Mr. Craig Nelsen reports
AVANTI MINING RECEIVES POSITIVE FEASIBILITY STUDY CONFIRMING ROBUST ECONOMICS FOR RESTART OF KITSAULT MOLYBDENUM MINE
Avanti Mining Inc. has released the results of the NI 43-101 feasibility study
prepared by AMEC on its 100-per-cent-owned Kitsault molybdenum property
in northwest British Columbia, Canada. The complete report will be
filed on SEDAR and posted on Avanti's website within 45 days of the issue of this press release. All figures are in
U.S. dollars and were derived assuming 100-per-cent equity financing.
Highlights
An increased resource estimate contains measured and indicated mineral
resources totalling 298.8 million tonnes grading 0.072 per cent molybdenum and
4.20 grams per tonne silver containing 472.5 million pounds of Mo and 40.3 million
ounces of Ag. This represents a 9.7-per-cent increase of contained molybdenum
and an 18-per-cent increase of contained silver over the company's prior estimate for
measured plus indicated mineral resources. In addition, the inferred
category totals 157.1 million tonnes grading 0.050 per cent Mo and 3.65 g/t Ag
containing 172.2 million pounds of molybdenum and 18.4 million ounces
of silver, an increase of 330 per cent of contained molybdenum and 360 per cent of
contained silver over the company's previous resource estimate for inferred
mineral resources.
The mine plan calls for a total of 232.5 million tonnes of proven and
probable reserves grading 0.081 per cent molybdenum to be mined over a 16-year mine life, producing 373.9 million pounds of molybdenum. The first
five years of production averages 0.101 per cent Mo.
A long-term exchange rate of 0.92 has been used to convert Canadian dollars to U.S. dollars.
Initial capital costs are estimated at $770-million (plus/minus-15-per-cent accuracy estimated in Canadian dollars at $837-million).
Cash operating costs (mine gate) are estimated to be $4.76 per pound of
molybdenum.
The average annual price of molybdenum for the base case scenario over
the mine life as forecast by the CPM Group ranges from $13.75 per pound to
$18.25 per pound based upon its June, 2010, molybdenum market outlook. The
average over the Kitsault mine life is $16.76 per pound of molybdenum.
Forecasts were also prepared for a low- and a high-price scenario.
The base case after-tax net present value (8 per cent) is $798-million, with an internal rate of return of 26.8 per cent.
Projected undiscounted net cash flow (after tax) is $2.0-billion.
Annual metal production for the mine life averages 23.4 million pounds
of molybdenum with the first five years averaging 29.6 million pounds per year.
There is a life-of-mine roasting agreement in place with Molymet that
assures roasting capacity for the project.
The mine has certain infrastructure in place with road and ocean freight
access to the mine site and will be serviced by the existing B.C. Hydro
transmission grid.
The reopening of the mine is projected to create over 350 high-paying
local jobs during its 16-year life and, at the peak of construction,
over 650 jobs. The construction period is estimated at 25 months.
The project is progressing through an environmental assessment process
under the B.C. and federal legislation, as well as the Nisga'a final agreement, and the company expects to submit its application in April, 2011.
"We are delighted with the plan developed in this feasibility study by
AMEC and other contributors," stated Craig J. Nelsen, Avanti's president
and chief executive officer. "We are pleased with the project's robust economics and plan
to utilize this study as the basis for negotiating strategic
partnerships to assist with the financing plan for Kitsault. Our
schedule anticipates receipt of permits toward the end of 2011 and
construction to follow in early 2012 with initial production in 2014."
Project description
The Kitsault property is located about 140 kilometres north of Prince Rupert,
B.C., 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, which is approximately 12 kilometres from ocean transport routes and which is serviced by the B.C. Hydro
transmission grid. The feasibility study estimates that the Kitsault
mine would operate at an annual resource throughput rate of 14.6
million tonnes, or 40,000 tonnes per day, with a strip ratio of 0.77 to 1 during a mine life of 16 years. The ore mined will be crushed in
a gyratory primary crusher then grounded 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 373.9 million pounds of molybdenum contained in 326,150 tonnes of
molybdenum concentrate produced from the processing of 233.7 million
tonnes of reserves plus planned dilution grading 0.081 per cent Mo. Total
molybdenum recovery varies depending on mill head grade but is
estimated to average 89.9 per cent.
