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Exeter Resource Corp
Symbol XRC
Shares Issued 88,407,753
Close 2015-12-16 C$ 0.44
Market Cap C$ 38,899,411
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Exeter trying to save money, stops Caspiche studies

2015-12-17 06:55 ET - News Release

Mr. Wendell Zerb reports

EXETER RESOURCE CORPORATION: CORPORATE UPDATE

Exeter Resource Corp. is providing the following corporate update.

With a treasury of $23-million, Exeter is in an enviable position in this very challenging down cycle for mineral resource companies. As a result of the downturn in commodity prices, Exeter's share price has been severely discounted and does not reflect the value of the Caspiche property, a rare and unique asset. The new, lower-capital-expenditure scalable mine development options for Caspiche, identified in the preliminary economic assessment, released in 2014, offer viable alternatives for potential development. Engineering studies for Caspiche have been sufficiently advanced that upon improved market conditions, new studies that could lead to a production decision can be fast-tracked.

Given the depth of this market downturn and the possibility of a protracted recovery timeline, Exeter has postponed advancing further detailed engineering studies at Caspiche. Furthermore, the company has initiated measures to preserve its capital. Corporate expense reductions have been implemented, including reducing personnel and applying salary reductions for those retained.

Outlook

Over the course of the next year, the company will continue to optimize Caspiche development options and importantly investigate infrastructure alternatives that could enhance project economics. The intention is to continue the process of derisking the project such that it stands out, as one of the few projects that can be advanced rapidly for future development when market conditions improve.

A secondary focus for Exeter is to actively review corporate opportunities with the possibility of acquiring assets that will provide additional value for shareholders. In particular, the company is focusing on securing assets/projects in the Americas.

The Exeter team has a record of success having discovered three significant mineral deposits in the last decade. The company remains committed to prudently managing its capital, while seeking to maximize shareholder value in this challenging market environment.

Caspiche

Caspiche represents one of the largest mineral discoveries made in Chile in recent years. The unique characteristics of the deposit, with its surface oxide gold zone and higher-grade gold-copper core, offer future mining opportunities that range from modest-scale oxide heap-leach gold production, to larger-scale open-pit/underground mining of the underlying gold-copper zone. These characteristics were assessed in the 2014 PEA, which reviewed three development alternatives, all of which require significantly less capital than earlier studies.

The fact that Caspiche is scalable opens the potential for operational cash flow to provide expansion capital as mining transitions from the shallow oxide gold zone to development of the Caspiche gold-copper deposit.

The 2014 PEA showed three potential development options:

  • A 30,000-tonne-per-day heap-leach oxide gold project producing a projected average of 122,000 ounces gold-equivalent annually over a planned 10-year mine life, including 148,000 ounces AuEq annually in the first five years. A very low strip ratio (0.27 to 1) and favourable gold recoveries drive excellent economics:
    • Projected average total cash operating costs of $589 (U.S.)/ounce AuEq(i), all-in sustaining costs (AISC) of $676 (U.S.)/ounce AuEq;
    • Pretax net present value at a 5-per-cent discount (NPV5) of $355-million (U.S.) at $1,300 (U.S.)/ounce Au;
    • Internal rate of return of 34.7 per cent;
    • Aftertax (27-per-cent tax rate) NPV5 of $252-million (U.S.), IRR of 28.5 per cent;
    • Payback period of 3.4 years from initial construction;
    • Estimated initial capex of $210-million (U.S.) plus $41-million (U.S.) in contingencies;
    • Required water of 44 litres per second;
  • A larger, scalable 60,000 tpd open-pit, heap-leach oxide gold option followed by expanded open-pit mining (27,000 tpd) of the gold-copper sulphide zone. Planned mine life is 18 years with projected average annual production of approximately 289,000 ounces AuEq per year;
  • A scalable 60,000 tpd open-pit, heap-leach oxide gold operation transitioning to underground sublevel open-stope mining (27,000 tpd) of the higher-grade gold-copper sulphide zone. Projected annual average production is 250,000 ounces of Au in years one to three and 425,000 ounces AuEq in years four to 13. Over a planned 42-year mine life projected production is 344,000 ounces AuEq per year.

