Mr. Douglas Forster reports
NEWMARKET GOLD ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR THE 100% OWNED MAUD CREEK GOLD PROJECT - PRE-TAX NPV5% OF AUD$201 MILLION
Newmarket Gold Inc. has released the results of a preliminary economic assessment (PEA) prepared in accordance with National Instrument 43-101 on the company's 100-per-cent-owned Maud Creek gold project in the Northern Territory, Australia. The Maud Creek PEA was prepared by SRK Consulting (Australasia) Pty. Ltd. and provides a base case for processing gold mineralization from conventional open pit and underground mining methods, through the use of Newmarket's permitted and operating Union Reefs processing facility. The NI 43-101 technical report for Maud Creek entitled "Technical report, preliminary economic assessment of the Maud Creek gold project, Northern Territory, Australia" and dated May 16, 2016, will be available today under Newmarket's profile on SEDAR and on its website.
All figures are stated in Australian dollars unless otherwise noted.
Highlights
Base-case parameters assume a gold price of $1,550 per ounce ($1,200 (U.S.)) and an exchange rate (U.S. to Australian) of 0.77.
- Pretax net present value at a 5-per-cent discount rate (NPV5) of $201-million ($155-million (U.S.)) and internal rate of return (IRR) of 116 per cent
with a 1.25-year payback period.
-
Aftertax NPV5 of $137-million ($105-million (U.S.)) and IRR of 80 per cent and a
1.25-year payback period.
- Mine life of 9.5 years with average annual gold production of 52,000
ounces and peak annual gold production of approximately 70,000 ounces.
- Total recovered gold of 496,000 ounces.
- Life-of-mine (LOM) diluted head grade of 4.2 grams per tonne gold.
- Preproduction capital cost estimated at $42-million ($32-million (U.S.)).
- LOM cash operating cost estimate of $1,101 per ounce ($847 (U.S.) per ounce) and LOM
capital cost of $113 per ounce.
Douglas Forster, president and chief executive officer of Newmarket, stated that: "The Maud Creek PEA base case provides Newmarket with the potential to increase the utilization of the Union Reefs processing facility, which has the capacity to process two million tonnes per annum, and is currently processing ore from the Cosmo underground gold mine at a rate of approximately 800,000 tonnes per year. The Maud Creek deposit is located close to existing infrastructure such as road and rail networks and is also situated approximately 20 kilometres from the regional centre of Katherine in the Northern Territory. The positive results of the PEA at our 100-per-cent-owned Maud Creek project provides additional flexibility for Newmarket's Northern Territory operations in addition to the current mill feed being provided by the Cosmo mine. The benefits of the Union Reefs processing option includes the ability to realize value from the oxide gold mineralization mined through open-pit mining and the fresh sulphide mineralization from underground mining methods and low capital cost for modification of the existing operating Union Reefs processing facility."
The PEA is preliminary in nature and is based on a number of assumptions that may be changed in the future as additional information becomes available. The PEA 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, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
PEA summary
The PEA, examined the processing of gold mineralization at Newmarket's Union Reefs processing facility, located 144 km from the Maud Creek project via an existing major roadway (including oxide mineralization), and through a stand-alone plant, constructed on-site at Maud Creek (excluding oxide mineralization), to produce a saleable gold concentrate and gold dore. Based on the results of the comparison of the economic and infrastructure considerations associated with both options, the Union Reefs processing facility is the preferred option.
The PEA is based on oxide and sulphide gold mineralization at Maud Creek, mined by a combination of open pit and underground mining methods, and trucked using quad semi-trailers to Newmarket's existing operating and permitted processing plant at Union Reefs.
The mine has a 9.5-year operating life, including two years of open-pit operations prior to commencing underground production. The Maud Creek deposit remains open down plunge and with additional drilling it may be possible to extend the mine life of the operation. The maximum depth of the underground is 500 metres below surface with the current open-pit/underground transition at 125 metres below surface.
