Mr. Joseph Grosso reports
GOLDEN ARROW ANNOUNCES POSITIVE PRE-FEASIBILITY STUDY FOR THE CHINCHILLAS
PROJECT JOINT VENTURE WITH SILVER STANDARD
Golden Arrow Resources Corp. has released the results of a prefeasibility study of the Chinchillas project located in the Jujuy province, Argentina, for the joint venture development of the project with Silver Standard Resources Inc., pursuant to the business combination agreement between the parties dated Sept. 30, 2015, as outlined in the company's news release dated March 31, 2017. The prefeasibility study envisions a satellite open-pit mining operation at the Chinchillas project with ore processing undertaken using the existing mill and concentrator facility at the Pirquitas mine property, which has the capacity to accept and process Chinchillas ore, located approximately 42 kilometres west of Chinchillas.
All financial results are in U.S. dollars, and all technical data are presented on a 100-per-cent project basis.
Prefeasibility study highlights:
- Average annual silver-equivalent production of 8.4 million ounces over an eight-year mine life at a 4,000-tonne-per-day plant throughput;
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Robust operating margins based on cash costs of $7.40 per payable ounce of silver sold over the life of mine;
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Posttax net present value (NPV) of $178-million using a 5-per-cent discount rate and metal prices of $19.50 per ounce silver, 95 cents per pound lead and $1 per pound zinc;
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Attractive posttax internal rate of return (IRR) of 29 per cent;
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Near-term production based on construction beginning in the third quarter of 2017, subject to permitting, followed by ore delivery to the Pirquitas mill in the second half of 2018;
- Low capital intensity based on initial capital expenditures, including owner's costs and contingency, estimated to be $81-million;
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Mineral reserves of 11.7 million tonnes containing 58 million ounces of silver at a grade of 154 grams per tonne (g/t), 310 million pounds of lead at a grade of 1.2 per cent and 127 million pounds of zinc at a grade of 0.49 per cent;
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Measured and indicated mineral resources (inclusive of mineral reserves) of 29.3 million tonnes containing 96 million ounces of silver at a grade of 101 g/t, 581 million pounds of lead at a grade of 0.9 per cent and 386 million pounds of zinc at a grade of 0.6 per cent;
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Capital cost estimates assume utilizing certain property, plant and equipment from the Pirquitas mine. All costs incurred prior to the declaration of commercial production are considered capital costs.
Project overview
The Chinchillas project is a silver-lead-zinc deposit located in the Puna region of northwestern Argentina in the Jujuy province. Chinchillas is approximately 42 kilometres by road from the Pirquitas mine owned and operated by Silver Standard and 280 kilometres from the provincial capital of San Salvador de Jujuy. The project is composed of three contiguous claims totalling 2,043 hectares. The project is accessed by paved road to the town of Abra Pampa via National Route No. 9 and an additional 66 kilometres west across public gravel roads, through the village of Santo Domingo, with similar road conditions presently utilized to service the Pirquitas mine. Santo Domingo is equipped with electricity, natural gas and water services.
Mineral resources estimate
The updated mineral resources estimate is based on all available data for the Chinchillas deposit as at Oct. 2, 2016.
Category Tonnes AgEq Ag Pb Zn AgEq Ag Pb Zn
(Mt) (g/t) (g/t) (%) (%) (Moz) (Moz) (Mlb) (Mlb)
Measured 3.1 160 128 0.60 0.41 16 13 41 28
Indicated 26.2 148 98 0.94 0.62 124 83 540 358
Total (M+I) 29.3 149 101 0.90 0.60 140 96 581 386
Inferred 20.9 94 50 0.54 0.81 63 34 250 374
Mineral reserves estimate
The mineral reserves estimate is based on all available data for the Chinchillas deposit as at Dec. 31, 2016.
Category Tonnes Ag Pb Zn Ag Pb Zn
(Mt) (g/t) (%) (%) (Moz) (Mlb) (Mlb)
Proven 1.6 180 0.75 0.42 9 27 15
Probable 10.1 150 1.27 0.50 48 282 111
Total 11.7 154 1.20 0.49 58 310 127
Mining and processing
The prefeasibility study evaluates the development and construction of an open-pit mine and supporting infrastructure, which will supply ore to the Pirquitas processing facilities over an eight-year active mining period.
Chinchillas will be mined by conventional drill, blast, truck and loading open-pit mining methods. A fleet of 35-tonne road haul trucks will transport ore approximately 42 kilometres to the Pirquitas processing facilities. Haul trucks, loading equipment and drills at the Pirquitas mine will be transferred to Chinchillas, allowing the project to leverage existing equipment and infrastructure for capital cost savings and a shorter time to production.
