Mr. Patrick Anderson reports
DALRADIAN ANNOUNCES POSITIVE FEASIBILITY STUDY FOR THE CURRAGHINALT GOLD PROJECT DEMONSTRATING HIGH PROFITABILITY AND STRONG RETURNS
Dalradian Resources Inc. has released the results of the independent feasibility study prepared in accordance with National Instrument 43-101 for its 100-per-cent-owned Curraghinalt gold project in Northern Ireland. Unless otherwise stated, all dollar amounts are quoted in U.S. dollars.
Patrick F.N. Anderson, Dalradian's president and chief executive officer, commented:
"The feasibility study outlines a project with high expected profitability and returns and demonstrates the strong economic case for advancing Curraghinalt to development. One of the project's main competitive strengths is the high reserve grade, which would place it in the top 10 per cent of gold mines worldwide(1). What is also very encouraging is that there are multiple opportunities to enhance the economics and extend the project life.
"We are particularly pleased that our test mining showed the viability of mechanized underground mining methods for this deposit and returned consistently higher grades than those predicted by the resource model. The FS sensitivities demonstrate considerable potential for grade upside, such that a 20-per-cent grade improvement increases after-tax net present value by 64 per cent and after-tax internal rate of return by 39 per cent.
"We aim to build Europe's leading gold mine using best-in-class mining, processing and environmental standards, while facilitating economic development in Northern Ireland with the creation of at least 350 permanent jobs during operations. We recently held community consultation events on the proposed mine, with more than 270 people in attendance. We are addressing community consultation feedback and incorporating it into our plans wherever possible."
(1) Source: Canaccord Genuity analysis of the 2015 operating results of 232 gold mines worldwide.
Feasibility study highlights
- Net present value of $301-million ($402-million (Canadian)) after tax
(at a 5-per-cent discount rate) and
internal rate of return of 24.4 per cent after tax, at an assumed gold
price of $1,250/ounce;
- Proven and probable mineral reserves of 1.44 million ounces of gold and
660,000 ounces of silver (5.24 million tonnes at 8.54 grams per tonne gold and
3.9 g/t silver), a subset of the measured and indicated resources of 2.10
million ounces of gold (5.61 million tonnes at 11.61 g/t Au). The FS
excludes inferred resources of 2.31 million ounces of gold (7.13 million
tonnes at 10.06 g/t Au);
- Life-of-mine (LOM) production of approximately 1.36 million ounces of
gold and 380,000 ounces of silver over an initial 10.5-year mine
life using an average overall gold recovery of 94.3 per cent;
- Average annual gold production of 130,000 ounces in first 10 years with
an average LOM total cash cost of $556/ounce and an LOM all-in sustaining
cash cost (AISC) of $674/ounce;
- Estimated initial capital cost, including contingency, of $192.0-million
with payback of four years and LOM sustaining capital costs of $165.1-million;
- At year five, production increases above 150,000 ounce/year, with peak
production achieved in year seven, at 170,000 ounces. There is potential to
maintain this higher rate of production beyond year seven with conversion of
existing inferred mineral resources;
- Curraghinalt will be operated using automation, mechanized underground
mining methods and best-in-class processing. The dry stack tailings from
the process will not have not come into contact with cyanide;
- Creation of several hundred new jobs: during the 18- to 24-month
construction period, direct employment is estimated to be at least 300;
once the mine is in operation, it is expected to employ at least 350
people in permanent positions.
Project enhancement opportunities
There are numerous opportunities to further enhance Curraghinalt project economics including:
- Enhancement of the deposit grade via tighter drill spacing and detailed
definition of high-grade ore shoots within mineralized zone;
- Mine life extension from: (i) conversion of inferred resources to
measured and indicated resources and then into reserves with infill
drilling; and (ii) overall resource and reserve growth from step-out
drilling along strike and at depth combined with exploring the potential
for new veins parallel to the those already defined;
- Reduction of operating costs with additional geotechnical programs to
maximize long-hole mining methods;
- Ore-sorting technology to increase the grade and reduce the tonnage of
material entering the processing plant. Testwork is currently under way
and shows positive preliminary results, with final results expected in
the first half of 2017.
