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Sabina Gold & Silver Corp
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Sabina estimates $539-million NPV for Back River

2015-05-20 14:12 ET - News Release

Mr. Bruce McLeod reports

SABINA GOLD & SILVER ANNOUNCES POSITIVE FEASIBILITY STUDY ON BACK RIVER GOLD PROJECT, NUNAVUT

Sabina Gold & Silver Corp. has received the results of the feasibility study (FS) for its 100-per-cent-owned Back River gold project in Nunavut, Canada. The FS was led by JDS Energy & Mining Inc. (mining, on-site infrastructure, off-site infrastructure, logistics, capital costs, operating costs, financial analysis and report preparation) and contributed to by Hatch Ltd. (metallurgy, processing, on-site infrastructure and off-site infrastructure), SRK Consulting (Canada) Inc. (geotechnical, hydrology, tailings design, and waste and water management), AMC Mining Consultants (Canada) Ltd. (geology) and Knight Piesold Ltd. (KP) (geomechanical).

The Back River gold belt is located in the West Kitikmeot region of Nunavut, Canada, and is situated approximately 75 kilometres from tidewater at Bathurst Inlet. The project is made up of a series of five claim blocks, of which only two (Goose and George) have been the primary focus of exploration and resource development to date.

"Back River offers a rare opportunity for significant high-grade gold production by both open-pit and underground operations in one of the world's safest mining jurisdictions. We are very pleased to announce what we believe is a very compelling FS," said Bruce McLeod, president and chief executive officer. "The FS presents a project that has been designed on a fit-for-purpose basis, with the potential to produce approximately 350,000 ounces a year for approximately 10 years with a rapid payback of 2.2 years. At a $1,200 (U.S.) gold price and a 0.87 exchange rate, the study delivers a potential after-tax internal rate of return (IRR) of approximately 22 per cent with an initial capex of $695-million. Comparing the study against other projects, we believe this is a sound FS that demonstrates the potential of Back River to be a significant Canadian gold producer. Additionally, as part of their recommendations in the FS, JDS has identified the potential optionality to start smaller at Back River which could kick off production on the belt. Such an opportunity would require less initial capital which in these markets may enhance shareholder value."

Feasibility study highlights

The FS was initiated in June of 2014, following the encouraging results of the preliminary feasibility study (PFS) on Back River which was announced in October of 2013.

All currencies are in Canadian dollars unless otherwise specified. Base-case economics are based on a gold price of $1,200 (U.S.) per ounce Au and an exchange rate of 0.87 (U.S. dollar to Canadian dollar).

The study's highlights include:

  • The project could generate a posttax IRR of 21.7 per cent and a net present value (NPV) (at a 5-per-cent discount rate) of $539-million;
  • The project could generate life-of-mine (LOM) posttax net cash flow of $914-million on gross revenues of $4.5-billion with a payback period of 2.2 years (from start of operations);
  • Processing rate of 6,000 tonnes per day (tpd) could produce an average of approximately 346,000 ounces Au per year (postcommencement of commercial production);
  • Average production of 413,000 ounces Au in years 1 through 4;
  • Majority of production from open pit;
  • Initial capital estimate of $695-million and sustaining capital estimate of $529-million (including closure);
  • Total LOM cash cost estimate of $535 (U.S.)/ounce Au (including third party royalties, refining and transport). LOM all-in sustaining cash cost estimates of $671 (U.S.)/ounce Au (including sustaining capital);
  • A total of 19.8 million tonnes of ore could be milled over 10 years with an LOM average grade of 5.70 grams per tonne (g/t) Au and metallurgical recoveries of 93 per cent;
  • Base-case assumptions of delivered diesel price of 94 cents per litre for power generation;
  • Open-pit strip ratio of 7.2 to 1 over LOM.

Comparison with the PFS

Compared with the PFS, the FS provides:

  • Improved economics using a lower gold price;
  • Longer mine life from increased measured and indicated resources;
  • More ounces could be recovered due to improved gold recoveries, notably from the first years of open-pit mining, resulting in a positive impact on the economics and payback;
  • Optimized throughput -- increased throughput to 6,000 tpd from 5,000 tpd, resulting in higher production yield;
  • Improved mine sequencing, providing opportunity for smaller initial tailings facility and utilization of open pits for tailings disposal.

