transportation and smelter charges would be $7.07 (US$ 6.57)
per pound of Mo.
-- The new mine plan based upon the resource model developed in 2012 calls
for a total of 226 million tonnes of proven and probable reserves
grading 0.083% Mo and 5.3 g/t silver to be mined over a 14-year mine
life, producing 367 million pounds of Mo and 15.3 million ounces of
silver. The Mo grade to the mill over the first five years of production
averages 0.101% Mo;
-- At a long term price Mo price of US$14.50/lb, (long term price
projections are supported by CPM July 2013 commodity report), the
project has an after tax Net Present Value (NPV) at an 8% discount rate
of $417 million and a 17.3% IRR. Sensitivity analysis to Mo prices is
provided in this report.
-- The mine has certain infrastructure in place with road access and will
be serviced by the existing BC Hydro transmission grid;
-- The reopening of the mine is projected to create over 300 high paying
local jobs during its 14-year life, and at the peak of construction,
over 700 jobs. The construction period is estimated at 25 months;
-- The Project received the BC Environmental Assessment Certificate in
March 2013 and subsequently applied for the British Columbia permits for
construction in April 2013. The permitting process is well advanced and
the permits are expected by the end of this year. The Kitsault Project
underwent a comprehensive study as required by the Comprehensive Studies
Regulation of the Canadian Environmental Assessment Act (CEAA), with key
triggers being the requirement for a Fisheries Act permit and explosives
permit under the Explosives Act. The federal review of Avanti's
Environmental Impact Statement (EIS) was completed on September 22,
2013. The federal Minister of Environment will render a decision on the
EIS before the end of 2013.
Optimization approach
Early in 2013 Avanti engaged a group of engineering and consultancy firms
including Whittle Consulting, Ausenco, AMEC and Knight Piesold to further
optimize the Kitsault Molybdenum Project. The optimization initiative is aimed
to rationalize the initial capital expenditure while providing higher returns in
early stages of the project as well as the maximization of metal recovery at the
later stages. The main aspects incorporated into the project as part of the
optimization include:
-- Fully variable elevated cutoff grades during the life of mine paired
with the dynamic use of the ore stockpiles.
-- Implementation of a flexible mineral processing regimen based on grind-
throughput-recovery (GTR) relationships for the three main rock types
contained in the deposit.
-- Selection of the ultimate pit and internal operational phases
incorporating the results of the Enterprise Optimization study.
-- Optimization of equipment selection and layout in the process plant.
-- Optimization of the grinding circuit to maximize throughput
-- Incorporation of improvements to the silver recovery circuit.
-- Rationalization of the initial and sustaining capital requirements,
including optimization to the project infrastructure and tailings
management facilities.
Project Description
The Kitsault property is located about 140 km north of Prince Rupert, British
Columbia, and south of the head of Alice Arm, an inlet of the Pacific Ocean. The
property includes three known molybdenum deposits: Kitsault, Bell Moly, and
Roundy Creek. The Kitsault mine was a producer of molybdenum between 1967 and
1972 and from 1981 to 1982 with total production on the property during both
periods being approximately 31 million pounds of molybdenum.
Kitsault has road access to the mine site and is serviced by the BC Hydro
transmission grid. The November 2013 FS update estimates that the Kitsault Mine
would operate at an annual mill throughput rate of 16.6 million tonnes, or
45,500 tpd, with an average strip ratio of 1:1 for a mine life of 14 years. The
ore mined by conventional truck and shovel open pit methods will be crushed in a
gyratory primary crusher, then ground using a SAG-ball mill configuration.
Conventional flotation and five stages of cleaning will produce molybdenum
concentrate that will be dried and packaged into bags for shipment. The
life-of-mine molybdenum production is estimated at 367 million pounds of
molybdenum contained in approximately 343 thousand wet tonnes of molybdenum
concentrate produced from the processing of 226 million tonnes of ore grading
0.083% Mo. Total molybdenum recovery varies depending on mill head grade but is
estimated to average 89% over the life of the mine. During the de-sulfidization
of the tailings for environmental considerations, a process was developed to
recover by-product silver that averages 5.3 g/t in the mill feed. Silver
production of 15.2 million ounces is indicated at a metallurgical recovery of
approximately 39%.
Mineral Reserves Statement
The Kitsault mine Mineral Reserves have been prepared by the consultants in
accordance with NI 43-101 standards and CIM Definition Standards (2010). This
statement was prepared by Mr. Ramon Mendoza Reyes (P.Eng.) of AMEC, a Qualified
Person (QP) as defined in NI 43-101. These reserves are sufficient for 14 years
of operation at a nominal production rate of 45,500 t/d. Mineral Reserves are
summarized by category in Table 1. The notes accompanying Table 1 are an
integral part of the Mineral Reserves and should be read in conjunction with the
Mineral Reserve statement.
