Mr. Thomas Irwin reports
INTERNATIONAL TOWER HILL MINES ANNOUNCES OPTIMIZATION STUDY RESULTS SHOWING IMPROVED LIVENGOOD GOLD PROJECT; PRE-FEASIBILITY STUDY COMPLETED FOR OPTIMIZED PROJECT CONFIGURATION
International Tower Hill Mines Ltd. has released the results of a prefeasibility study (PFS) on an optimized configuration for its Livengood gold project located near Fairbanks, Alaska. The engineering optimization studies incorporated in the PFS evaluated several scenarios, ultimately selecting a project that will process 52,600 tons per day and produce 6.8 million ounces of gold over 23 years. This improved configuration has reduced the capital costs by 34 per cent, or $950-million (U.S.), to $1.84-billion (U.S.), the process operating cost by 28 per cent, or $2.97 (U.S.) per ton, to $7.48 (U.S.) per ton, and the all-in sustaining costs by 16 per cent, or $242 (U.S.), to $1,263 (U.S.) per ounce, all as compared with the 100,000-ton-per-day project evaluated in the September, 2013, feasibility study (FS). All dollar figures in this news release are stated in U.S. dollars.
"We are pleased that our optimization study has resulted in lower capex and opex costs projected over a 23-year mine life. Livengood's fundamentals are compelling, with a substantial gold resource, favourable jurisdiction, proximity to infrastructure and great leverage to the gold price. We are committed to advancing our basic engineering and metallurgical work to further derisk the project and prepare for future permitting," said Tom Irwin, chief executive officer.
Prefeasibility study overview
The project configuration evaluated in the PFS remains a conventional, owner-operated surface mine that will utilize large-scale mining equipment in a blast/load/haul operation. Mill feed would be processed in a 52,600-ton-per-day comminution circuit consisting of primary and secondary crushing, wet grinding in a single semi-autogenous (SAG) mill and single ball mill followed by a gravity gold circuit and a conventional carbon-in-leach circuit.
Lower capex was achieved by a reduction in tonnage from 100,000 tons to 52,600 tons per day, elimination of two previously planned freshwater supply reservoirs due to the inclusion of a freshwater supply from a local aquifer, elimination of a permanent accommodations camp as a result of the planned daily transport of workers to the mine site during operations, changes in project execution strategy for the placement of large development earthworks using mine preproduction material by owner instead of contractor and design changes to focus on bulk fills instead of cut/fills during construction.
Lower opex was achieved through mining, process, and general and administrative (G&A) optimization as described below.
Mine design changes that lowered costs include a more-direct haul route to the primary crusher and steeper pit slopes in the early phases. Changes that increased costs were higher drill and blast costs for enhanced blast fragmentation to optimize mill throughput.
Mill configuration changes that contributed to overall reduction in capex and opex include the addition of secondary crushing ahead of the SAG mill for more-efficient use of power, inclusion of a single line SAG/ball mill configuration, and simplification of the mill foundation and pebble regrind circuit. Metallurgical studies completed since 2013 support process opex reduction through a combination of increasing grind size from micro-80 90 micron to micro-80 180 micron, reducing leach circuit retention time from 32 hours to 24 hours, and reducing reagent consumption per ton. Lower power and reagent costs, based on updated data, also contributed to a reduction in opex.
Total G&A costs went down due to reduced corporate overhead estimates based on current data, but went up on a unit basis due to lower throughput.
Next steps and opportunities
Results to date indicate that further work is warranted in order to continue to optimize the project, such as improved resource modelling that could potentially enhance head grades and improvement to the mine plan to reduce capex and opex.
The metallurgical tests completed to date indicate that there are further opportunities to improve overall gold recovery. Subject to available financing, work will continue to optimize flow sheet and reagent consumption to maximize recovery, confirm the grind/recovery relationships, refine the process opex, and thereby further derisk the project.
The company will also continue to advance environmental baseline work in support of future permitting in order to better position the project for a construction decision when warranted by market conditions.
