Roxgold announces an after-tax IRR of 47.7% in its Preliminary Economic Assessment on the Yaramoko Gold Project
TORONTO, Sept. 16, 2013 /PRNewswire/ - Roxgold Inc. ("Roxgold" or "the Company") (TSXV: ROG) is pleased to announce the results of its Preliminary Economic Assessment ("PEA") prepared pursuant to National Instrument 43-101 ("NI 43-101") for the 55 Zone on its 100% owned Yaramoko exploration permit in Burkina Faso.
Roxgold will be hosting a conference call and webcast presentation at 11:00 a.m. E.T. on September 16, 2013 to discuss these results. Details are provided at the end of this release.
HIGHLIGHTS: (all amounts in US dollars unless otherwise indicated)
Base case is stated assuming 100% basis and a gold price of $1,300/oz
- Pre-tax IRR of 59.2% with a 1.2 year payback on initial capital
- After-tax IRR of 47.7% with a 1.4 year payback on initial capital
- Pre-tax NPV5% of $250 million
- After-tax NPV5% of $192 million
- Estimated average annual gold production of 98,300 ounces for the first five years
- Current study mine life of 10 years
- Average metallurgical recoveries of 96% gold
- Average total cash costs of $455/oz (including royalties) for the first 5 years of production
- Average total cash costs of $530/oz (including royalties) for Life of Mine ("LOM")
- Estimated all-in sustaining costs of $681/oz for first 5 years
- Pre-Production capital of $93.8 million
The PEA is preliminary in nature and it 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. There is no certainty that the conclusions reached in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Although no production decision has been reached for the Yaramoko Gold Project ("YGP"), Roxgold believes that the conceptual economic case presented in the PEA coupled with the straightforward nature of the project in terms of geology, geometry and processing merit the advancement of the project directly to a FS level of study.
"The Preliminary Economic Assessment on Yaramoko's 55 Zone marks a turning point for Roxgold from being an explorer to a development focused company. The conceptual economics outlined in the PEA, particularly for the first 5 years, are encouraging. The start-up capital costs estimated in the PEA would be manageable for a company of our size which supports our belief that Yaramoko has potential to continue towards development. We feel that the first five years provide a strong start to this project, and with the deposit still open below, the 55 Zone has the potential to increase its existing resources and improve the project economics through drilling from underground." commented John Dorward, President and Chief Executive Officer. "Roxgold will now be focusing on our upcoming Feasibility Study ("FS"), which will expand upon the PEA and examine areas where there are opportunities for optimization. Additionally, we continue to pursue a targeted exploration program on areas such as Bagassi South, where we recently saw very encouraging drill results, as we search for the next resource on the Yaramoko Permit."
ECONOMIC SUMMARY
| Pre - tax | $1,100/oz | $1,300/oz | $1,500/oz |
| NPV5% ($M) | $144 | $250 | $348 |
| IRR (%) | 39.8% | 59.2% | 75.2% |
| Payback (Years) | 1.6 | 1.2 | 0.9 |
| After - tax | $1,100/oz | $1,300/oz | $1,500/oz |
| NPV5% ($M) | $104 | $192 | $273 |
| IRR (%) | 30.8% | 47.7% | 61.6% |
| Payback (Years) | 2.0 | 1.4 | 1.1 |
MINING AND PROCESSING
A summary of the capital costs, production and operating metrics from the PEA are summarized below:
| Capital Costs | Pre-Production ($ million) |
Year 1-5 ($ million) |
Year 6-10 ($ million) |
LOM ($ million) |
| Underground Mine | $37.7 | $88.9 | $10.5 | $136.9 |
| Processing Plant | $24.2 | $2.8 | $0.1 | $27.1 |
| Infrastructure | $14.4 | $0.8 | $0.5 | $15.6 |
| Environmental | - | - | $5.0 | $5.0 |
| Owner's Costs | $7.1 | - | - | $7.1 |
| Contingency | $10.4 | 10.4 | $1.9 | $22.7 |
| Capital Cost | $93.8 | $102.7 | $18.0 | $214.5 |
| PEA baseline metrics | Year 1-5 | Year 6-10 | LOM |
| Average mine production (tpd) | 740 | 540 | 640 |
