Banks Island Gold Ltd. (TSX VENTURE:BOZ) -
-- NI43-101 Preliminary Economic Assessment for 1,800tpd underground gold
mine completed.
-- PEA study contemplates gold equivalent production of 114,000oz per year
at a cost of $459/oz.
-- Banks Island Gold plans to initiate exploration, permitting and
feasibility studies at Red Mountain.
Banks Island Gold Ltd. (the "Company") announces results of a Preliminary
Economic Assessment (PEA) for significant underground gold mining operation at
the Red Mountain Project, located 30km east of Stewart, British Columbia.
The NI43-101 compliant PEA study, dated June 14th 2012, was prepared by
independent consultants, Mr. Robert Baldwin, P.Eng and Mr. Lyn Jones, P.Eng. The
study considers a 1,800 tonne per day operation based on the current Mineral
Resource at the Red Mountain Gold Property. Underground mining methods are
proposed with the utilization of flotation and cyanidation for the production of
gold dore onsite for shipment to a refinery.
Pretax Financial Summary
The base case scenario, using the 3 year rolling average price of gold of $CDN
1,360 per troy oz, resulted in a pretax NPV(8%) of $CDN 155M, an IRR of 43%, and
a payback of initial capital of 1.2 years.
A scenario using the current price of gold of $CDN 1,700 per troy oz was also
considered. The financial summary for the base case and current price scenario
is presented Table 1.
Table 1 - Pretax Financial Summary
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FINANCIAL SUMMARY (PRETAX)
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BASE CASE CURRENT PRICE UNITS
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PRICE OF GOLD $1,360 $1,700 $CDN/oz
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MINE LIFE 4.3 years
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TOTAL ORE MINED 2,845,000 Tonnes
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GOLD PRODUCTION 474,382 oz
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SILVER PRODUCTION 1,233,405 oz
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GOLD EQ(i) PRODUCTION 499,050 oz Aueq
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AVERAGE ANNUAL PRODUCTION 115,246 oz Aueq / year
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OPERATING COST PER OZ(ii) $459 $471 $CDN/oz Aueq
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TOTAL REVENUE $678,709,000 $848,386,000 $CDN
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TOTAL OPERATING COST $206,789,000 $206,789,000 $CDN
ROYALTIES PAYABLE $22,505,000 $28,444,000 $CDN
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OPERATING CASH FLOW $449,415,000 $613,153,000 $CDN
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CAPITAL COST $162,671,000 $162,671,000 $CDN
PROPERTY ACQUISITION $11,000,000 $11,000,000 $CDN
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INCOME AFTER CAPITAL $275,744,000 $439,482,000 $CDN
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NPV(8%) $155,398,000 $264,134,000 $CDN
NPV(5%) $192,779,000 $318,980,000 $CDN
NPV(0%) $275,744,000 $439,482,000 $CDN
IRR 43% 63%
PAYBACK ON CAPITAL 1.2 0.9 years
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(i)Gold Equivalent calculated by converting silver to gold at ratio of 1:50
(ii)Operating Cost per oz gold equivalent including royalties payable
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The minable resource used in preparation of the preliminary assessment is
partially based on an Inferred Resource. The preliminary assessment is
preliminary in nature and includes inferred mineral resources that are
considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral reserves.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. There is no certainty that the results and conclusions
presented in this preliminary assessment will be realized.
Mr. Mossman, President of the Company stated; "The Preliminary Economic
Assessment on our newly acquired Red Mountain Gold Property demonstrates its
potential as a significant low-cost producing gold mine. The excellent geometry
and grade of the Red Mountains mineralized zones allow the use of highly
productive mining methods and the planned adit from the Bitter Creek valley
allows year-round access to the planned mine and a superior exploration platform
in the depths of Red Mountain. The Company plans to continue advancing the Red
Mountain Project through exploration, environmental permitting, and feasibility
studies."
Resource Estimate
Mr. Baldwin, P.Eng prepared a current Mineral Resource estimate for Red
Mountain, which is presented in the Technical Report & Preliminary Economic
Assessment on the Red Mountain Gold Property on June 14th 2012. Mr. Baldwin
modeled the significant mineralized zones at Red Mountain and calculated the
Mineral Resource for gold and silver. Gold and silver assays used in the
resource estimate were capped to the 98th percentile, resulting in a top cap of
70gpt for gold and 348gpt for silver. The current Mineral Resource is displayed
in Table 2 and is effective as of June 14th 2012.