Mineral resource/reserves statement
The mineral resources are reported in accordance with Canadian Institute
of Mining, Metallurgy and Petroleum definition standards for
mineral resources mineral reserves and its guidelines and are
compliant with National Instrument 43-101. The resource
estimate was prepared under the supervision of Greg Kulla, PGeo, an
independent qualified person, as this term is defined in NI
43-101. The mineral resource statement for the Kitsault molybdenum
project is presented in the attached Kitsault mineral resources table.
KITSAULT MINERAL RESOURCES, EFFECTIVE DATE NOV. 8, 2010,
GREG KULLA, PGEO (CUT-OFF 0.021 PER CENT MO)
Category Volume Density Tonnage Mo Mo Ag Ag
Mm3 g/cm3 Mt % Mlb ppm Moz
Measured 27.6 2.65 73 0.093 150.3 4.28 10
Indicated 84.9 2.66 225.8 0.065 322.2 4.17 30.3
Measured plus indicated 112.4 2.66 298.8 0.072 472.5 4.2 40.3
Inferred 58.8 2.66 157.1 0.05 172.2 3.65 18.4
Mineral resources are inclusive of mineral reserves.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Mineral resources are defined with a Lerchs-Grossmann pit shell and
reported at a 0.021-per-cent-molybdenum-cut-off grade.
Mineral resources are reported using a commodity price of
$15.62 (Canadian) per pound Mo, an average process recovery of 89
per cent, a process cost of $5.84 (Canadian) per tonne
and selling cost of $1.24 per pound of Mo sold. No revenue was
assumed for Ag.
Tonnages are rounded to the nearest 1,000 tonnes, grades are rounded to
three decimal places for Mo and two decimals for Ag.
Rounding as required by reporting guidelines may result in apparent
summation differences between tonnes, grade and contained-metal content.
Tonnage and grade measurements are in metric units; contained molybdenum
is in imperial pounds.
There is potential for a 30- to 50-per-cent recovery of the silver reporting to a
saleable concentrate. As of Dec. 1, 2010, the metallurgical work
in support of this is indicative only, suggesting that, although there
may be a reasonable prospect to extract this silver resource, there is
insufficient work to define the level of benefit that would support
inclusion of silver in a reserve estimate. No dedicated silver
recovery circuit has been included in the process design, but there are
reasonable expectations that this can be added in the future.
The mineral resources are reported at a cut-off grade to reflect the
reasonable prospects for economic extraction. This estimate of the
Kitsault molybdenum deposit is based on open pit extraction, and Avanti and
AMEC have not considered underground mining methods for deeper portions
of the deposit. Although silver has been reported in the mineral
resource, it has not been included in the economic analysis or the
reserve statement. There is sufficient metallurgical testwork to
suggest it could be an economic contributor, but this work has not yet
reached the feasibility level of confidence. The recovery of silver
remains a potential-project upside contributor, as well as the
opportunity of conversion of inferred to higher confidence categories
through additional drilling. Additional drilling will continue through
the 2011 field season in parallel with basic and advanced engineering
studies.
The attached molybdenum-cut-off table reflects the sensitivity of the resource estimate
to various cut-off grades.
MOLYBDENUM-CUT-OFF-GRADE SENSITIVITY ANALYSES WITHIN RESOURCE PIT --
MEASURED AND INDICATED RESOURCES
Cut-off Tonnes Mo Ag Mo Ag
Mo% (kt) (%) (ppm) (Mlb) (Moz)
0.010 348,203 0.064 4.09 489.7 45.8
0.015 328,421 0.067 4.13 484.2 43.6
0.021 298,835 0.072 4.2 472.5 40.3
0.025 278,316 0.075 4.26 462.1 38.1
0.030 249,895 0.081 4.34 444.8 34.8
0.035 224,460 0.086 4.4 426.7 31.8
0.040 204,924 0.091 4.47 410.6 29.4
AMEC conducted a complete re-evaluation of all old historical and recent
drilling information and recalculated the mineral resources from first
principals. Ten holes from the previous database were not used in the
calculation because of an inability to verify core quality (recoveries)
and assay methods.
The Kitsault mine mineral reserves have been prepared in accordance with
NI 43-101 standards and CIM definition standard (2010). This statement
has been prepared by Ryan W. Ulansky (PEng) of AMEC, a qualified person as
defined in NI 43-101. These reserves are sufficient for 16 years of
operation at an annual production rate of 40,000 tonnes per day. Mineral reserves
are summarized by category in the attached Kitsault mineral reserves table. The notes accompanying the table are an integral part of the mineral reserves and should be read in
conjunction with the mineral reserve statement.