| Average annual gold production(oz) | 98,300 | 49,400 | 73,900 |
| Average mill feed grade (g/t) | 11.9 | 8.5 | 10.2 |
| Tonnes Processed (t) | 1,342,500 | 994,700 | 2,337,200 |
| Average gold recoveries (%Au) | 96% | 96% | 96% |
| Total Gold Recovered (oz) | 491,600 | 246,900 | 738,500 |
| Cash Cost Summary | Year 1-5 ($/oz) |
Year 1-5 ($/tonne) |
Year 6-10 ($/oz) |
Year 6-10 ($/tonne) |
LOM ($/oz) |
LOM ($/tonne) |
| Mining | $245 | $89 | $401 | $99 | $297 | $94 |
| Processing | $76 | $27 | $111 | $27 | $87 | $27 |
| G & A | $72 | $26 | $108 | $27 | $84 | $26 |
| Refining | $10 | $4 | $10 | $2 | $10 | $3 |
| Cash operating Cost | $403 | $146 | $630 | $155 | $478 | $150 |
| Royalties | $52 | $19 | $52 | $13 | $52 | $16 |
| Total Cash Costs | $455 | $165 | $682 | $168 | $530 | $166 |
| Sustaining Costs(1) | $226 | $82 | $92 | $23 | $182 | $58 |
| All-in Sustaining Cost (2) | $681 | $247 | $774 | $191 | $712 | $224 |
| (1) | Sustaining Costs include sustaining Capital and Corporate G&A |
| (2) | Quoted All-in Sustaining Costs are presented as defined by the World Gold Council ("WGC"). |
ECONOMIC SUMMARY AND SENSITIVITY TO GOLD PRICE AND DISCOUNT RATE
| NPV (Millions) Discount rate |
Pre - Tax | Post - Tax | |||||
| 5% | 7.5% | 10% | 5% | 7.5% | 10% | ||
| Gold Price | $ 1,000 | $ 96 | $ 78 | $ 62 | $ 65 | $ 50 | $38 |
| $ 1,100 | $ 144 | $ 120 | $ 99 | $ 104 | $ 85 | $68 | |
| $ 1,200 | $ 197 | $ 166 | $ 141 | $ 148 | $ 123 | $102 | |
| $ 1,300 | $ 250 | $ 213 | $ 182 | $ 192 | $ 162 | $136 | |
| $ 1,400 | $ 295 | $ 253 | $ 217 | $ 230 | $ 195 | $166 | |
| $ 1,500 | $ 348 | $ 299 | $ 258 | $ 273 | $ 233 | $199 | |
| $ 1,600 | $ 400 | $ 345 | $ 299 | $ 317 | $ 271 | $233 | |
STUDY DESCRIPTION
An underground operation is envisioned in the PEA that will be scheduled to run for 10 years and average 98,300 ounces of gold production for the first 5 years. The PEA is based on upon a mining contractor approach, utilizing a long hole open stope mining method which is estimated to recover approximately 738,500 ounces of gold. Over the life of mine the average production rate is estimated at approximately 74,000 ounces per year. Total cash costs per ounce sold including royalties are estimated to be $455 for the first 5 years and $530 for the life of mine. An average life of mine dilution (waste tonnes/mill feed tonnes) of 21% (including development material) is assumed in the PEA. This is a key area for optimization in subsequent studies.
The processing facility will be sized for 740 tonnes per day ("tpd") throughput and will include two-stage crushing, grinding, gravity recovery, leaching circuits and thickening. Average recoveries are estimated to be 96% based on two rounds of metallurgical test work. Material milled is estimated to be of a moderate hardness with a Bond Ball Work Index of 13.8 kWh/t.
Pre-production capital costs are estimated to total $93.8 million including $10.4 million in contingency capital. This figure includes $37.7 million in underground development which includes the development of an underground decline to the 5134 Level (182 metres vertical depth) as well as 9 levels of lateral development designed to open up multiple working faces and allow flexibility within the conceptual mine plan. Surface and processing infrastructure are estimated to total $45.6 million of the $93.8 million in pre-production capital and includes all roads, tailings and water storage facilities, as well as all processing facilities and a 300 person camp.
Of note is that an estimated 28,000 ounces of gold (in 77,000 tonnes grading 11.2 g/t) in the indicated category and 99,000 ounces of gold (in 256,600 tonnes grading 11.9g/t) in the inferred were not considered within the conceptual mine plan.
Management believes that with additional drilling from underground there is an opportunity to firstly optimize the mine plan and secondly to potentially add more ounces to the resource base. However there is no certainty that additional drilling would result in all or any such ounces being included in a mine plan.