The FS was prepared under the direction of JDS Energy & Mining Inc., an international engineering firm with extensive experience in both the construction and operation of mining projects. The study was supported by SRK Consulting and is being summarized into a technical report to be filed on SEDAR in accordance with National Instrument 43-101. The FS confirms that the project is expected to support an economically viable and robust, high-grade underground gold mine.
NPV AND IRR PRETAX AND AFTER TAX
Pretax After tax
Net present value @ 5% discount rate $371.7M $301.3M
Internal rate of return 27.8% 24.4%
Payback (years) 3.6 4.0
All figures are reported on a 100-per-cent equity project basis valuation.
Capital payback is calculated based on start of production.
CASH FLOW OVER THE INITIAL THREE YEARS OF PRODUCTION AND LOM
(In millions)
Year 1 Year 2 Year 3 LOM
Total revenue (Au and Ag) $120.2 $164.2 $172.9 $1,700.5
Total operating costs 58.8 64.8 65.2 647.3
Transportation, royalties and refining 7.6 10.3 10.8 106.9
Operating margin 53.9 89.1 96.8 946.4
Capital costs 41.7 19.9 17.0 357.1
Working capital 0.6 0.6 (0.4) -
Corporate taxes 0.7 7.6 9.7 96.7
Undiscounted after-tax cash flow 10.9 61.1 70.4 492.6
The cash flow is based on assumed prices of $1,250/ounce for gold and
$17/ounce for silver, and a U.S.-dollar/British-pound exchange rate of $1.20
and U.S.-dollar/Canadian-dollar exchange rate of 75 cents.Gold price sensitivity
The project sensitivity analysis shows that a $100/ounce variation from the base-case gold price had the following impact on the project after-tax economics, with silver held at $17/ounce.
GOLD PRICE SENSITIVITY
$1,150/oz $1,250/oz (base case) $1,350/oz
NPV5 ($M) $224.6 $301.1 $378.0
IRR (%) 20.1 24.4 28.4
Payback (years) 4.5 4.0 3.4Grade sensitivity
The project sensitivity analysis indicated that variations from the base-case gold grade had the impact on the project after-tax economics shown in the table, with silver held at $17/ounce.
GRADE SENSITIVITY
-20% -15% -10% -5% Base case +5% +10% +15% +20%
8.54 g/t
NPV5 ($M) $108 $157 $206 $253 $301.1 $349 $397 $445 $493
IRR (%) 13% 16% 19% 22% 24.4 27% 29% 32% 34%
Payback
(years) 5.6 5.1 4.6 4.3 4.0 3.6 3.3 3.1 2.9Combined results from three test stopes completed in 2016 demonstrated a 50-per-cent-plus improvement in gold ounces recovered compared with the resource model on the V-75 vein (see news releases of Sept. 14, 2016, and Dec. 8, 2016, for details). This is a direct result of a higher-than-expected grade in those areas. At a broader scale, the resource table shows that tighter drill spacing results in higher grade with gold grades increasing from 10.1 g/t in inferred to 11.5 g/t in indicated to 27.0 g/t in measured.
Economic benefits to Northern Ireland
The FS confirms that development of Curraghinalt is expected to provide substantial economic benefits to Northern Ireland at the local, county and national levels, including:
- During the 18- to 24-month construction period the project is expected to
generate direct employment of at least 300 people;
- When the mine is in operation, it is projected to directly employ at
least 350 people in permanent positions, excluding any contractors and
support staff;
- It is estimated that the mine will pay annual wages of approximately $26-million (21 million British pounds) to direct employees;
- The company believes the project will also generate several hundred indirect jobs
with suppliers of products and services to support mine operations;
- Based on a gold price of $1,250 per ounce, the project is anticipated to
generate average payments annually to the government totalling
approximately $21-million (18 million British pounds) in the form of income tax,
corporate tax and national insurance contributions;
- Training and skills development aimed at maximizing local employment at
the project;
- Expected improvement of local and regional infrastructure;
- Continuation and increase of existing community investment programs,
small business development and support of cultural development.