KITSAULT MINERAL RESERVES, EFFECTIVE DATE NOV. 8, 2010,
RYAN ULANSKY, PENG (CUT-OFF 0.026 PER CENT MO)
Category Tonnage (Mt) Mo (%) Contained Mo
(MLb)
Proven 69.7 0.097 148.5
Probable 162.8 0.075 267.3
Total proven and probable 232.5 0.081 415.8
Mineral reserves are defined within a mine plan, with pit phase designs
guided by Lerchs-Grossmann pit shells and reported at a 0.026-per-cent-
molybdenum-cut-off grade, after dilution and mining loss adjustments. The
LG shell generation was performed on measured and indicated materials only,
using a molybdenum price of $13.58 (Canadian) per pound, an average mining
cost of $1.94 (Canadian) per tonne mined, a combined ore based cost of
$5.84 (Canadian) per tonne milled and a selling cost of $1.24 per pound of
Mo sold.
Dilution and mining loss have been accounted for based on a waste
neighbour analysis. An amount of 1.5 million tonnes of measured and
indicated material above cut-off was routed as waste. An amount of 1.9
million tonnes of measured and indicated material below cut-off has been
included as dilution material. An additional 200,000 tonnes of inferred
dilution material with grades set to zero are included in the mine plan
as mill feed.
Tonnages are rounded to the nearest 1,000 tonnes, grades are rounded to
three decimal places for Mo.
Rounding as required by reporting guidelines may result in apparent
summation differences between tonnes, grade and contained-metal content.
Tonnage and grade measurements are in metric units; contained molybdenum
is in imperial pounds.
The life of mine strip ratio is 0.77.
Mining
The single ultimate pit will be mined in six phases, with elevated
cut-offs in the early years and low-grade stockpiling. A bulk-mining
approach has been selected, mining on 10-metre benches. The selected mining
fleet features one 26-cubic-metre rope shovel, one 28-cubic-metre electric hydraulic shovel, one 18-cubic-metre front-end loader and up to 10 218-tonne haul trucks with related
support equipment. Benches will be drilled with eight-metre-by-eight-metre production
drill patterns and wall control patterns as required. The holes will be
loaded and shot with a 70-per-cent emulsion/30-per-cent ANFO-blend blasting agent. Ore
control will be based on blasthole samples assayed for molybdenum.
Waste rock will be stored in an expansion to the existing Patsy waste
management facility. Low-grade ore will be stockpiled throughout the
mine life on the top of the existing Clary waste management facility.
This ore stockpile will be reclaimed and processed during the last two
years of the operation.
The mining production schedule is presented in the attached summarized production table.
SUMMARIZED PRODUCTION SCHEDULE
Ore to
Mining Ore direct low-grade Waste Total Strip Mill Mo grade
period to mill (kt) stockpile (kt) mined (kt) ratio production (%)
-2 -- -- -- -- -- --
-1 362 8,500 23.48
1 13,836 3,801 19,910 37,547 1.13 14,029 0.104
2 14,600 4,126 22,940 41,666 1.23 14,600 0.106
3 14,600 3,088 21,375 39,063 1.21 14,600 0.114
4 14,600 5,969 13,315 33,884 0.65 14,600 0.088
5 14,600 2,833 15,349 32,782 0.88 14,600 0.096
6 14,600 2,581 14,136 31,317 0.82 14,600 0.096
7 14,600 2,087 12,675 29,362 0.76 14,600 0.089
8 14,600 1,043 12,725 28,368 0.81 14,600 0.082
9 14,600 1,024 11,061 26,685 0.71 14,600 0.08
10 14,600 291 8,125 23,016 0.55 14,600 0.074
11 14,600 -- 6,523 21,123 0.45 14,600 0.072
12 14,600 -- 5,360 19,960 0.37 14,600 0.068
13 14,600 -- 3,657 18,257 0.25 14,600 0.079
14 14,600 -- 2,103 16,703 0.14 14,600 0.081
15 1,833 -- 475 2,308 0.26 14,600 0.037
16 -- -- -- -- -- 14,245 0.031
Totals 205,469 27,205 178,229 410,903 0.77 232,674 0.081
As part of the dilution/mining loss adjustments, an additional 202,000 t of inferred
dilution material with grades set to zero are routed to the mill.