Roxgold has not yet completed a Pre-Feasibility Study or a FS to demonstrate the economic viability of the YGP. Furthermore, no mineral reserves have been established on the YGP. Any statements regarding planned production rates, projected cash flows, payback period, IRR, NPV assume that Roxgold is or will be able to complete all of the required steps to bring the YGP into commercial production including the completion of a FS to demonstrate the economic viability of the YGP, the completion of the environmental assessment process, the successful granting of relevant permits, and that Roxgold obtains the necessary project financing to pay for the capital costs to develop and construct a mine at the YGP. There is no certainty that Roxgold will be able to complete any or all of these steps.
OPPORTUNITIES TO OPTIMIZE PROJECT IN FUTURE STUDIES
Roxgold believes that while presenting a credible and positive conceptual development case, the PEA is preliminary in nature and the FS that the Company will be completing will build on and optimize the results from the PEA, as outlined below:
- A detailed geotechnical drilling and testing investigation as well as a mining method optimisation study, including backfill could potentially realise the benefits of a reduction in waste and lateral development which could reduce capital and operating costs and maximize mining recoveries and reduce dilution.
- Detailed metallurgical test work to optimize flow sheet and provide engineering inputs for design and construction.
- In terms of resource recoveries, it should be noted that as currently defined, an estimated 139,000 ounces of gold (in 435,000 tonnes with a grade of 9.9 g/t) estimated in the indicated category and approximately, 42,000 ounces of gold (in 169,000 tonnes with a grade of 7.7 g/t) in the inferred category remain in pillars. As part of the FS, consideration will be given to optimizing the mining method in order to maximize indicated resource recoveries.
- An estimated 28,000 ounces of gold (in 77,000 tonnes grading 11.2 g/t) of indicated resource and 99,000 ounces of inferred resource (in 256,600 tonnes grading 11.9g/t) are excluded from the conceptual mine plan. Management believes that with further drilling from underground and subsequent mine optimization, that there may be an opportunity for Roxgold to increase its resource estimate and optimize the mine plan. There is no certainty however that any additional drilling will result in all or any of such indicated ounces being included in an optimized mine plan.
MINERAL RESOURCE ESTIMATE:
The PEA is based on the updated mineral resource estimate as at August 27, 2013* of 850,000 gold ("Au") ounces using a 3.0 g/t cut-off grade in the Indicated Resource category, and 273,000 gold ounces using a 3.0 g/t cut-off grade in the Inferred category.
The resource estimate presented below is based on 99,077 metres of drilling and was prepared by AGP Mining Consultants Inc. ("AGP") in accordance with NI 43-101.
*Please refer to the Company's disclosure on its August 27, 2013 press release outlining the mineral resource estimate for further details.
| Cut -off | Resource(2) | Grade (capped) | Metal | |
| Category | Tonnes | Au g/t | Au Oz | |
| >5.0g/t | Indicated | 1,433,000 | 17.15 | 790,000 |
| Inferred | 675,000 | 11.50 | 250,000 | |
| >3.0g/t(1) | Indicated | 1,904,000 | 13.88 | 850,000 |
| Inferred | 860,000 | 9.88 | 273,000 | |
| > 2.0g/t | Indicated | 2,213,000 | 12.29 | 874,000 |
| Inferred | 980,000 | 8.97 | 283,000 | |
| (1) | 43-101 resource estimate published at a 3.0 g/t cut-off |
| (2) | It should be noted that mineral resources that are not mineral reserves do not have demonstrated economic viability; there are no known legal, political, environmental or other risks that could materially affect the potential development of the mineral resources. |
NEAR TERM DEVELOPMENT PLANS AND ONGOING EXPLORATION:
Roxgold has commenced a FS which has been awarded to SRK Consulting of Toronto and Mintrex of Perth, Australia. This FS study will build on and optimize the results from the PEA and is expected to be completed in Q2 2014. Future work will include detailed geotechnical drilling, geochemical sampling, further metallurgical test work and hydrology studies as well as tendering of operating and capital costs. Detailed work on surface infrastructure design and layout are also being undertaken and will form part of Roxgold's Environmental and Social Impact Assessment ("ESIA"). Roxgold Intends to complete an ESIA by the end of 2013 which will form the basis of an application for an Exploitation Permit. If granted, Roxgold will become a 90% owner of the YGP in Partnership with the Government of Burkina Faso which will have a 10% carried interest in the Project.