PEA RESULTS -- UNION REEFS PROCESSING FACILITY
Parameter/result Units Quantity
Gold price $/oz $1,550
Exchange rate $:US$ 0.77
Gold price US$/oz 1,200
Mine life years 9.5
Mineral inventory 000 t 3,911
Diluted gold grade g/t 4.2
Contained gold koz 528
Gold recovery (oxide/transitional) % 85
Gold recovery (sulphide) % 95
LOM recovered gold koz 496
Production rate ktpa 500
Average annual gold production koz 52
Peak annual gold production koz 70
Annual tonnes concentrate (dry) kt 30
Concentrate grade g/t con 45
LOM operating cost $m 408
LOM cash operating cost $/oz 1,101
Total operating costs/tonne milled $/t 105
Net revenue (less selling expenses) $m 725
Preproduction capital cost $m 42
Sustaining capital cost (LOM) $m 14
PEA GOLD PRICE SENSITIVITIES
Gold price ($/oz) $1,400 $1,450 $1,500 $1,550 $1,600 $1,650 $1,700
Pretax NPV5 ($m) 145 163 182 201 220 239 257
Pretax IRR (%) 85 95 106 116 127 138 150
Aftertax NPV5 ($m) 98 111 124 137 150 163 177
Aftertax IRR (%) 59 66 73 80 87 94 102
Taxes
The Maud Creek project aftertax financial model has incorporated Australian federal tax at a rate of 30 per cent and the Northern Territory royalty tax of 20 per cent. Newmarket Gold NT Holdings Pty. Ltd., the owner of the Maud Creek gold project and wholly owned subsidiary of Newmarket, carries estimated tax losses as follows as at Dec. 31, 2015, which have not been included in the economic analysis:
- Income tax non-capital losses -- $229.8-million;
-
NT royalty tax net negative value -- $151.0-million.
Based on the integration of the Maud Creek project with existing infrastructure and Northern Territory production unit, the NT royalty net negative value has the potential to positively impact the value of the Maud Creek project if determined to be applicable. The NT royalty tax of 20 per cent in the financial model equates to a cost of $107 per ounce.
Mineral resource
The Maud Creek mineral resource estimates presented in the associated tables, prepared by SRK, are based upon 97 diamond drill holes and 442 reverse circulation percussion holes totalling 74,993 metres drilled over a 22-year period. SRK undertook a thorough examination of all available information. The mineral resource was estimated using ordinary kriging within six domains.
OPEN-PIT MINERAL RESOURCE ABOVE 950 M RL AT 0.5 G/T AU CUT-OFF
Inventory Gold grade Contained metal
Mineral resource category (kt) (g/t Au) (koz Au)
Measured 1,070 5.6 190
Indicated 1,100 2.1 75
Measured and indicated 2,170 3.8 268
Inferred 530 1.4 25
Notes
1. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions
followed for classification of measured, indicated and inferred mineral
resources.
2. Mineral resources estimated as of March 15, 2016, as reported in technical
report mineral resources of the Maud Creek gold project, Northern
Territory, Australia, dated March 21, 2016, and effective Dec. 31,
2015, and prepared by Peter Fairfield, BEng (mining), FAusIMM, CP
(mining), principal consultant for SRK Consulting (Australia) Pty. Ltd.
and Danny Kentwell, MSc, mathematics and planning (geostatistics), FAusIMM,
principal consultant for SRK Consulting (Australia) Pty. Ltd.
3. Mineral resources stated according to CIM guidelines.
4. Totals may appear different from the sum of their components due to
rounding.
5. Reported at a 0.5 g/t cut-off grade.
6. The open-pit mineral resource is exclusive of the underground mineral
resource.
7. The mineral resource estimation was performed by Danny Kentwell, FAusIMM,
full-time employee of SRK Consulting, who is a qualified person under NI
43-101.
8. Mineral resources are not mineral reserves and do not have demonstrated
economic viability.