Table 1. Kitsault Mineral Reserves, Effective Date November 05, 2013,
Ramon Mendoza Reyes, P. Eng. (cut-off 0.029% Mo)
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Tonnage Mo Ag Contained Contained
Classification (Mt) (%) (g/t) Mo (M lb) Ag (M Oz)
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Proven 130.7 0.092 5.2 264.2 21.7
Probable 95.6 0.071 5.5 150.0 17.0
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Total Proven and
Probable 226.3 0.083 5.3 414.2 38.7
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Notes:
1. Mineral Reserves are defined within a mine plan, with pit phase designs
guided by Lerchs-Grossmann (LG) pit shells, and reported at a 0.029% Mo
cut-off grade, after dilution and mining loss adjustments. The LG shell
generation was performed on Measured and Indicated mineral resources
only, using a molybdenum price of $13.44/lb, an average mining cost of
$1.82/t mined, stockpile rehandling cost of $0.60/t moved, a combined
ore based cost of $5.91/t milled, and a selling cost of $0.30/lb of Mo
sold. Metallurgical recovery used was a function of the rock type, head
grade and target grinding size and was defined as follows:
a. Monzonites, assuming a target grind size of 356 microns (51% of the
resources in the mine plan)
Recovery = 0.952x(-282.21(Mo%)2 + 91.062(Mo%) + 87.97) with a cap of
90.75%
b. Diorites, assuming a target grind size between 258 microns and 212
microns and a cap of 91.15% (28% of the resources in the mine plan)
Recovery = 0.52x(0.952x(-282.21(Mo%)2+ 91.062(Mo%) + 87.52)) +
0.48x(0.952x(-282.21(Mo%)2+ 91.062(Mo%) + 89.33))
c. Hornfels, assuming a target grind size between 291 microns and 212
microns and a cap of 91.10% (20% of the resources in the mine plan)
Recovery = 0.67x(0.952x(-282.21(Mo%)2+ 91.062(Mo%) + 87.79)) +
0.33x(0.952x(-282.21(Mo%)2+ 91.062(Mo%) + 89.41))
d. For other rock types (less than 1% of the resources in the mine
plan)
Recovery =7.5808xLn (Mo %) +108.63 with a cap applied at 95%
2. Revenue from silver was included in the LG shell generation assuming a
price of $24.73/oz and an overall metallurgical recovery of 39% for all
rock types.
3. Overall pit slopes varied from 42 to 48 degrees.
4. Dilution and Mining loss have been accounted for based on a contact
dilution approach assuming a dilution band of one meter around the
contact edges. 2.6Mt of Measured and Indicated mineral resources above
cut-off was routed as waste. 1.4Mt of Measured and Indicated material
below cut-off has been included as dilution material at the grade of
those blocks. The 0.3Mt of Inferred dilution material had its grades set
to zero.
5. Tonnages are rounded to the nearest 100,000 tonnes; grades are rounded
to three decimal places for Mo and one decimal place for Ag.
6. Rounding as required by reporting guidelines may result in apparent
summation differences between tonnes, grade and contained metal content.
7. Tonnage and grade measurements are in metric units; contained molybdenum
is in imperial pounds and contained silver is in troy ounces.
8. The life-of-mine strip ratio is 1:1
Capital Costs
Initial capital costs are estimated at $812 million compared with $938 million
in the February 2013 update to the FS for a reduction of approximately 14%.
Life-of-Mine sustaining capital (including reclamation bonding) was estimated to
be $166 million, which is comprised mainly of mobile mine equipment replacement,
ongoing Tailings Management Facility ("TMF") embankment construction. This
compares with $106 million in the 2013 update for an increase of about 56%. All
capital costs are (+/-15%) accuracy in this estimate.