              MINERAL RESOURCES -- OXIDE AND SULPHIDE MATERIALS

Material         Class         Tonnes     Au     Cu     Ag     AuEq     AuEq 
                                   (M)  (g/t)    (%)  (g/t)    (g/t)    (Moz)

Oxide            Measured        65.9   0.46      -   1.55     0.46      1.0
Oxide            Indicated       55.6   0.39      -   1.63     0.40      0.7
Total oxide      M&I            121.5   0.43      -   1.58     0.43      1.7
Sulphide         Measured       554.2   0.58   0.23   1.16     1.02     18.3
Sulphide         Indicated      727.9   0.48   0.18   1.17     0.84     19.6
Total sulphide   M&I          1,282.1   0.52   0.20   1.17     0.92     37.9
Total M&I                     1,403.6   0.51   0.19   1.20     0.88     39.6

             MINERAL RESOURCES -- HIGHER-GRADE GOLD-COPPER ZONE 

Material         Class         Tonnes     Au     Cu     Ag     AuEq     AuEq 
                                   (M)  (g/t)    (%)  (g/t)    (g/t)    (Moz)

Total sulphide   M&I            177.1   1.05   0.41   1.71     1.83     10.4
Total sulphide   M&I            510.0   0.80   0.33   1.45     1.43     23.5
Total sulphide   M&I            810.2   0.67   0.29   1.35     1.22     31.8

Infrastructure

The Caspiche project is accessible by a well-maintained all-weather road from the mining centre of Copiapo. The property is situated between the undeveloped Cerro Casale gold-copper project 12 kilometres to the south and the operating Maricunga gold mine 15 km to the north.

Power

An existing electrical power corridor starts from the Cardones substation south of Copiapo and passes within 12 km of Caspiche. Current excess capacity at Cardones is adequate for any of the expected power requirements envisioned in the 2014 PEA.

The Chilean Environmental Assessment Service (SEA) has recently approved a 753 km expansion of the southern SIC power grid from Polpaico to Cardones. The expansion includes a 500-kilovolt double circuit with a design capacity of 1,700 megavolt-amperes per circuit. Initial construction is scheduled to start in early 2016 and the line is expected to be operational in 2017. A 580 km, 500 kv double circuit Transmisora Electrica del Norte (TEN) power grid will connect Mejillones in the Antofagasta region in northern Chile through to Cardones.

New contracts for both conventional and renewable energy operations (solar photovoltaic parks, wind, hydro) have been, or are in the process of being awarded. This new power initiative in Chile is expected to improve the overall capacity of the grid power and also significantly reduce power costs throughout the country. According to Chile's National Energy Commission (CNE), the unification of the grids should reduce energy prices for wholesale industrial consumers, by between $9 (U.S.)/megawatt-hour and $17 (U.S.)/mwh.

Water

Exeter continues to pursue a diverse strategy to secure water sources for Caspiche. Numerous potential water supply options exist for Caspiche, including groundwater, industrial water and desalination. Testing of Exeter's recent water discovery at the Penas Blancas (option for 90 per cent interest) aquifer confirmed aggregate flow rates of over 400 l/s. The ultimate, cumulative flow rate potential of the aquifer remains open and the technical characteristics of the aquifer are considered excellent. Maximum anticipated water requirements based on the 2014 PEA are 185 l/s, less than half of the flow rate tested at Penas Blancas.

The water exploration phase at Penas Blancas is complete and Exeter has initiated applications to now acquire water rights. The timeline for this approval process is not defined by the Chilean water authorities. To maintain a diverse strategy to secure water, Exeter has additional water exploration applications in the area of Caspiche in process with anticipated approval in 2016. In addition, the company is pursuing potential infrastructure sharing associations with other stakeholders in the region for both water and power. Alternative water sources, including desalination or industrial water options under consideration, could have the benefits of minimal timelines for approval and from infrastructure-sharing associations with other stakeholders in the region. The anticipated reduction in power costs would positively impact an industrial or desalination option for water.

Environment

Exeter has completed a number of environmental campaigns to generate suitable baseline studies to support a future environmental impact study. Community consultation and environmental baseline work programs are continuing.

We seek Safe Harbor.

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