Note that according to regulations, a feasibility study is only permitted to incorporate measured and indicated resources in its calculations. Measured and indicated mineral resources represent less than 50 per cent of total mineral resource ounces identified to date at the deposit. However, the environmental and social impact assessment (ESIA) and planning application will take into consideration the inferred mineral resource with a view to permitting a mine with a life of greater than 20 years.
Feasibility study details
Mineral resources
The Curraghinalt gold deposit is an orogenic gold system consisting of a series of moderately to steeply dipping, structurally controlled, high-grade gold-bearing quartz-carbonate veins. The deposit remains open in all directions. The mineral resource estimate incorporates information from 175 infill drill holes (51,215 metres) and underground samples from new and existing drifts along the T17, Sheep Dip, 106-16, V-75, Slap Shot and No. 1 vein zones. The measured mineral resources are higher grade than the indicated and inferred mineral resources.
The current mineral resource estimate consists of 2.1 million ounces of contained gold in the measured and indicated categories (5.61 million tonnes at 11.61 g/t) and 2.3 million ounces of contained gold in the inferred category (7.13 million tonnes at 10.06 g/t gold).
MINERAL RESOURCE STATEMENT, CURRAGHINALT GOLD PROJECT, NORTHERN IRELAND
Contained
Resource category Tonnes grade Gold
(cut-off grade of 5.0 g/t) (M) (g/t Au) (oz)
Measured 0.03 26.99 25,000
Indicated 5.58 11.53 2,069,000
Measured + indicated 5.61 11.61 2,094,000
Inferred 7.13 10.06 2,306,000
1. Mineral resource statement prepared by SRK Consulting (Canada) Inc. in
accordance with National Instrument 43-101 with an effective date of May 5,
2016, and the corresponding NI 43-101 technical report was filed on SEDAR.
2. Mineral resources are not mineral reserves and have no demonstrated
economic viability. The estimate of mineral resources may be materially
affected by environmental, permitting, legal, marketing or other relevant
issues. The mineral resources have been classified according to the Canadian
Institute of Mining, Metallurgy and Petroleum definition standards for
mineral resources and mineral reserves (May, 2014).
3. All figures have been rounded to reflect the relative accuracy of the
estimates.
4. The mineral resources are reported at a cut-off grade of five g/t gold,
based on a gold price of $1,200 per ounce and 95-per-cent gold recovery.
Mineral reserves and mining
The estimated mineral reserves, presented by reserve class, are shown in the table. The overall diluted gold grade of the mineralized material going to the mill is estimated at 8.54 g/t.
PROBABLE MINERAL RESERVES
Diluted Au Au Ag Ag
Category tonnes grade ounces grade ounces
(g/t) (g/t)
Proven 28,000 18.93 17,000 10.0 9,000
Probable 5,211,000 8.48 1,421,000 3.9 655,000
Total 5,239,000 8.54 1,438,000 3.9 664,000
1. The qualified person for the mineral reserve estimate is Michael
Makarenko, PEng, of JDS Energy & Mining.
2. Mineral reserves have an effective date of Dec. 12, 2016. All mineral
reserves in the table are proven and probable mineral reserves. The mineral
reserves are not in addition to the mineral resources, but are a subset
thereof.
3. Mineral reserves were estimated using a $1,200/ounce gold price and gold
cut-off grade of five g/t. Other costs and factors used for gold cut-off
grade determination were mining, process and other costs of $165/tonne,
transport and treatment charges of $6.00/ounce Au. A royalty of $71.50/ounce
Au and a gold metallurgical recovery of 94 per cent were assumed.
4. Silver was not used in the estimation of cut-off grades but is recovered
and contributes to the revenue stream.
