Mr. Craig Nelsen reports
AVANTI MINING ANNOUNCES KITSAULT NPV INCREASES TO US$798 MILLION (AFTER TAX) IN FINAL FEASIBILITY STUDY
Avanti Mining Inc. is releasing the results of the NI 43-101 feasibility study prepared by Amec Inc. on its 100-per-cent-owned Kitsault molybdenum property in
northwest British Columbia. The complete report will be filed on
SEDAR and Avanti's website within 45 days of the
issue of this news release. All figures are in U.S. dollars and were derived
assuming 100-per-cent equity financing.
Highlights include:
- The base case after-tax net present value (NPV) (8 per cent) is $798-million, with an internal rate of return (IRR) of
26.8 per cent.
-
Projected undiscounted net cash flow (after-tax) is $2.0-billion.
-
Cash operating costs (mine gate) are estimated to be $4.76 a pound of
molybdenum;
- 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.
- Initial capital costs are estimated at $770-million and life-of-mine (LOM) sustaining
capital at $78-million (plus/minus-15 per cent accuracy estimated in Canadian dollars at $837-million
and $85-million, respectively).
- 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 a pound to
$18.25 a 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.
A long-term exchange rate of 0.92 has been used to convert Canadian dollars to
U.S. dollars.
-
There is a LOM roasting agreement in place with Molymet that
assures roasting capacity for the project.
- 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 molybdenum.
- An increased resource estimate containing 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 molybdenum and 40.3 million
ounces of silver. This represents a 9.7-per-cent increase of contained molybdenum and
an 18-per-cent increase of contained silver over the prior estimate for measured
plus indicated mineral resources. In addition, the inferred category totals
157.1 million tonnes grading 0.050 per cent molybdenum and 3.65 grams per tonne silver 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
previous resource estimate for inferred mineral resources.
The mine has certain infrastructure in place with road and ocean
freight access to the mine site and will be serviced by the existing BC
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 the environmental assessment process
under the B.C. and federal legislation, as well as the Nisga'a final
agreement, and 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 projects robust economics and plan to utilize
this study as the basis for negotiating strategic partnerships to assist
with the financing plan for Kitsault. The principal reason for the
approximately $250-million improvement in the NPV over our prefeasibility
study is the decrease in initial and sustaining capital of almost $200-million and a long-term improved outlook for molybdenum prices. We also
expect to add byproduct silver recovery after we complete additional
metallurgical test that should enhance further the projects economics. 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 is serviced by the BC 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 0.77:1 during a mine life of 16 years. The ore
mined will be crushed in a gyratory primary crusher, then ground 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 LOM molybdenum production is
estimated at 373.9 million pounds of molybdenum contained in 326,150 tonnes
of molybdenum concentrate produced from the processing of 232.7 million
tonnes of reserves grading 0.081 per cent molybdenum, plus planned dilution. 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 (CIM) definition standards for mineral
resources mineral reserves and 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
an attached table.
KITSAULT MINERAL RESOURCES
(effective Nov. 8, 2010; cut-off 0.021 per cent Mo)
Category Volume Density Tonnage Mo Mo Ag Ag
mm(3) g/cm(3) 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 and 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
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 open-pit extraction and Avanti and
Amec has 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
below. 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.
An attached table reflects the sensitivity of the resource estimate to
various cut-off grades.
MO CUT-OFF GRADE SENSITIVITY ANALYSES WITHIN RESOURCE PIT
-- MEASURED AND INDICATED RESOURCES
Cut-off Tonnes Mo Ag Mo Ag
Mo % (kt) (%) (ppm) (mlbs) (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 historic 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 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 a day. mineral reserves are summarized by
category in an attached table.
KITSAULT MINERAL RESERVES
(effective Nov. 8, 2010; cut-off 0.026 per cent Mo)
Contained Mo
Category Tonnage (mt) 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
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-square-metre rope shovel, one 28-square-metres electric hydraulic shovel, one 18-square-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 an attached table.
SUMMARIZED PRODUCTION SCHEDULE
Ore to
Ore low-
direct grade Waste
Mining to mill stockpile mined Strip Mill Mo grade
period (kt) (kt) (kt) Total 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 tonnes of inferred dilution material with grades set to zero is 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 a day, 365 days a year. Over the life of mine, the
processing plant will produce an estimated 326,150 tonnes of molybdenite
concentrate grading 52 per cent molybdenum. 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 consists 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; and
flotation to produce desulphidized tailings which will have a portion
cycloned for dam construction and the remainder will be deposited by
gravity into an on site tailings management facility (TMF). 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. LOM
sustaining mine capital was estimated to be $50-million, which is consists
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 an attached table.