Table 2 - Red Mountain Mineral Resource
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Measured Indicated Inferred
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Au Ag Au Ag Au Ag
Grade Grade Grade Grade Grade Grade
Zone Tonnes (gpt) (gpt) Tonnes (gpt) (gpt) Tonnes (gpt) (gpt)
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Marc 737,000 9.2 36 123,000 8.3 35 3,000 8.1 32
AV 326,000 8 23 250,000 8.1 23 175,000 8.4 24
JW 75,000 6.2 10 100,000 6 7 315,000 5.4 5
141 314,000 3.8 8
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Total 1,138,000 8.7 31 473,000 7.7 23 807,000 5.4 10
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Total Measured & 1,611,000 tonnes @ 435,000oz 1,976,000oz
Indicated: 8.4gpt Au & 38gpt Ag = Gold, Silver
807,000 tonnes @ 140,000oz 259,000oz
Total Inferred: 5.4gpt Au & 10gpt Ag = Gold, Silver
Based on the current Mineral Resource, a diluted minable resource was calculated
for the purposes of the PEA study. The Red Mountain mineralization is broken
into four distinct zones for the purposes of mine planning. The estimated
diluted minable resource is presented in Table 3.
Table 3 - Red Mountain "Minable Resource"
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Insitu Mining Diluted
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Au Ag Au Ag
Grade Grade Dilu- Reco- Grade Grade
Zone Tonnes (g/t) (g/t) tion very Tonnes (g/t) (g/t)
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Marc 863,000 9.1 36 20% 98% 1,015,000 7.8 31
AV 752,000 8.1 23 20% 98% 884,000 7.0 20
JW 491,000 5.7 6 20% 98% 577,000 4.9 5
141 314,000 3.8 8 20% 98% 369,000 3.3 7
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Total 2,420,000 7.4 22 20% 98% 2,845,000 6.4 19
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Mining Summary
The current mining methods proposed for the Red Mountain Project are transverse
open stoping methods with the use of cemented paste fill for the Marc, AV, and
141 Zones and longitudinal longhole retreat method for the JW Zone.
Proposed access to the underground Red Mountain Project will be provided by a
7,190m adit, at a grade of +15%, from the Bitter Creek Mill site. Based on the
current mineral resource estimate, mine production is planned to be 657,000
tonnes per year (1800tpd) over a mine life of 4.3 years (52 months).
Mineral Processing
Mr. Jones, P.Eng is responsible for the engineering designs, calculations, and
recommendations related to mineral processing and metallurgical engineering,
which is presented in the Technical Report & Preliminary Economic Assessment on
the Red Mountain Gold Property on June 14th 2012. The proposed method of gold
and silver recovery from the Red Mountain Gold Property consists of conventional
crushing and milling, followed by froth flotation and CIL cyanidation of the
flotation concentrate. The Red Mountain Project will produce gold/silver dore
for shipment to a precious metal refinery.
Flotation and cyanidation recoveries were estimated from historical test work.
Estimated metallurgical recoveries of 82% gold and 72% silver were assumed for
the Red Mountain PEA study.
The objective of the PEA study was to optimize the Red Mountain process
flowsheet to provide maximum gold and silver recoveries. Whereas previous
flowsheets have included whole ore fine grinding followed by CIL/CIP
cyanidation, the process route recommended is to produce a sulfide concentrate
for fine grinding and subsequent CIL cyanidation. While there is some additional
loss of cyanide recoverable gold in the flotation tailings, this method offers
the following advantages over the whole-ore cyanidation flowsheet:
-- Reduced plant capital costs in the areas of fine grinding and
cyanidation.
-- Lower operating costs associated with milling power and cyanide
consumption.
-- Low-sulfide and coarse particle size flotation tailings for surface
deposition.
Non-acid generating tailings from the flotation circuit will be sent to a
tailings storage facility proposed to be located immediately south of the Bitter
Creek Mill Site. A minor valley created by a series of outcrop knobs is located
in this area, which creates an excellent area for tailings storage. This valley
only has minor inflows from a branch of Otter Creek, which is separate from the
large flows of Bitter Creek.