Prefeasibility study summary
The PFS was prepared by independent third party consultants, and provides information on the optimized project with lower throughput, updated resource estimate, and capital and operating cost estimates as compared with the project evaluated in the FS. The final version of the National Instrument 43-101 technical report containing the PFS will be filed on SEDAR within the next 45 days, and investors are urged to review this report in its entirety. As a result of the changes to the project as evaluated in the PFS, including differences in the economic parameters applied to the geologic block model that resulted in a change in resources (gold price, recovery, capex and opex), the original project as evaluated in the FS is no longer considered current, and the FS should therefore no longer be relied upon by investors.
The company cautions that the PFS is preliminary in nature, and is based on technical and economic assumptions which would be further refined and evaluated in a full feasibility study. The PFS is based on an updated project resource estimate effective as of Aug. 26, 2016, using the same resource model as used in the FS.
The following is a summary of the material aspects and assumptions of the PFS. Investors are urged to review the complete NI 43-101 report following its filing on SEDAR for all details of the PFS.
The engineering design to estimate capital costs used in the PFS is within a minus-20-per-cent/plus-25-per-cent accuracy.
Project location
The project is connected by an existing paved highway to the city of Fairbanks, 70 miles to the southwest in central Alaska. The project is located in an active mining district that has been mined for gold since 1914. The State of Alaska land use plan designates mining as the primary surface land use for the area in which the project is located.
Infrastructure
The project would include a lined tailings management facility, an administration office/shop/warehouse complex and would also include construction of a 50-mile 230-kilovolt electrical transmission line to the mine site from the existing grid power near Fairbanks, Alaska. The total power demand is estimated to be 55 megawatts.
Environmental and community
relations
Eight continuous years of baseline environmental work continues to indicate that all aspects of the project can be successfully and safely managed. The design of the tailings facility incorporates best practices including a lined rock fill structure with a lined tailings basin. The project development team has had considerable experience working with Alaska's large mine permitting process, and has a proven and respected record of developing mining projects safely and in an environmentally sound manner. The project has already and will continue to provide local economic opportunities with local access to a highly skilled and available work force. The company is also working within Fairbanks and the nearby community of Minto to seek early input on the project and to explore ways to maximize economic benefits to the local communities.
SUMMARY OF RESULTS OF THE 52,600-TON-PER-DAY PFS AND COMPARISON WITH 2013 FS
2016 PFS 2013 FS
Operating metrics
Mill throughput 52,600 100,000 Tons per day
Head grade -- life of mine (LOM) 0.71 0.69 Grams per tonne
Head grade -- years one to five 0.88 0.83 Grams per tonne
Gold recovery -- LOM 75.3 78.4 %
Mine life 23 14 Years
Total ounces produced 6,763,900 7,893,800 Troy ounces
Average annual production -- LOM 294,100 563,800 Troy ounces
Average annual production -- years one to five 378,300 681,700 Troy ounces
Total ore processed 432 501 Million tons
Total waste 468 720 Million tons
Annual mining rate 54 95 Million tons
Waste rock to mill ore (tonnes) ratio -- LOM 1.3:1 1.4:1 Waste to ore
Low-grade stockpile maximum size 145 93 Million tons
Financial metrics
Capex -- initial 1.84 2.79 $ billions
Capex -- sustaining 665 667 $ millions
Reclamation and closure 342 353 $ millions
Opex -- mining 1.73 1.67 $ per ton material
Opex -- processing 7.48 10.45 $ per ton ore
Opex -- G&A 1.28 0.89 $ per ton ore
Opex -- operating cost -- LOM 877 1,054 $ per ounce
Opex -- operating cost -- years one to five 782 906 $ per ounce
All-in sustaining cost of production -- pretax
(capex plus opex) -- LOM 1,247 1,481 $ per ounce
All-In sustaining cost of production -- after-tax
(capex plus opex) -- LOM 1,263 1,505 $ per ounce
Gold price sensitivity analysis
The attached table shows the after-tax economics at various gold prices.
Gold price ($ per ounce) NPV 5% ($ millions) IRR (%) Payback (years)
$1,000 (1,429) -13.1 N/A
$1,100 (1,064) -5.1 N/A
$1,200 (708) -0.9 N/A
$1,250 (552) 0.5 22.07
$1,300 (404) 1.8 14.91
$1,400 (116) 4.1 12.10
$1,500 165 6.2 10.70
Capital costs
Key capital expenditures for initial and sustaining capital requirements are identified in the attached table.