CAPITAL COST SUMMARY
(in millions of U.S. dollars)
Area Description Amount
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 (included above)
-------
Total capital costs $ 770
Operating costs
LOM unit cash operating costs are $7.64 a tonne milled and operating costs for
the processing plant are estimated at $4.36 a tonne milled (plus/minus-15 per cent accuracy).
General and administrative costs have been estimated at $1 a tonne milled. The
LOM unit cash operating costs are also summarized in an attached table.
UNIT CASH OPERATING COSTS
(LOM average -- US$)
Total
Area LOM ($000) US$/t milled US$/lb Mo
Mine operations 528,038 2.27 1.42
Processing operations 1,014,030 4.36 2.71
Administration 232,745 1.00 0.63
------------ ------------ ------------
Total 1,774,813 7.64 4.76
Project economics
The feasibility study economic results utilized assumptions summarized in
an attached table.
FINANCIAL ANALYSIS PARAMETERS
Parameters Inputs
General assumptions
Mine life 16 years
Available mill operating days per year 365 days a year
Production rate (average) 40,000 tonnes per day
Average process recovery 89.9 per cent
Molybdenum concentrate -- LOM 326,150 tonnes
CDN$:US$ exchange rate 0.92
Market
Discount rate 8 per cent
Base case LOM average molybdenum price $16.76 a pound
Royalty
Amax Zinc (Newfoundland) Ltd. net profits interest 9.22 per cent
Alcoa royalty 1.0 per cent
The feasibility study economic model for the base case in this study assumes a LOM average
molybdenum price of $16.76 apound for revenue purposes, as projected by CPM
Group.
The after-tax NPV at an 8-per-cent discount rate over the estimated mine life is
$798-million. The after-tax IRR is 26.8 per cent. Payback of the initial capital
investment is estimated to occur in 2.6 years after the start of production
Sensitivity
Sensitivity analysis for key economic parameters is shown in an attached table prior
to tax effects. This analysis suggests that the project is most sensitive
to exchange rates followed by commodity prices. The project is least
sensitive to operating and capital costs.
BASE CASE SENSITIVITY TO PRETAX NPV AT 8-PER-CENT DISCOUNT RATE
Change in factor
-30% -20% -10% 0% 10% 20% 30%
Factor
Exchange rate 2,424 1,922 1,531 1,219 963 749 569
Capital expenditure 1,426 1,357 1,288 1,219 1,150 1,080 1,011
Operating expenditure 1,485 1,396 1,307 1,219 1,130 1,041 953
Metal price 365 650 934 1,219 1,503 1,787 2,071
Development timetable
A construction schedule, as shown in an attached table, has been established that is contingent on the
following milestones to be realized.
PROJECT MILESTONES
Milestone Date
Notice to proceed Jan. 1, 2012
Begin crushing and screening at pit site Jan. 1, 2012
Begin earthworks at plant site March 2, 2012
Begin work at south embankment April 1, 2012
Construction camp ready for partial occupancy June 1, 2012
Construction power and communications at plant site compete June 30, 2012
Commence concrete at plant site July 1, 2012
Construction camp ready for full occupancy Sept. 30, 2012
Truckshop construction complete Oct. 30, 2013
Complete installation of power and distribution Oct. 31, 2013
Complete north embankment Oct. 31, 2013
Begin commissioning Dec. 1, 2013
Plant ready for start-up Jan. 29, 2014
Complete south embankment Jan. 30, 2014
The NI 43-101 preliminary feasibility study, Avanti Mining, 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 qualified persons have reviewed and approved this
news release. The consultants with their responsibilities are as
follows:
Amec is under the direction of Mr. Kulla, PGeo, for matters
relating to geology and mineral resource reporting.
Amec is under the direction of Mr. Ulansky, PEng, for matters
and costs relating to mineral reserve statements, mining, mining capital
and mine operating costs.
Amec is 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. (SRK Canada) is under the direction of Peter
Healey, PEng, for matters and costs relating to mine closure and
reclamation.
SRK US is under the direction of Michael Levy, PE, PG, for matters
relating to the pit slopes.
Knight Piesold Ltd. is under the direction of Bruno Borntraeger, PEng, for matters and costs relating to plant site geotechnical
conditions, surface water diversions and the TMF.
We seek Safe Harbor.
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