UNDERGROUND MINERAL RESOURCE BELOW 950 MRL AT 1.5 G/T AU CUT-OFF
Inventory Gold grade Contained metal
Mineral resource category (kt) (g/t Au) (koz Au)
Measured - - -
Indicated 4,330 3.2 456
Measured and indicated 4,330 3.2 456
Inferred 1,450 2.7 124
Notes
1. CIM definitions followed for classification of measured, indicated and
inferred mineral resources.
2. Mineral resources estimated as of March 15, 2016, as reported in technical
report mineral resources of the Maud Creek gold project, Northern
Territory, Australia, dated March 21, 2016, and effective Dec. 31,
2015, and prepared by Mr. Fairfield, BEng (mining), FAusIMM, CP
(mining), principal consultant for SRK Consulting (Australia) Pty. Ltd.
and Danny Kentwell, MSc, mathematics and planning (geostatistics), FAusIMM,
principal consultant for SRK Consulting (Australia) Pty. Ltd.
3. Mineral resources stated according to CIM guidelines.
4. Totals may appear different from the sum of their components due to
rounding.
5. Reported at a 0.5 g/t cut-off grade.
6. The open-pit mineral resource is exclusive of the underground mineral
resource.
7. The mineral resource estimation was performed by Danny Kentwell, FAusIMM,
full-time employee of SRK Consulting, who is a qualified person under NI
43-101.
8. Mineral resources are not mineral reserves and do not have demonstrated
economic viability.
Capital costs
Preproduction capital costs are estimated at $42-million with the majority of the costs associated with the inclusion of a sulphide circuit at the Union Reefs processing plant and capitalized mine development for access.
Open-pit and underground mining operations are proposed to be undertaken by contract mining, as is conducted at Newmarket's existing NT operations at the Cosmo mine. The company has allocated $7.3-million for surface works associated with diversion of the ephemeral creek and water management and treatment infrastructure. Additional work is required to further define the technical requirements and the capital requirements. The associated table outlines the PEA capital cost estimates.
PEA CAPITAL COST ESTIMATES
Capital item Millions of dollars
Process plant modification $24.8
Surface infrastructure -- power 2.6
Surface water management 7.3
Access road 2.2
Capitalized development (includes mobilization) 18.4
Total capital costs 55.6
Mining
The PEA mine plan is based upon conventional open-pit mining followed by a transition to underground mining where conventional long-hole open stoping utilizing cemented rock and waste fill will be used. The absence of suitable data has led to low confidence in the geotechnical conditions. Additional data are required to improve confidence and refine decisions on mining methods and the mine design. The mining method studies are linked to the decision on the location of the processing plant and the availability of paste fill.
MINING METHODS IN PEA MINE PLAN
Mining method Inventory Gold grade Contained metal
(kt) (g/t Au) (koz Au)
Open pit 634 5.1 104
Underground 3,276 4.0 423
Total 3,911 4.2 528
Total mineralized material mined over the course of the mine life is 3.8 million tonnes. The associated table summarizes the proposed underground mill feed allowing for 20-per-cent mining dilution and 95-per-cent mill recovery of the mainly fresh mineralization from underground mining.
UNDERGROUND MINERAL RESOURCE (MINE DILUTED) INCLUDED IN PEA MINE PLAN (i)
Resource classification Percentage Inventory Gold grade Contained metal
of feed (kt) (g/t Au) (Koz)
Measured 20 679 6.1 132
Indicated 70 2,306 3.9 290
Inferred 10 291 2.8 26
Note
(i) Mineral resources are not mineral reserves and do not have demonstrated
economic viability. All figures have been rounded to reflect the relative
accuracy of the estimates. Initial disclosure of mineral resources is reported
at a cut-off grade of 2.6 g/t Au based on 1,415 per ounce gold, gold
metallurgical recoveries of 85 per cent for oxide and transitional
mineralization and 95 per cent for fresh mineralization.