Processing
The proposed concentrator in this study is based on an annual resource
throughput rate of 14.6 million tonnes, or 40,000 tonnes per day at 92-per-cent plant availability,
for the production of a molybdenum concentrate. The processing plant
is expected to operate 24 hours/day, 365 days/year. Over the life of
mine, the processing plant will produce an estimated 326,150 t of
molybdenite concentrate grading 52 per cent Mo. The molybdenum recovery is
variable with the average estimated at 89.9 per cent.
The proposed process design is based on historical testwork results, the
results from a recent (2009 and 2010) test program and utilizing plant
data from the previous Kitsault concentrator operations. Plant design,
principally the crushing-grinding circuit, has been revised to reflect
current technologies using a primary crusher-SAG-ball mill
configuration. The process design is composed of the following unit
processes:
-
Primary crushing using a gyratory crusher;
-
Grinding using a SAG-ball mill-pebble crusher configuration with
cyclones for flotation feed size classification;
-
Rougher and scavenger flotation;
-
Five stages of cleaner flotation with three stages of regrinding;
- Final molybdenum concentrate thickening, leaching for the removal of
contaminants, and the filtering, drying and packaging of the final
concentrate;
- Flotation to produce desulphidized tailings, which will have a portion
cycloned for dam construction, and the rest will be deposited by
gravity into an on-site tailings management facility. Pyritic
tailings will be deposited in a separate submerged cell in the TMF to
prevent oxidation.
Capital costs
Initial capital costs are estimated at $770-million, which includes $50-million for mobile mining equipment. Preproduction stripping costs of
$13-million are reflected in the initial operating costs. Life of mine
sustaining mine capital was estimated to be $50-million, which is
composed mainly of mobile equipment and TMF embankment continuing construction. All capital costs are plus/minus 15 per cent in this estimate.
The capital costs for the mine, plant and TMF are given in the attached capital cost table.
CAPITAL COST SUMMARY
Area Description Cost
(U.S.$M)
1000 Mining 83.8
2000 Site preparation and roads 35.5
3000 Process facilities 195.1
4000 Tailings management and reclaim systems 89.8
5000 Utilities ties 39.7
6000 Ancillary buildings and facilities 38.4
Total direct costs 482.3
8000 Owner's costs 21.1
9000 Indirects 266.7
Total indirect costs 287.8
Contingency Incl above
Total capital costs 770
Operating costs
Life-of-mine unit cash operating costs are $7.64 (U.S.)/t milled, and operating costs
for the processing plant are estimated at $4.36/t milled (15-per-cent
accuracy). General and administrative costs have been estimated at
$1/t milled. The life-of-mine unit cash-operating costs are also
summarized in the attached unit cash table.
UNIT CASH OPERATION COSTS (LOM AVERAGE -- U.S.$)
Area Total LOM ($000) U.S.$/t milled U.S.$/lb Mo
Mine operations 528,038 2.27 1.42
Processing operations 1,014,030 4.36 2.71
Administration 232,745 1.00 0.63
Total 1,774,813 7.64 4.76
The NI 43-101 preliminary feasibility study, "Avanti Mining Inc.,
Kitsault molybdenum property, British Columbia, Canada," was prepared by
industry consultants, all of whom are independent of Avanti Mining and are qualified persons under National Instrument 43-101. The QPs have reviewed
and approved this news release. The consultants with their
responsibilities are as follows:
- AMEC Inc. under the direction of Mr. Kulla (PGeo) for matters
relating to geology and mineral resource reporting;
- AMEC Inc. under the direction of Mr. Ulansky (PEng) for
matters and costs relating to mineral reserve statements, mining,
mining capital and mine operating costs;
- AMEC under the direction of Tony Lipiec (PEng) for matters
relating to the metallurgical testing review, mineral processing and
process operating costs;
- SRK Consulting (Canada) Inc. under the direction of Peter Healey (PEng) for matters and costs relating to mine closure and
reclamation;
- SRK United States under the direction of Michael Levy (PE, PG) for matters
relating to the pit slopes;
- Knight Piesold Ltd. under the direction of Bruno Borntraeger
(PEng) for matters and costs relating to plant site geotechnical
conditions, surface water diversions and the tailings management
facility.
Kenneth Collison, senior vice-president of project
development for the company and a qualified person as defined in NI
43-101, has reviewed and approved the scientific or technical
information in this press release.
We seek Safe Harbor.
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