CAPITAL COSTS
(in millions of dollars)
Initial Sustaining
Process facilities $732 $24
Infrastructure facilities 168 442
Power supply 79 -
Mine equipment 173 123
Mine development 146 -
Owners' costs 307 -
Contingency 213 76
Subtotal before reclamation 1,818 665
Financing of reclamation trust fund (1) 18 201
----- ---
Total $1,836 $866
===== ===
Rounding of some figures may lead to minor discrepancies in totals.
(1) Includes initial financing; total -- $342-million estimated costs.
All-in sustaining costs of production
The attached table highlights the all-in operating cost of production over the life of the project.
ALL-IN SUSTAINING COSTS OF PRODUCTION
$ per ounce LOM ($ millions)
On-site mine operating costs $782 $5,286
Royalties 37 252
Third party smelting, refining and transport costs 8 54
----- -----
Subtotal 827 5,592
----- -----
Reclamation and remediation 50 342
----- -----
Subtotal production cost before capital 877 5,934
----- -----
Capital expenditures (initial and sustaining) (1) 370 2,501
All-in sustaining costs of production -- pretax 1,247 8,435
Mining and income taxes 16 104
----- -----
All-in sustaining costs of production -- after-tax $1,263 $8,539
===== =====
Rounding of some figures may lead to minor discrepancies in totals.
(1) Excludes $18-million upfront financing included in reclamation and remediation,
and $37-million of recoverable initial stores inventory.
Annual gold production
The attached table highlights the anticipated production schedule. Total life-of-mine production is anticipated to be 6,763,900 ounces. Mill feed will consist of reclaimed ore from the stockpile for years 17 through to 23.
Mill feed grade Ounces produced
Year (grams per tonne) (000s)
1 0.99 368.5
2 0.96 404.2
3 0.92 407.9
4 0.60 288.8
5 0.97 422.2
6 0.81 340.9
7 0.92 372.0
8 0.78 364.5
9 0.88 374.6
10 0.80 317.0
11 0.65 284.6
12 0.81 335.9
13 0.82 337.3
14 0.79 311.7
15 0.89 335.7
16 0.55 249.0
17 0.46 201.4
18 0.46 190.5
19 0.44 195.8
20 0.41 206.8
21 0.48 166.5
22 0.50 171.7
23 0.50 116.4
---- -------
LOM 0.71 6,763.9
==== =======
Rounding of some figures may lead to minor discrepancies in totals.
Project mineral reserves
The attached table provides a new mineral reserve estimate for the project (effective as of Aug. 26, 2016) utilizing a gold price of $1,250 per ounce. These proven and probable mineral reserves formed the basis of the economic evaluation of the project. The economic assumptions and parameters used for the calculation of reserves are the same as those used for the PFS financial model.
LIVENGOOD GOLD PROJECT MINERAL RESERVE ESTIMATE
Classification Tonnes (Mt) Au (g/t) Contained Au (000s)
Proven 377.65 0.71 8,620.43
Probable 14.01 0.72 352.86
------ ---- --------
Total proven plus probable 391.66 0.71 8,973.29
====== ==== ========
(1) Canadian Institute of Mining, Metallurgy and Petroleum standards
were followed in the estimation of the mineral reserves.
(2) Mineral reserves are estimated using a gold price of $1,250 per
ounce, 3-per-cent royalty, and average metallurgical recoveries of 81.8
per cent for rock type 4, 84.7 per cent for rock type 5, 75.6 per cent
for rock type 6, and weighted average of 62.4 per cent for rock type 7
and 69.6 per cent for rock types 8 and 9 (when applied to the 15-metre-
by-15-metre-by-10-metre block model).
(3) Mineral reserves are based on a cut-off grade of 0.306 gram per
tonne for rock type 4, 0.303 gram per tonne for rock type 5, 0.345 gram
per tonne for rock type 6, 0.431 gram per tonne for rock type 7, and
0.393 gram per tonne for rock types 8 and 9.
(4) Totals may not add due to rounding.
(5) The foregoing mineral reserves based upon and are included within
the current mineral resource estimate for the project.