5. Tonnages are rounded to the nearest 1,000 t, gold grades are rounded to
two decimal places and silver grades are rounded to one decimal place.
Tonnage and grade measurements are in metric units; contained gold and
silver are reported as thousands of troy ounces.
6. Rounding as required by reporting guidelines may result in summation
differences.
The Curraghinalt deposit is expected to be accessed by the existing exploration adit and a new ramp to be developed adjacent to the proposed plant site. This new ramp will serve as the primary access to the mine for personnel, materials and haulage of mineralized material to the plant site. Annual ore production of up to 511,000 tonnes (1,400 tonnes per day) is planned from a combination of primary longitudinal long-hole retreat, with some cut-and-fill mining methods and development along the veins. Sublevels are set at 18-metre intervals (floor to floor) with primary crosscuts spaced approximately 200 metres apart to access the 16 mineralized veins in the deposit. The recent test-stoping program at Curraghinalt successfully demonstrated the long-hole mining method at vein dips ranging between 55 to 75 degrees with good control on dilution. In zones of more challenging ground conditions or shallow dip, methods including cut and fill and uppers retreat will be used.
Processing
Curraghinalt mineralization is expected to be processed using a crush, grind, flotation and leach flowsheet to recover gold and silver into dore. Extensive metallurgical testwork has shown overall gold and silver recoveries of 94.3 per cent and 57.9 per cent can be expected over the LOM using a coarse primary grind size of approximately 80 per cent passing 240 microns. Gold in sulphide is concentrated in the flotation process with an average mass pull of 11.2 per cent with over 97 per cent of the gold recovered. After regrinding the concentrate to approximately 80 per cent passing 50 microns, the leaching circuit recovers approximately 96 per cent of the gold after 48 hours of retention time. The process plant uses the industry-standard sulphur dioxide/air treatment process to destroy the cyanide and directs the tailings to the paste backfill plant to be stored in the underground mine. Tailings from the flotation circuit, which will not have come into contact with cyanide, are expected to be filtered and placed as dry stack material in the mine waste storage facility and also used to complete the underground paste backfill requirement. Throughout the process, water is expected to be recycled and returned back to the process plant to minimize the impact on the environment. The water treatment plant includes reverse osmosis.
Capital and operating costs
The initial capital cost is estimated to be $192.0-million. This capital cost was estimated under the assumption that any expenditures by the company prior to the start of construction are a sunk cost and are not included the estimate shown in the table. The sustaining capital is estimated to be $165.1-million, including reclamation and closure costs.
CAPITAL COST SUMMARY
(In millions)
Capex Preproduction Sustaining LOM
Mining incl. paste plant $45.9 $142.6 $188.5
Site development 8.7 2.0 10.7
Crushing and handling 6.5 1.4 7.9
Mineral processing plant 36.9 4.1 41.0
On-site infrastructure 28.9 - 28.9
Off-site infrastructure 4.9 - 4.9
Tailings management 1.4 2.6 4.0
Indirect costs 20.4 2.2 22.6
Owners' costs 13.2 - 13.2
Closure assurance 7.5 (7.5) -
Closure net of salvage - 11.4 11.4
Contingency 17.6 6.4 24.0
Total 192.0 165.1 357.1The LOM operating cost estimate is $143.94 per tonne of mineralized material. The operating costs were estimated based on process design criteria, equipment lease rates (if applicable), labour, reagents, power, fuel, explosives, maintenance and other miscellaneous costs. All costs are in fourth quarter 2016 dollars and noted in the table.