Back River gold project -- FS

Economic analysis and sensitivities

Economic factors and assumptions include the following:

  • Discount rate of 5 per cent;
  • Costs based on nominal 2015 Canadian dollar values;
  • No application of inflation;
  • Values are presented on a 100-per-cent-ownership basis, and do not include management fees or financing costs;
  • Exclusion of all predevelopment and sunk costs (exploration and resource definition costs, engineering fieldwork and studies costs, environmental baseline study costs, and others). Note that predevelopment and sunk costs are used in tax calculations;
  • Gold price of $1,200 (U.S.)/ounce;
  • U.S. dollar/Canadian dollar exchange rate of 0.87;
  • Includes estimated third party net smelter royalties which average 3.3 per cent over LOM;
  • NWT/Nunavut mineral royalties (NTNMRs) have been evaluated as part of the after-tax analysis. The Crown royalty is levied on a mine-by-mine basis, and is equal to the lesser of 8 per cent of the net value of mine output during a fiscal year and an escalating rate from 0 per cent to 14 per cent on incremental levels of net value of the mine output during a fiscal year;
  • The Back River mineral resources considered in the study are on grandfathered properties subject to royalties under the NTNMRs;
  • Federal tax rate of 15 per cent and an NWT 12-per-cent rate were used to calculate income taxes;
  • Canadian exploration expense and Canadian development expense tax pools were used with appropriate opening balances to calculate income taxes;
  • Specific capital-cost-class CCA (capital cost allowance) rates were applied and used to calculate the appropriate CCA the company can claim during the entire life of the project.

Pretax and after-tax financial performance is summarized in an attached table. Pretax results provide a point of comparison with similar projects and are not intended to represent a measure of absolute economic value.

                         SUMMARY OF ECONOMIC RESULTS
Category                                                    Unit       Value

Net revenues                                                  $M      $4,486
Operating costs                                               $M       1,906
Cash flow from operations                                     $M       2,664
Capital costs (i)                                             $M       1,221
Cash cost (ii)                                            US$/oz         535
All-in sustaining cash cost (iii)                         US$/oz         671
Net pretax cash flow                                          $M       1,356
Pretax NPV at 5-per-cent discount rate                        $M         826
Pretax IRR                                                     %        26.4
Pretax payback                                             Years         2.1
Break-even pretax gold price (NPV5 equals zero)           US$/oz         882
Total taxes                                                   $M         442
Net after-tax NPV5                                            $M         539
After-tax IRR                                                  %        21.7
After-tax payback                                          Years         2.2
Break-even after-tax gold price (NPV5 equals zero)        US$/oz         885

(i) Includes preproduction, sustaining and closure capital costs
(ii) (Refining costs plus insurance plus transport costs plus third party
     royalties plus operating costs) divided by payable Au ounces
(iii) (Refining costs plus insurance plus transport costs plus third party
      royalties plus operating costs plus sustaining and closure capital
      costs) divided by payable Au ounces

Source: JDS, 2015

A sensitivity analysis was conducted on after-tax net present values (at a 5-per-cent discount rate) for individual parameters, including the gold price, foreign exchange rate, operating costs and capital costs. The project proved to be most sensitive to changes in the foreign exchange rate and gold price. The project showed the least sensitivity to operating costs.

2015 feasibility study parameters

The Back River mineral resource consists of two sites: George and Goose. Each site has four minable deposits, with the majority of the mineral resources and mineral reserves located at the Goose site. The project is based on conventional open-pit and underground mining operations that feed a 6,000-tonne-per-day whole-ore leach process plant located at Goose, which could produce an average of approximately 346,000 ounces of gold per year as dore bullion over a 10-year mine life with the majority of reserves being mined by open pit.

A total of 19.8 million tonnes (Mt) of ore could be mined at a mill head grade of 5.7 grams per tonne Au and a projected recovery of 93 per cent. A total of 3.4 million ounces Au are projected to be recovered over the life of mine, with cash costs of approximately $535 (U.S.) per ounce Au including royalties. All-in life-of-mine cash costs (including initial and sustaining capital costs) are approximately $850 (U.S.) per ounce Au.