The capital costs for the mine, plant and TMF and comparison with the February
2013 FSU are given in Table 2 below.
Table 2. Capital Cost Summary Comparison
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Kitsault Capital Costs
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2013 Feb 2013 Nov %
Preproduction Capital Update Update Difference
1000 Mining $000 111,269 122,675 10%
2000 Site Preparation and Roads $000 44,318 26,857 -39%
3000 Process Facilities $000 238,665 226,153 -5%
4000 Tailings Management and
Reclaim Systems $000 120,936 81,329 -33%
5000 Utilities $000 37,521 36,042 -4%
6000 Ancillary Buildings and
Facilities $000 49,896 33,856 -32%
8000 Owners Costs $000 22,069 31,811 44%
9000 Indirects, excluding
contingency $000 173,951 150,642 -13%
9900 Contingency $000 139,597 102,135 -27%
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Total Pre-Production Capital $000 938,221 811,500 -14%
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Sustaining Capital
Bonding $000 33,960 33,960 0%
Sustaining Capital Operating
Years $000 72,357 132,294 83%
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Total Sustaining Capital $000 106,317 166,254 56%
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Total Capital Cost $000 1,044,538 977,754 -6%
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Operating Costs
LOM cash mine site operating costs are estimated at $6.58 per pound of Mo
(+/-15% accuracy). Total cash cost are $7.07 per pound of Mo, this includes a
silver credit of $0.98 and transportation and smelter charges of $1.47. These
costs are about 3% higher than the February 2013 FS Update. The LOM unit cash
operating costs are also summarized in Table 3 below:
Table 3. Cash Operating Costs Summary Comparison (LOM average)
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Kitsault Operating Cost
----------------------------------------------------------------------------
%
Area Feb 2013 Update Nov 2013 Update Difference
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Cash Cash
Total LOM Cost Total LOM Cost
$000 $/lb Mo $000 $/lb Mo
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Mine Operations 933,896 2.50 940,101 2.56 1%
Processing Operations 1,244,879 3.33 1,206,207 3.29 -3%
G&A 307,166 0.82 270,075 0.74 -12%
Subtotal Mine Site 2,485,941 6.65 2,416,383 6.58 -3%
Ag Credit (340,878) (0.91) (359,908) (0.98) 6%
Transportation and Smelter
Charge 371,195 0.99 537,936 1.47 45%
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Total 2,516,259 6.73 2,594,411 7.07 3%
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Project Economics
The Feasibility Study economic results utilized assumptions summarized in the
Table 4 below:
Table 4. Financial Analysis Parameters
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Parameters Inputs
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General Assumptions
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Mine Life 14 years
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Mill operating days per year 365
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Mill Availability 92%
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Production Rate (average) 45,500 tpd
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Average Process Recovery (Mo) 89%
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Average Process Recovery (Ag) 39%
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Molybdenum Concentrate Production - LOM 343 kwmt
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Concentrate Grade (% Mo) 52%
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Capital costs US$ to CDN$ exchange rate 0.95(1)
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Cash flow revenue US$ to CDN$ exchange rate 0.93(2)
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Market
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Discount Rate 8%
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Base Case LOM average molybdenum price(3) US$14.56/lb
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Base Case LOM average silver price US$23.38/oz
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Royalty
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Amax Zinc (Newfoundland) Ltd Net profits Interest 9.22%
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Alcoa Royalty NSR 1.0%
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The economic model for the base case in this study update assumes a long-term
average molybdenum price of $14.50/lb for revenue purposes.
The after-tax NPV at an 8% discount rate over the estimated mine life is $417
million. The after-tax IRR is 17.3%. Payback of the initial capital investment
is estimated to occur in 4.4 years after the start of production.
Sensitivity
Sensitivity analysis for key economic parameters is shown in Table 5. This
analysis suggests that the project is most sensitive to exchange rates followed
by Mo prices. The project is least sensitive to operating and capital costs.
Table 5. Base Case Sensitivity to After-Tax NPV at 8% Discount Rate
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Change in Factor
SENSITIVITY OF AFTER-TAX NPV @ 8% Factor -30% -20% -10% 0% 10% 20% 30%
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Factor Exchange rate 1 1,189 870 619 417 248 105 (19)
Capital expenditure 2 586 530 474 417 359 300 241
Operating expenditure 3 692 601 509 417 324 231 137
Metal price 4 (167) 38 229 417 601 783 964
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The financial model also examines the primary financial outputs at various LOM
realized Mo prices and various discount rates. These results are displayed in
Table 6.
Table 6. Sensitivity of NPVs, IRR and Payback of the Project at Various
Metal Prices
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CNCF
Moly Price (Undisc.) NPV @ 6% NPV @ 8% NPV @ 10% IRR Payback
(US$/lb) (CDN $M) (CDN $M) (CDN $M) (CDN $M) % (Years)
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9.00 (88) (305) (350) (386) 0.0% 16.0
12.00 656 215 118 36 11.0% 5.6
15.00 1,303 653 507 386 20.4% 3.6
18.00 1,948 1,079 885 723 28.6% 2.7
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Financing and Environmental Assessment Update
Avanti continues to advance its strategy to finance the development of the
Kitsault Mine. Toward that end it has signed an off-take agreement with
ThyssenKrupp Metallurgical Products, a German steel maker, for 50% of the
production of Kitsault for the life of the mine. Contract volumes will be
established annually based upon the mine plan and reference a market based
monthly price for molybdenum. Based upon the strength of this off-take agreement
and an application made by KfW IPEX-Bank GmbH (KfW), a member of Avanti's
mandated banking syndicate, the project has received approval in principle for
German government debt guarantee for up to US$300 million.