LOM OPERATING COST BY AREA
Opex LOM LOM Unit cost
($M) ($/tonne) ($/payable Au oz)
Mining $442 $84.44 $326.43
Processing 146 27.83 107.60
General and administrative 59 11.27 43.57
Subtotal -- on-site opex 647 123.54 477.60
Refinement/transport 5 0.93 3.60
Royalties 102 19.46 75.24
Subtotal -- off-site opex 107 20.39 78.84
All-in opex 754 143.94 556.44
All cash cost information is net of silver byproduct credits of $4.77/ounce.Infrastructure
The Curraghinalt project has the advantage of being located approximately 100 kilometres west of the city of Belfast and approximately 60 km south of Derry/Londonderry, both of which have port facilities. The proposed site is in a natural hollow surrounded by mature trees and near to the communities of Greencastle, Rouskey, Gortin and Omagh. The site is accessible by major highways with grid power and other services close by.
The power requirements are expected to be met by an extension to the regional high-voltage transmission network. A single circuit 33-kilovolt dedicated transmission line, 40 km long, will be built to feed the project.
Next steps
- Continuing stakeholder engagement;
- ESIA completion;
- Planning application submission;
- Ore-sorting test program results;
- Additional infill and geotechnical evaluation of deposit;
- Drilling program to potentially increase the measured and indicated
mineral resources;
- Basic and detailed engineering.
Technical information
The Dalradian technical report summarizing the results of the FS is being prepared in accordance with National Instrument 43-101 and will be filed under the company's profile on SEDAR within 45 days of this press release. The qualified persons for the Dalradian technical report include:
- JDS Energy & Mining: Garett Macdonald, PEng; Michael Makarenko, PEng; Stacy Freudigmann, PEng; Indi Gopinathan, PEng;
-
SRK Consulting (U.K.): Jane Joughin, MSc, PrSciNat; Dr. Robert Bowell, PhD, CChem, CGeol, EGeol; William Harding, MSc;
-
SRK Consulting (Canada): Cam Scott, PEng; Bruce Murphy, PEng;
-
WSP Canada: Annie Lavoie, PEng; Jean-Philippe Grenier, PEng.
In this news release, the QP for the mineral resource estimate is Dr. Jean-Francois Couture, PGeo (APGO No. 0197), and Dr. Oy Leuangthong, PEng (PEO No. 90563867), both of SRK Consulting (Canada) Inc., and the QP for the mineral reserve estimate is Mr. Makarenko.
Other than as set forth above, all scientific and technical information contained in this press release has been reviewed, verified and approved by Eric Tremblay, PEng, a mining engineer and the company's chief operating officer, who is a qualified person under NI 43-101.
For information on the project, including the mineral resource estimate set forth in the table, please see the technical report filed on SEDAR entitled "Technical Report for the Northern Ireland Gold Project, Northern Ireland," dated June 17, 2016, and prepared by Dr. Couture and Dr. Leuangthong, both of SRK Consulting (Canada), and Stacy Freudigmann, PEng (APEGBC No. 33972), of JDS Energy & Mining.
For information with respect to the key assumptions, parameters and risks associated with the results of the FS for the project, the mineral resource and mineral reserve estimates included therein and other technical information, please refer to the Dalradian technical report to be filed on SEDAR within the next 45 days.
Feasibility study conference call
A conference call will be held on Dec. 12, 2016, at 11 a.m. ET or 4 p.m. GMT to discuss the feasibility study. Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist you).
Dial-in numbers
Toll-Free North America: 1-877-481-4446
Toll-free United Kingdom: 0-800-051-7107
International: 1-647-427-2479
Conference ID: 36057893
A live webcast presentation will be available on-line.
The presentation slideshow will also be available in PDF format for download from the Dalradian website.
About Dalradian Resources
Dalradian Resources is focused on advancing its high-grade Curraghinalt gold project located in Northern Ireland, United Kingdom. In May, 2016, Dalradian announced an updated mineral resource estimate for Curraghinalt, including a 109-per-cent increase in gold ounces contained in the measured and indicated categories compared with the 2014 resource. The current mineral resource consists of 2.1 million ounces of contained gold in the measured and indicated categories (5.61 million tonnes at 11.61 g/t) and 2.3 million ounces of contained gold in the inferred category (7.13 million tonnes at 10.06 g/t gold).
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