Initially, tailings could be stored in a purpose-built storage facility, followed by deposition into exhausted open pits at Goose. Mine construction and operations could be facilitated by sealift during the summer months and an ice road from the marine lay-down area (MLA) in the winter. Supplies could be brought by sealift to the MLA at Bathurst Inlet and hauled to the Goose mill by winter road.

                         FEASIBILITY STUDY PARAMETERS
Projected LOM production
Open-pit ore to process                        Kt         10,765         54%
Underground ore to process                     Kt          9,028         46%
ROM to process -- total                        Kt         19,793        100%
Ore grade
ROM grade to process -- O/P                g/t Au            5.2
ROM grade to process -- U/G                g/t Au            6.3
ROM grade to process -- average            g/t Au            5.7
Operating metrics
LOM production -- O/P                      Koz Au          1,680         50%
LOM production -- U/G                      Koz Au          1,705         50%
LOM production -- total                    Koz Au          3,385        100%
Average annual production             Koz Au/year          352.2
Mine life                                   Years            9.6
O/P strip ratio                                            7.2:1
Mill design throughput                        tpd          6,000
Gold recovery                                   %          93.3%
Capital costs ($M)
Direct costs                        Preproduction     Sustaining       Total
Mining                                       $106           $292        $398
Processing                                    112              -         112
On-site infrastructure                        172             55         227
Tailings storage facility 
and water management                           20             32          52
Off-site infrastructure                        73             35         109
Subtotal direct costs                         483            414         897
Indirect costs
Owner's costs                                  30              -          30
Project indirects                             126              4         130
Contingency                                    56             22          78
Total                                         695            440       1,135
Closure costs                                                 86          86
Operating costs                              $M/a     $/t milled   US$/oz Au
Open-pit mining                              28.5          13.79       70.39
Underground mining                           46.1          22.28      113.69
Process                                      53.8          26.04      132.88
Surface services                             27.0          13.08       66.75
General and administration                   28.2          13.61       69.47
Freight costs (ocean/port/ice
roads)                                        9.3           4.48       22.87
Ore hauling (George to Goose)                 6.2           3.00       15.29
Total                                       199.1          96.28      491.35
Total cash costs (including
royalties, refining and
transport)                                                            534.71
All-in cash costs (including all
capital) (i)                                                          850.33
Financial metrics
Base-case gold price                      $/oz Au         $1,200
Exchange rate                              C$:US$          $0.87
Average net smelter return royalty              %           3.3%

(i) Includes preproduction, sustaining and closure capital costs.

Geology and mineralization

The Goose site consists of four main deposits that contain predominantly structurally controlled gold mineralization: Goose Main, Echo, Umwelt and Llama. Gold mineralization is predominantly hosted within the Lower iron formation and, to a much lesser extent, the underlying sediments. The Goose Main, Umwelt and Llama deposits are associated with anticlinal structures that have been structurally thickened and disrupted, and cut by axial planar felsic dikes, which apparently trace the fluid pathways and are related to mineralization. The Echo deposit is associated with gentle folding of iron formation and a crosscutting felsic dike. Mineralization is spatially associated with the felsic dike.

The George site consists of six main deposits: Locale 1 (LOC1), Locale 2 (LOC2), Slave, GH, LCP North (LCPN) and LCP South (LCPS). Gold mineralization is located within oxide iron formations near the stratigraphic base of this unit. Less significant gold mineralization is also hosted within a silicate iron formation. Gold-bearing zones are associated with sulphide concentrations in the iron formation, and are commonly accompanied by increased quartz veining and attendant alteration of the surrounding rocks.

Infrastructure

Each of the MLA, Goose and George sites would have bulk fuel storage tanks, lay-down yards, diesel power plants, maintenance shops, accommodation camps, water and domestic waste management facilities, and satellite communications. All-weather airstrips would be located only at the Goose and George sites. In winter, the three sites would only be connected by ice roads. All-weather roads allow for year-round access within each site.

The major infrastructure related to the mining and processing operations at the Goose site includes the process plant buildings, power plant, truck shop/administration complex, accommodation camp, tailings storage facilities, waste rock storage areas, water management drainage and storage ponds, and haul roads and equipment to service the underground mines.