The Pirquitas processing facility has been in continuous operation since 2009. It will process ore from the Chinchillas project using standard crush, grind and flotation at a rate of 4,000 tonnes per day. Minor modifications to the Pirquitas plant are expected, and the associated capital costs are included in the capital cost estimate provided in an attached table (summary of capital costs). Over the life of mine, the plant is expected to produce a silver/lead concentrate and a zinc concentrate. The two concentrates will be shipped internationally to smelters for processing. A tailings storage facility will be located on the Pirquitas property and is included in the capital cost estimate. Selected operating and production statistics are presented in the attached table.
OPERATING AND PRODUCTION STATISTICS
Annual average Total
Total material mined (Mt) 7.8 66.6
Waste removed (Mt) 6.3 54.9
Ore to process plant (Mt) 1.5 11.7
Strip ratio (waste/ore) - 4.7
Processing rate (tonne/day) 4,000 -
Mine life (years) - 8
Silver grade (g/t) 154 -
Silver recovery (%) 88% -
Lead grade (%) 1.20% -
Lead recovery (%) 95% -
Zinc grade (%) 0.49% -
Zinc recovery (%) 85% -
Silver production (Moz) 6.1 51.0
Lead production (Mlb) 35.0 295.8
Zinc production (Mlb) 12.3 107.4
Silver-equivalent
production (Moz) 8.4 71.0
ANNUAL OPERATING STATISTICS
Year -1 1 2 3 4 5 6 7 8
Ore mined 7 1,177 1,367 1,456 1,607 1,461 1,405 1,509 1,721
Waste mined 4,332 9,238 9,146 8,959 8,068 8,335 3,507 1,797 1,505
Total material mined (kt) 4,339 10,415 10,513 10,415 9,674 9,796 4,912 3,306 3,226
Strip ratio (waste/ore) 7.8x 6.7x 6.2x 5.0x 5.7x 2.5x 1.2x 0.9x -
Silver head grade (g/t) 125 183 169 156 164 166 159 137 94
Lead head grade (%) 0.87% 0.94% 1.28% 1.24% 1.39% 1.41% 1.44% 1.15% 0.85%
Zinc head grade (%) 0.68% 0.48% 0.53% 0.58% 0.52% 0.26% 0.27% 0.63% 0.53%
Tonnes milled (tonne/day) 2,813 4,114 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Tonnes milled (kt) 985 1,440 1,400 1,400 1,400 1,400 1,400 1,400 886
Silver recovery (%) 86% 90% 89% 88% 89% 89% 88% 87% 83%
Lead recovery (%) 93% 94% 96% 96% 96% 96% 97% 95% 93%
Zinc recovery (%) 85% 85% 85% 85% 85% 85% 85% 85% 85%
Silver production (koz) 3,386 7,599 6,763 6,194 6,553 6,641 6,317 5,359 2,221
Lead production (klb) 17,501 28,137 38,047 36,610 41,249 41,872 43,033 33,865 15,503
Zinc production (klb) 12,567 12,888 13,968 15,168 13,573 6,758 6,967 16,689 8,844
Silver-equivalent
production (koz) 4,883 9,630 9,333 8,756 9,259 9,027 8,771 7,865 3,430
Capital cost summary
Capital cost estimates assume utilizing certain property, plant and equipment from the Pirquitas mine. All costs incurred prior to the declaration of commercial production are considered capital costs. Ore delivery to the Pirquitas mill is expected in the second half of 2018. The total capital required to construct the mine and associated infrastructure is $81-million. A summary of expected capital costs is presented in the attached table.
SUMMARY OF CAPITAL COSTS
Capital costs Value
($M)
Site infrastructure $10
Mining equipment $12
Prestripping capital $11
Plant and tailings $16
Owner's costs $10
Other $5
Contingency $16
Total $81
Capital costs incurred after the start of commercial production are considered sustaining capital costs. The sustaining capital, excluding capitalized stripping, is expected to be $44-million, including a $9-million contingency. A summary of expected sustaining capital costs is presented in the attached table.
SUMMARY OF SUSTAINING CAPITAL COSTS
Sustaining capital costs Value
($M)
Mining equipment $29
Other $7
Contingency $9
Total $44
Capitalized stripping during the operating period of a three-phase open pit is estimated at $62-million.
Operating cost summary
Total operating costs are presented in the attached table. These costs were developed based on actual operating experience and are adjusted where appropriate to characteristics specific to the Chinchillas project.
SUMMARY OF OPERATING COSTS
Operating costs Units Value
Mining $/t mined $2.88
$/t milled $15.34
Processing $/t milled $14.72
General and administrative $/t milled $7.00
Ore transport to plant $/t milled $7.86
Tails management $/t milled $0.43
Total $/t milled $45.34
Cash costs, which include cost of inventory net of capitalized stripping, and treatment and refining costs total $7.40 per payable ounce of silver sold net of byproduct revenues and estimated capitalized stripping over the life of mine. All-in sustaining costs, which include sustaining capital, capitalized stripping and reclamation, total $9.75 per payable ounce of silver sold net of byproduct revenues over the life of mine.