Project mineral resources
The current resource estimate for the project (effective as of Aug. 26, 2016) is based on the statistical analysis of data from 783 drill holes totalling 717,435 feet (218,674 metres) and 14 trenches totalling 1,678 feet (516 metres) within a model area covering 3.1 square miles (7.9 square kilometres). The 3-D geology was modelled, and the structural/stratigraphic units have been used to constrain the resource model.
Multiple indicator kriging was used to calculate the gold grades for the blocks (15 metres by 15 metres by 10 metres) in the model using the assay data composited to 10-metre lengths. Statistical analysis indicated a significant relationship between the tenor of mineralization and the individual structural/stratigraphic units; consequently, the resource interpolation for each individual geologic unit was restricted to: (1) the composite data within that unit, (2) contained within a 0.1-gram-per-tonne gold grade shell, and (3) where data were available from a minimum of two octants and from two separate drill holes. Spatial statistics indicate that the mineralization shows very reasonable continuity within the range of anticipated operational cut-off grades. Bulk density for blocks within each of the structural stratigraphic units was assigned the mean value for density measurements of core and reverse circulation samples from that unit (total of 98 measurements for all the units). The resource model (15-metre-by-15-metre-by-10-metre blocks) was estimated using nine indicator thresholds, then a change-of-support correction was imposed on the model based on the assumption of 7.5-metre-by-7.5-metre-10-metre selectable mining units. Resource classification into measured, indicated and inferred categories was based on estimation variance.
To determine the quantities of materials with reasonable prospects for eventual economic extraction by open-pit methods, pit-constraining limits were developed using the Lerchs-Grossman economic algorithm which constructs lists of related blocks that could or could not be mined. The final list defines a surface pit shell that has the highest possible total value, while honouring the required surface mine slope and economic parameters. The attached table indicates the input parameters at a $1,230-per-ounce gold price -- the three-year trailing average gold price at Aug. 26, 2016.
PIT-CONSTRAINING PARAMETERS USED FOR THE LIVENGOOD GOLD PROJECT RESOURCE ESTIMATION
Parameter Unit Rock type 4 Rock type 5 Rock type 6 Rock type 7 Rock type 8 Rock type 9
Mining costs $/total tonne 1.77 1.77 1.77 1.77 1.77 1.77
Au cut-off g/tonne 0.33 0.32 0.35 0.40 to 0.38 0.38
0.85 (1)
Processing cost $/process tonne 9.03 9.55 9.42 9.25 9.87 9.87
Au recovery % 80.4 86.5 78.3 64.01 75.4 75.4
Administrative
cost $/process tonne 1.07 1.07 1.07 1.07 1.07 1.07
Royalty % 3 3 3 3 3 3
Au selling price $/oz 1,230 1,230 1,230 1,230 1,230 1,230
Overall slope
angle Degrees 40 40 40 40 40 40
(1) Variable cut-off grade related to geological characteristics unique to rock type 7 quartz stibnite plus jamesonite
ratios.
The parameters listed in the attached table define a realistic basis to estimate the mineral resources for the project and are representative of similar mining operations throughout North America. The mineral resource has been limited to mineralized material that occurs within the pit shells and which could be scheduled to be processed based on the defined cut-off grade. All other material within the defined pit shells was reported as non-mineralized material.
Mineral resource statement -- Livengood gold project
The attached table lists the current mineral resource estimate for the project.
LIVENGOOD GOLD PROJECT MINERAL RESOURCE ESTIMATE
Classification Tonnes (Mt) Au (g/t) Contained Au (000s)
Measured 497.34 0.68 10,840.84
Indicated 28.04 0.69 620.33
------ ---- ---------
Total measured
plus indicated 525.38 0.68 11,461.17
------ ---- ---------
Inferred 52.80 0.66 1,127.21
(1) Effective date -- Aug. 26, 2016.
(2) The measured and indicated mineral resources are
inclusive of those mineral resources modified to produce the
mineral reserves for the project.
Sensitivity of mineralization to gold price
The sensitivity of mineralization defined by the evaluation of the mineralization inventory at different gold prices was performed for gold prices of $984 per ounce (minus 20 per cent), $1,230 per ounce (resource base case) and $1,476 per ounce (plus 20 per cent). The input parameters defined above were used in the analysis. The attached table lists the amount of the mineralization contained within the pit shells that could be scheduled to process.