Avanti also continues discussions with a potential strategic partner that will
assist in providing the equity component of the project financing.
The Project received the BC Environmental Assessment Certificate in March 2013
and subsequently applied for the British Columbia permits for construction in
April 2013. The permitting process is well advanced and the permits are expected
by the end of this year. The Kitsault Project went through a comprehensive study
as required by the Comprehensive Studies Regulation of the Canadian
Environmental Assessment Act (CEAA), with key triggers being the requirement for
a Fisheries Act permit and explosive permit under the Explosives Act. The
federal review of Avanti's Environmental Impact Statement (EIS) was completed on
September 22, 2013. The federal Minister of Environment will render a decision
on the EIS before the end of 2013.
The QPs reviewed and approved the content of this news release summarized from
the November 2013 Feasibility Study Optimization. The consultants (QPs) with
their responsibilities are as follows:
AMEC Americas Limited, Mr. Ramon Mendoza Reyes (P.Eng.) for matters relating to
mineral reserve statements, mining plan, mining capital, and mine operating
costs.
AMEC Americas Limited, Mr. Tony Lipiec (P.Eng.) for matters relating to the
metallurgical testing review, mineral processing, and process operating costs.
AMEC Americas Limited under the supervision of Mr. Simon Allard (P.Eng.) for
financial analysis.
AMEC Americas Limited under the supervision of Mr. Scott Fulton (P.Eng.) for
matters relating to infrastructure and cost estimates.
SRK Consulting (Canada) Inc. (SRK Canada) under the direction of Mr. Peter
Healey (P.Eng) for matters and costs relating to mine closure and reclamation.
Knight Piesold Ltd. (KP) under the direction of Mr. Bruno Borntraeger (P.Eng.)
for matters and costs relating to plant site geotechnical conditions, surface
water diversions and the Tailings Management Facility (TMF).
Avanti Mining Inc. is focused on the development of the past producing Kitsault
molybdenum mine located north of Prince Rupert in British Columbia. Mr. Mark
Premo, Chief Executive Officer for the Company has reviewed and approved the
scientific or technical information in this press release including the
financing update.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements: This news release contains certain forward-looking
information concerning the business of Avanti Mining Inc. (the "Corporation").
All statements, other than statements of historical fact, included herein
including, without limitation; statements about the recoverability of molybdenum
and silver at the Kitsault property, the results of the feasibility study, the
timing of the receipt of environmental approvals and other regulatory permits,
operating cost, capital cost, cash flow, the anticipated dates of commencement
of construction and production, production schedule, molybdenum products meeting
the specifications of the London Metals Exchange, silver concentrate quality and
other matters related to the development of the Kitsault molybdenum mine, are
forward-looking statements. These forward-looking statements are based on the
opinions of management at the date the statements are made and are based on
assumptions and subject to a variety of risks and uncertainties and other
factors that could cause actual events to differ materially from those projected
in forward-looking statements. Important factors that could cause actual results
to differ materially from the Corporation's expectations include fluctuations in
commodity prices and currency exchange rates; uncertainties relating to
interpretation of drill results and the geology, continuity and grade of mineral
deposits; uncertainty of estimates of capital and operating costs, recovery
rates, production estimates and estimated economic return; the need for
cooperation of government agencies and native groups in the exploration and
development of properties and the issuance of required permits; the need to
obtain additional financing to develop properties and uncertainty as to the
availability and terms of future financing; the possibility of delay in
exploration or development programs or in construction projects and uncertainty
of meeting anticipated program milestones; uncertainty as to timely availability
of permits and other governmental approvals; and other risks and uncertainties
disclosed in the Corporation's Annual Information Form for the year ended
December 31, 2010, which is available at www. Sedar.com. The Corporation is
under no obligation to update forward-looking statements if circumstances or
management's opinions should change, except as required by applicable securities
laws. The reader is cautioned not to place undue reliance on forward-looking
statements.
(1) 0.95 FX rate reflects a rate close to current and applies to capex as most
of it will occur early in the project life.
(2) 0.93 FX rate reflects a long term rate considered to be a consensus of bank
estimates and applies to the revenues from metal sales over the life of the
project which is over a period of 16 years.
(3) Long term Mo price projections are supported by CPM July 2013 commodity report.
FOR FURTHER INFORMATION PLEASE CONTACT:
Avanti Mining Inc.
Mark Premo
Chief Executive Officer
604-620-7670, extension 223
Avanti Mining Inc.
A.J. Ali
Chief Financial Officer
604-620-7670, extension 222
www.avantimining.com
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