All mine development would be performed by mining contractor using conventional electric hydraulic drilling equipment and suitable-sized diesel-powered long-haul dump loaders and haul trucks. All mine manpower except for technical and support staff would be contracted employees.
Power
Due to the limited electrical power demand for the underground mining operation of two-megawatt power will be provided via on-site diesel generators supplied, owned and operated by an independent power provider (IPP). Power at the Union Reefs processing plant is supplied via the 66-kilovolt Darwin-Katherine distribution network. There is sufficient power capacity to meet the modifications to the Union Reefs facility for processing the Maud Creek mineralization.
Processing
An extensive program of metallurgical testing was carried out on the Maud Creek project from 1994 through to 2006 at reputable and suitably experienced laboratories. The PEA proposes processing Maud Creek oxide mineralization through the existing Union Reefs carbon-in leach processing plant. The transitional mineralization feed, which makes up just a small portion of the overall LOM tonnage is a significant part of the first years feed, will have more variable metallurgical behaviour. Transitional mineralization can be processed through the existing oxide circuit and/or the new flotation circuit to optimize recovery. The base case presented for this study contemplates the addition of flotation and concentrate dewatering circuits to the existing Union Reefs processing facility to process fresh, sulphide mineralization, the bulk of the project tonnage, producing a gold-sulphide concentrate for sale. A gravity gold concentrate will also be produced with 20 per cent of the gold being recovered by gravity. The concentrate will be dewatered through thickening and filtration before being bagged, stored in shipping containers and transported by road, then shipped to customers in China.
The PEA reviewed the previous metallurgical testwork data and supporting engineering studies and proposes a conventional, inexpensive and low-risk processing circuit allowing flexibility with respect to circuit configuration and downstream processing. Based on the historical testwork, a total gold recovery of the fresh sulphide material of 95 per cent was applied and a total recovery of 85 per cent was applied for the oxide/ transitional material. Further work is required to fully integrate the proposed sulphide circuit and determine the optimum processing configurations.
PEA OPERATING COST ESTIMATES
Unit cost Unit cost
Operating cost ($/t) Activity ($/oz recovered)
Open-pit mining 5 mined (incl. waste) 328
Underground mining 55 stoped 342
Processing 32 milled 255
Concentrate transport 17 milled 136
Indirect 5 milled 40
Total cash cost 105 milled 1,101
Capital 14 milled 113
Total cash cost plus
capital 119 milled 1,211
Project opportunities
The PEA supports that Maud Creek has the potential to significantly positively impact Newmarket's Northern Territory operations, which currently operate the Cosmo underground gold mine with processing of ore through the Union Reefs processing facility. The processing facility is currently processing approximately 800,000 tonnes per annum of Cosmo ore and retains the capacity to include additional material mined from the Maud Creek project.
The Maud Creek deposit also remains open down plunge and with additional drilling it may be possible to extend the mine life of this operation. Newmarket believes that there is an opportunity to increase the mine life through targeted exploration.
The PEA is part of a phased feasibility study agreement in place between Newmarket and SRK, which provides Newmarket with the option to proceed to prefeasibility and feasibility stages now that the PEA has been completed. Such future stages would further consider geotechnical and geometallurgical modelling of the Maud Creek project, additional review of the metallurgical testwork completed on the Maud Creek deposit, and confirmation of capital required to upgrade the Union Reefs processing facility. Future stages may also include further drilling, with the potential to increase the mineral resource base of the deposit.
Qualified persons and NI 43-101 disclosure
The technical report on the Maud Creek project was compiled by Mr. Fairfield, principal consultant (project evaluation), BEng (mining), FAusIMM CP (mining), of SRK Consulting (Australasia) Pty. Ltd. By virtue of his education, membership to a recognized professional association and relevant work experience, Mr. Fairfield is an independent qualified person as such term is defined in NI 43-101.
Mark Edwards, MAusIMM (CP), MAIG, general manager, exploration, of Newmarket, is a qualified person as such term is defined in NI 43-101 and has reviewed and approved the technical information and data included in this news release.
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