Financial analysis
Chinchillas is expected to generate $178-million in posttax NPV using a 5-per-cent discount rate over the life of mine. Key financial estimates presented in the attached table are based on the key economic assumptions presented in a separate table. Argentine-peso-denominated cost estimates have been converted into U.S.-dollar terms based on prevailing exchange rates in the third quarter of 2016. Going forward, Argentine inflation rates in excess of U.S. inflation rates are assumed to be offset by a corresponding devaluation of the Argentine peso against the U.S. dollar, resulting in no changes to Argentine-peso-denominated costs in U.S.-dollar terms.
KEY FINANCIAL ESTIMATES
(in thousands of U.S. dollars)
Net revenue $1,062
Mining costs $272
Processing costs $177
General administration costs $82
Royalties and other $37
Operating cash flow $495
Net value-added tax $10
Puna credits $24
Stamp duty $16
Change in net working capital $0
Operating cash flow $494
Development initial capex $81
Sustaining capex $44
Reclamation and severance $17
Pretax cash flow $351
Tax $84
Posttax cash flow $267
Pretax NPV (5%) $239
Pretax NPV (10%) $162
Pretax IRR 35.2%
Posttax NPV (5%) $178
Posttax NPV (10%) $115
Posttax IRR 29.1%
Payback 3.5 years
KEY ECONOMIC ASSUMPTIONS
Assumption Units Value
Silver price $/oz $19.50
Lead price $/lb $0.95
Zinc price $/lb $1.00
Sensitivity analysis
The operation provides significant leverage to silver and lead prices. NPV sensitivities for key operating and economic metrics are presented in the attached tables.
NPV SENSITIVITY ANALYSIS -- LEAD AND SILVER PRICE
(posttax NPV (5 per cent) sensitivities ($M))
Silver price ($/oz)
$16.00 $18.00 $19.50 $22.00 $25.00
Lead price($/lb) $0.85 $57 $119 $162 $229 $307
$0.95 $75 $136 $178 $244 $321
$1.05 $93 $152 $194 $259 $336
$1.15 $110 $169 $209 $274 $351
$1.25 $128 $185 $225 $289 $366
NPV SENSITIVITY ANALYSIS -- CAPITAL EXPENDITURE AND OPERATING COSTS
(posttax NPV (5 per cent) sensitivities ($M))
Capex (percentage change)
-20% -10% 0% +10% +20%
Opex (percentage change) +20% $170 $162 $155 $148 $140
+10% $181 $174 $166 $159 $152
0% $192 $185 $178 $170 $163
-10% $203 $196 $189 $182 $174
-20% $214 $207 $200 $193 $185
Opportunities
Several opportunities to improve the economics of the Chinchillas project have been identified.
The Pirquitas mill has demonstrated operating throughput of up to 5,000 tonnes per day. Opportunity exists to sustainably increase the rate of mining and transport of ore from the Chinchillas project above 4,000 tonnes per day, the rate utilized in the prefeasibility study. This would increase annual production levels.
Further opportunity exists for mineral resource discovery and conversion of mineral resources to mineral reserves. Significant mineral resources in excess of mineral reserves exist on the Chinchillas property. Through additional drilling, higher metal prices or lower costs, there would be an opportunity to convert mineral resources to mineral reserves, thereby extending the operating life of the Chinchillas project. Additionally, more detailed drill testing in the areas surrounding and to the southeast of Socavon would have potential to add further mineral resources at the Chinchillas property.
Project schedule
The permitting process for the Chinchillas project continues to advance with positive support from the local communities and government authorities. The Chinchillas environmental and social impact assessment has been prepared and submitted to the Argentine regulatory authorities, and is in the consultation process. Work with local communities on social programs and understanding of the Chinchillas project are advancing positively.
Subject to permitting, the company expects construction at Chinchillas to begin during the third quarter of 2017, with ore delivery to the Pirquitas mill expected in the second half of 2018.
Qualified persons
The scientific and technical information contained in this news release pertaining to Chinchillas has been reviewed and approved by the following qualified persons under National Instrument 43-101:
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Anoush Ebrahimi, PEng, PhD, SRK Consulting (Canada) Inc.;
- Ken Kuchling, PEng, P&E Mining Consultants Inc.;
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Robert Sim, PGeo, SIM Geological Inc.
Technical report
A National Instrument 43-101 technical report will be filed on SEDAR within 45 days of this news release and will be available at that time on the corporate website.
We seek Safe Harbor.
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