Potentially acid generating tailings from the CIL circuit will be sent
underground and utilized as cemented paste backfill material to provide support
for mining adjacent longhole stopes and to create nearly impermeable material to
reduce the acid generating potential.
Infrastructure
A 14km access road from Highway 37A to the Bitter Creek Mill Site requires
significant repairs and reconstruction. A 14km transmission line is planned to
be constructed to connect the mine and mill to the BC Hydro electrical grid.
The Bitter Creek Mill Site is planned to be located on a gently sloping terrace
at the planned portal location of the Bitter Creek Mine Adit. Water supply for
the mill will be from groundwater, reclaimed water from the settling ponds, and
fresh water from Bitter Creek.
BC Hydro maintains a 138kV transmission line which runs along Highway 37A to
Stewart, BC. It is intended that a 14km transmission line will be built by the
Company to connect the Bitter Creek Mill site to the BC Hydro electrical grid.
Operating Costs
Based on the mine design and schedule, an estimate of operating costs was
derived for the PEA study. Costs are based on productivities, labour, and
material costs obtained from supplier and contractor quotes, cost data from
other mines, first principle calculations, and experience.
A summary of operating cost estimates for the Red Mountain Gold Project are
displayed in Table 4. Operating costs have been estimated at $206,789,000 over
the current 52 month mine life averaging $72.68 per tonne milled.
Table 4 - Operating Cost Summary
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OPERATING COST SUMMARY
Total Cost Cost per tonne
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MINING & SURFACE
MATERIALS $12,090,000 $4.25
BACKFILL BINDER $24,107,000 $8.47
LUBE, TIRES, & PARTS $12,096,000 $4.25
MINE ELECTRICITY $2,639,000 $0.93
DIESEL FUEL $9,592,000 $3.37
AVALANCHE CONTROL $2,603,000 $0.91
MINE AIR HEATING $1,445,000 $0.51
MINE, MAINTENANCE & SURFACE LABOUR $49,750,000 $17.49
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$114,322,000 $40.18
MILL
LABOUR $26,857,000 $9.44
SAFETY, SPARES, & ELECTRICAL $7,824,000 $2.75
MILL ELECTRICITY $5,861,000 $2.06
REAGENTS $12,973,000 $4.56
BALLS & LINERS $4,353,000 $1.53
PIPING, LUBRICANTS, ASSAY $854,000 $0.30
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$58,722,000 $20.64
MANAGEMENT, TECHNICAL & SUPERVISION
STAFF SALARIES $15,885,000 $5.58
STAFF INCENTIVES $2,542,000 $0.89
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$18,427,000 $6.48
CONTINGENCY (8%) $15,318,000 $5.38
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TOTAL OPERATING COSTS $206,789,000 $72.68
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Capital Costs
Capital expenditures related to design, permitting, construction, and
commissioning of the Red Mountain Gold Property are modeled to occur in a 3-Year
pre-production period. All expenditures that are expected to occur after
commercial production has commenced are treated as operating costs.
The estimated capital cost from feasibility through to commercial production is
estimated at $162,671,000, including cost contingencies. A summary of estimated
capital costs is presented in Table 5.
Table 5 - Initial Capital Cost Summary
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CAPITAL COST SUMMARY
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FEASIBILITY STUDY $6,477,000
ROAD BUILDING & POWER TRANSMISSION $8,386,000
MOBILE EQUIPMENT $16,560,000
MINE STATIONARY EQUIPMENT $2,383,000
MINE DEVELOPMENT & CONSTRUCTION $39,271,000
SURFACE STRUCTURES $8,488,000
BACKFILL PLANT $7,000,000
MILL EQUIPMENT & CONSTRUCTION $53,979,000
COST CONTINGENCY $20,127,000
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TOTAL $162,671,000
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Based on the production schedule and expected operating costs, a working capital
requirement of $11,000,000 is anticipated. The working capital is adequate to
cover all operating costs expected for the first three months of production.
Environmental and Permitting
The Red Mountain Project will require a formal review under the BC Environmental
Assessment Act prior to being issued a Mines Act permit. The Environmental
Assessment review process was initiated in 1996 by a previous Property owner but
was subsequently withdrawn. The Environmental Assessment information is
available for future use. The most important waste management issue for the Red
Mountain Project is the prevention and control of ARD from the tailings and any
potentially acid generating rock, which is produced during mine development or
operation.