The Company is continuing a systematic regional exploration program across the 167km2 Yaramoko permit. Roxgold is currently drill testing targets defined through auger and IP ("Induced Polarization") surveys completed earlier in the year. Roxgold is currently also following up on success earlier this year at the new zone at Bagassi South where it has commenced a 1,600 metre diamond drilling program.
NI 43-101 TECHNICAL REPORT
The complete updated NI 43-101 Technical Report which will include the PEA will be filed on SEDAR (www.sedar.com) within 45 days and will also be available on the Company's website (www.roxgold.com).
PEA CONTRIBUTORS
The PEA was completed by AGP Mining Consultants Inc. ("AGP"), Toronto. The information in this news release that relates to the PEA was prepared by: Gordon Zurowski, P.Eng., Principal Mining Engineer, Geoffrey Challiner, C.Eng, Chief Mining Engineer, and Lyn Jones, P.Eng., Senior Associate Metallurgist, all of AGP, each of whom are independent of Roxgold and are recognized as a Qualified Person within the meaning of ("NI 43-101")
Pierre Desautels, Principal Geologist with AGP and a Qualified Person within the meaning of 43-101, has reviewed and approved the scientific or technical information in this press release. Mr. Desautels is independent of Roxgold.
PEA RESULTS CONFERENCE CALL AND WEBCAST
Roxgold will be hosting a conference call and webcast presentation discussing the results of the PEA on Monday, September 16, at 11:00 a.m. ET. A replay of the call will be available until September 23, 2013.
| Conference Call Details: | |
| Toll Free (North America) | 1-888-390-0605 |
| Toronto Local and International | 416-764-8609 |
| Webcast Link: | Click Here |
| Conference Call REPLAY: | |
| Toll Free Replay Call (North America) | 1-888-390-0541, Passcode: 484130 |
| Toronto Local and International Replay Call | 416-764-8677, Passcode: 484130 |
ABOUT ROXGOLD:
Roxgold is an exploration and development company with its key asset, the 167 Km2 Yaramoko exploration permit, located in the Houndé greenstone region of Burkina Faso, West Africa. Roxgold is focused on further exploring the Company's 100% owned Yaramoko permit and advancing the 55 Zone. Roxgold trades on the TSX Venture Exchange under the Symbol ROG.
"Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release."
This news release contains forward-looking information. Forward looking information contained in this new release includes, but is not limited to, statements with respect to: (i) the estimation of inferred and indicated mineral resources; (ii) the success of exploration activities; (iii) the completion and timing of the environmental assessment process (iv) the results of the PEA including statements about future production, future operating and capital costs, the projected IRR, NPV, payback period, and production timelines for the 55 Zone on the Yaramoko permit.
These statements are based on information currently available to the Company and the Company provides no assurance that actual results will meet management's expectations. In certain cases, forward-looking information may be identified by such terms as "anticipates", "believes", "could", "estimates", "expects", "may", "shall", "will", or "would". Forward-looking information contained in this news release is based on certain factors and assumptions regarding, among other things, the estimation of mineral resources, the realization of resource estimate, gold metal prices, the timing and amount of future exploration and development expenditures, the estimation of initial and sustaining capital requirements, the estimation of labour and operating costs, the availability of necessary financing and materials to continue to explore and develop the Yaramoko project in the short and long-term, the progress of exploration and development activities, the receipt of necessary regulatory approvals, the completion of the environmental assessment process, and assumptions with respect to currency fluctuations, environmental risks, title disputes or claims, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks inherent in the exploration and development of mineral deposits, including risks relating to changes in project parameters as plans continue to be redefined including the possibility that mining operations may not commence at the Yaramoko project, risks relating to variations in mineral resources, grade or recovery rates resulting from current exploration and development activities, risks relating to changes in gold prices and the worldwide demand for and supply of gold, risks related to increased competition in the mining industry generally, risks related to current global financial conditions, uncertainties inherent in the estimation of mineral resources, access and supply risks, reliance on key personnel, operational risks inherent in the conduct of mining activities, including the risk of accidents, labour disputes, increases in capital and operating costs and the risk of delays or increased costs that might be encountered during the development process, regulatory risks, including risks relating to the acquisition of the necessary licenses and permits, financing, capitalization and liquidity risks, including the risk that the financing necessary to fund the exploration and development activities at the Yaramoko project may not be available on satisfactory terms, or at all, risks related to disputes concerning property titles and interest, and environmental risks. This list is not exhaustive of the factors that may affect any of the Company's forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking information. The Company does not undertake to update any forward-looking information that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.
SOURCE Roxgold Inc.
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