SENSITIVITY OF MINERALIZATION INVENTORY CONTAINED IN PIT SHELLS DEFINED BY WHITTLE ANALYSES
AT DIFFERENT GOLD PRICES WITHIN PIT SHELLS
Whittle pit gold price Classification Tonnes (Mt) Au (g/t) Contained Au (000s)
$984 Measured 322.75 0.79 8,166.23
Indicated 15.06 0.83 399.36
------ ---- ---------
Total M&I 337.81 0.79 8,565.59
------ ---- ---------
Inferred 19.77 0.79 504.68
$1,230 Measured 497.34 0.68 10,840.84
Indicated 28.04 0.69 620.33
------ ---- ---------
Total M&I 525.38 0.68 11,461.17
------ ---- ---------
Inferred 52.80 0.66 1,127.21
$1,476 Measured 663.11 0.61 13,004.65
Indicated 46.76 0.60 899.03
------ ---- ---------
Total M&I 709.88 0.61 13,903.68
------ ---- ---------
Inferred 115.01 0.56 2,070.62
Rounding of some figures may lead to minor discrepancies in totals.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.
Exploration target
Exploration work at the project since 2006 has identified an exploration target of between 490 million tonnes and 965 million tonnes at a gold grade between 0.36 gram per tonne and 0.48 gram per tonne (between 7.5 million ounces and 11 million ounces of gold), which lies outside of (and therefore does not include) the estimated project resource stated above. Identification of this exploration target is based upon 455 drill holes with aggregate footage outside the shell exceeding 182,000 feet (55,470 metres), which was drilled on a similar grid spacing as the drill holes defining the current estimated project resource. Investors should be aware that the potential quantity and grade of the exploration target noted above are conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the noted exploration target ever being delineated as a mineral resource.
Metallurgy recovery by rock type
The company has completed extensive metallurgical test work on the five rock types that comprise 98 per cent of the current estimated mineral resource. Recovery rates by rock type using gravity and carbon-in-leach recovery of gravity tail are shown in the attached table.
Rock type Gold recovery %
RT4 Cambrian 81.8
RT5 Sunshine upper sediments 84.7
RT6 upper sediments 75.6
RT7 lower sediments 62.41
RT9 volcanics 69.62
(1) Weighted average based on Au grade/
recovery and quartz stibnite plus jamesonite
mineralization.
(2) Weighted average based on Au grade/
recovery when applied to the 15-metre-by-15-
metre-by-10-metre block model.
Derivative liability risk
During 2011, the company acquired certain mining claims and related rights in the vicinity of the project located near Fairbanks, Alaska. The aggregate consideration for the purchased claims was $13.5-million in cash plus an additional contingent payment based on the five-year average daily gold price from the date of the acquisition. The contingent payment will equal $23,148 for every dollar that the average gold price exceeds $720 per troy ounce. If the average gold price is less than $720, there will be no additional contingent payment. As at June 30, 2016, the company's estimate of the amount of the contingent payment is $14.7-million. This contingent payment, which is due in January, 2017, significantly exceeds the company's available cash resources, and, therefore, the company will be required to secure significant additional financing on or before January, 2017, in order to be able to make this payment. The obligation to make the contingent payment is secured by a deed of trust over the rights of the company in the purchased claims in favour of the vendors. If the company is unsuccessful in raising the required capital to make the contingent payment, the vendors of the purchased claims will have the right to enforce their rights under the deed of trust, including the power of sale thereunder, thereby resulting in the company losing any rights to the purchased claims. The vendors of the purchased claims may also seek to obtain a judgment against the company for the amount of the contingent payment, including any portion of the contingent payment remaining following a sale of the purchased claims. Any such loss or judgment could materially and adversely affect the ability of the company to proceed with any development of, or mining at, the project, and the loss of the rights to the purchased claims could materially and adversely affect the results of the PFS and any subsequent feasibility study.
Detailed report
An NI 43-101 technical report that summarizes the results of the PFS will be filed on SEDAR within 45 days of this news release and will be available on the company's website at that time.