Banks Island Gold places a high priority on minimizing environmental impacts,
mine closure, and reclamation of its projects without the creation of long-term
environmental liabilities. The Red Mountain PEA study incorporates sulphide
flotation in the process flowsheet before cyanidation to produce a coarse,
non-acid generating tailings product for surface disposal and reduce grinding
and cyanide use.
Potentially acid generating tailings from the sulphide concentrate will be sent
underground and utilized as cemented paste backfill material to provide support
for mining adjacent longhole stopes and to create nearly impermeable material to
reduce the acid generating potential.
Detailed metallurgical testwork is required to verify the assumptions and
designs presented in the PEA.
Mine Life and Exploration Potential
There is high potential for expansion of minable resources at Red Mountain with
a resulting increase in the mine life. Historic drilling results suggest that
mineralization at Red Mountain may continue past the current minable resource at
depth and mineralized intercepts exist outside the current resource at Red
Mountain. The 132 zone was not included in the current mineral resource. Based
on historic resource estimates by previous operators this area has a high
potential for resource expansion through additional diamond drilling.
Sensitivity Analysis
An analysis was performed to determine the sensitivity of the NPV (8%) to
changes in key input parameters. Gold price, ore grade, capital cost, and
operating cost were varied from -60% to +140% and the resulting NPV (8%) was
calculated. The results of this analysis are displayed in Figure 1. The project
economics are highly sensitive to changes in the price of gold and the ore grade
but significantly less sensitive to changes in operating and capital costs.
Note: To view Figure 1, please click the following link:
http://media3.marketwire.com/docs/boz0618figure1.pdf.
Recommendations
The preliminary economic assessment presented in the PEA indicates an
underground gold mining operation at Red Mountain may be viable. It is
recommended that the Project be advanced towards a pre-feasibility or
feasibility level study.
A feasibility level study is recommended at an estimated cost of $6,477,000. The
recommended work is comprised of a diamond drilling program with a budgeted cost
of $4.2M and engineering and environmental studies at a cost of $2.3M.
Diamond drilling is required to bring the current Inferred Mineral Resource into
the Measured and Indicated Mineral Resource categories. Detailed metallurgical
testwork is required to verify the assumptions and designs presented in the PEA
and advanced fieldwork and engineering is required for road design, electrical
transmission lines, foundations, tailings facilities, and structures.
Mr. Robert Baldwin, P.Eng is the qualified person who reviewed and approved the
contents of this news release. The NI43-101 Technical Report & Preliminary
Economic Assessment on the Red Mountain Gold Property dated June 14th 2012 has
been posted on SEDAR and will be available on the Company's website.
The Company is a junior mining resource exploration company focused on exploring
for and developing economically viable mineral resources. The Company's mineral
properties are located in British Columbia. For more information, please refer
to the Company's website at www.banksislandgold.com.
ON BEHALF OF THE BOARD OF DIRECTORS
Benjamin W. Mossman, P.Eng, President, Director, & Chief Executive Officer
This press release contains forward-looking statements. All statements, other
than statements of historical fact, constitute "forward-looking statements" and
include any information that addresses activities, events or developments that
the Company believes, expects or anticipates will or may occur in the future
including the Company's strategy, plans or future financial or operating
performance and other statements that express management's expectations or
estimates of future performance.
Forward-looking statements are generally identifiable by the use of the words
"may", "will", "should", "continue", "expect", "anticipate", "estimate",
"believe", "intend", "plan" or "project" or the negative of these words or other
variations on these words or comparable terminology. These statements, however,
are subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, level of activity, performance or achievements of the
Company to be materially different from those expressed, implied by or projected
in the forward-looking information or statements. Important factors that could
cause actual results to differ from these forward-looking statements include but
are not limited to: risks related to the exploration and potential development
of the Company's project, the actual results of current exploration activities,
conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, future prices of gold, as well as those factors
discussed in the sections relating to risk factors of the Company prospectus
dated September 30, 2011 filed on SEDAR.
There can be no assurance that any forward-looking statements will prove to be
accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, the reader should not place any
undue reliance on forward-looking information or statements. Except as required
by law, the Company does not intend to revise or update these forward-looking
statements after the date of this document or to revise them to reflect the
occurrence of future unanticipated events.
Grafico Azioni Banks Island Gold Ltd. (TSXV:BOZ)
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