Qualified persons
The PFS was prepared by the following qualified persons under NI 43-101, each of whom is independent of the company under NI 43-101, who have reviewed, verified and approved the scientific and technical data for which they have responsibility contained in this news release pertaining to the PFS.
Qualified person Company Scope of responsibility
Financial model, process plant and infrastructure capex,
Colin Hardie, PEng process engineering G&A and process opex, environmental
(Ontario APEO No. 90512500) BBA Inc. studies and permitting, overall NI 43-101 integration
Ryan T. Baker. Geotechnical engineering, waste rock and water
(Nevada No. 11172) NewFields Companies LLC management, TMF capex
Mike Levy, PE
(Colorado No. 40268) SRK Consulting (U.S.) Inc. Mine slope stability
Tim Carew, PGeo,
Association of Professional
Engineers and Geoscientists
of British Columbia
(professional geoscientist
19706) SRK Consulting (Canada) Inc. Geology, drilling and MIK model
Scott Wilson, CPG No. 10965 Metal Mining Consultants Inc. Resource estimation
Tim George, PE Mine engineering, mine capex and opex, reserve
(Colorado No. 47109) Wildcat and Badger LLC estimation
Colin Hardie is a senior process engineer and the director of non-ferrous metal markets at BBA. He joined the BBA team in 2008, and has over 15 years of experience as an operations metallurgist, engineering consultant and in process research and development. He is a graduate of the University of Toronto with a bachelor of applied science degree in geological and mineral engineering (1996). Mr. Hardie also has a master of engineering degree in metallurgy from McGill University (1999), as well as a master's degree in business administration from HEC Montreal (2008). He is a registered professional engineer in the province of Ontario, Canada. He has acted as a qualified person and lead study integrator for numerous North American gold projects.
Ryan T. Baker is a principal engineer with NewFields Mining Design & Technical Services LLC, located in Lone Tree, Colo. He is a graduate of Colorado State University with a bachelor of science degree in civil engineering (1993), and a registered professional engineer in Nevada (No. 13947), Alaska (No. 11172), Idaho (No. 10226), Colorado (No. 36988), Missouri (PE2008000049) and New Mexico (No. 22110). He is also a registered member of the Society for Mining, Metallurgy and Exploration (SME No. 4204584) and the American Society of Civil Engineers (ASCE No. 307827), with relevant experience pertaining to heap-leach, tailings and mine overburden storage facilities, and mine surface infrastructure design and inspection since 1994.
Michael Levy is a senior geotechnical engineer with SRK Consulting Inc. in Lakewood, Colo. He is a graduate of the University of Iowa with a bachelor of science degree in geology and a master of science degree in civil geotechnical engineering. He is a registered professional engineer with the states of Colorado (No. 40268) and California (No. 70578), and a registered professional geologist with the state of Wyoming (No. 3550). He has practised for 18 years, and, during that period, has been involved in a variety of geotechnical projects specializing in advanced analysis and design of soil and rock slopes.
Tim Carew is a geologist with SRK Consulting. He is a graduate of the University of Rhodesia with a bachelor of science degree in geology, a professional geoscientist (No. 19706), and a professional member of the Institute of Mining, Metallurgy and Materials (No. 46233). He has practised continuously for 38 years, and, during that period, has been involved in geologic work in similar lithotechtonic terranes (Cassiar, Northern British Columbia), and resource estimation of vein- and disseminated-type gold deposits in the United States (Florida Canyon, Nevada), South America (Nassau, Suriname) and Asia (Boroo, Mongolia).
Scott Wilson is currently president of Metal Mining Consultants Inc., and has been employed as a geologist or an engineer continuously for 28 years. His experience includes resource estimation, mine planning, geological modelling, geostatistical evaluations, project development, and authorship of numerous technical reports and preliminary economic assessments of various projects throughout North America, South America and Europe.
Tim George is a mining engineer with 13 continuous years of experience in the mining industry. He graduated from the University of Arizona with a bachelor of science degree in mining engineering. He is a registered professional engineer in the state of Colorado (No. 47109). His experience includes mine design, scheduling and costing in North America, South America, Africa and Australasia.
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