The MLA would support the seasonal transshipment and staging of construction and operational freight. Because access to the property is seasonal, the types and capacities of the project infrastructure have been designed to store and transport the required yearly quantities of equipment, materials and supplies.

Buildings and facilities at the Goose site would be heated primarily by heat recovered from the power plant, as would the Umwelt underground mine ventilation air.

The accommodation camps would be portable, modular units constructed off-site. The construction and mine site operation phases at the Goose site would require accommodation for up to 465 workers. The construction and mine site operation phases at the George site would require accommodation for up to 150 workers. The construction and port operation phases at the MLA site would require accommodations for up to 75 workers.

Power

The FS includes 100-per-cent on-site diesel-generated power at Goose, George and the MLA, based on a diesel price of 94 cents/L for power generation assumed. The estimated power unit cost averages 24 cents per kilowatt hour, not including capital cost or operating labour at the Goose site. The average annual process-related fuel consumption for power generation at Goose is estimated to be 26.3 million litres.

Mining

Conventional shovel-and-truck open pits combined with underground mines are projected to provide the process plant feed at a nominal rate of 6,000 tpd or 2.2 million tonnes per annum for a period of 10 years. Annual mine production of ore and waste is profiled to peak at 13.6 Mt/a from the open pits, with an LOM waste-to-ore strip ratio of 7.2. Ore production from underground mining will peak at 1.7 Mt/a and will supplement the feed from the open pits. In order to optimize the project cash flow, the run-of-mine ore is planned to be segregated into high-, medium- and low-grade stockpiles located adjacent to the processing plant.

The FS contemplates mining starting at Goose in year minus 2 and at George in year 5. Open-pit mining at Goose would begin with the Umwelt pit in year minus 2 to provide waste rock for construction and enable the stockpiling of high-grade ore prior to the start of plant processing. Open-pit mining would then transition sequentially to the Llama, Goose Main and Echo pits. Open-pit mining would be completed by year 6 at Goose. Underground ore production would begin in year 1 with the Llama mine, and then transition to the Umwelt, Goose Main and Echo mines. The Umwelt mine, beginning in year 2, will continue until year 10. Open-pit mining operations at George would transition sequentially from LCPN through LOC1, LCPS and LOC2. Underground mining operations at LOC1, LOC2 and LCPs would begin simultaneously in year 7.

Open-pit mining operations would use a fleet comprising seven-cubic-metre shovels, a seven-cubic-metre front-end loader, four-cubic-metre excavators and 64-tonne haul trucks. This fleet would be supplemented by drills, graders, and track and rubber-tire dozers. A five-metre bench height was selected for mining in ore and waste with overall 20 m effective bench heights based on a quadruple-bench configuration.

Underground mining operations would be carried out using post pillar cut-and-fill, drift-and-fill and longitudinal open-stoping mining techniques. Underground mining would use a combination of two-boom jumbos, long-hole production drills, 10-tonne load-haul-dump (LHD) vehicles and 30-tonne trucks.

Metallurgy

In early 2013, a comprehensive metallurgical test program was conducted to further assess the metallurgical performance of the mineralization to support the PFS. A subsequent and more detailed test program commenced in late 2013 and concluded in mid-2014 to support the FS.

Based on the 2014 and historical test results, a combination of gravity separation and cyanide leach processes is proposed for the project.

The 2014 test results are summarized as follows:

  • Whole-ore leach showed slightly better metallurgical recoveries when compared with a flotation/regrind/concentrate leach circuit;
  • Gold recoveries by gravity concentration ranged from 16 to 76 per cent;
  • A weighted 75th-percentile Bond ball mill work index (BWI) of 15 kWh/t was determined, indicating moderate hardness in terms of grinding requirements;
  • The optimum grind for the ore was determined to be 50 micrometres (P80).

Testwork results were used to determine the relationship between mill feed grade and metallurgical recoveries for each of the deposits, as shown in an attached table.

                         GOLD RECOVERY PROJECTIONS

                                    Head grade                Estimated gold
Mineral zone                           (g/t Au)                  recovery (%)

Umwelt                                     6.1                          92.0
Llama                                      6.7                          91.1
Goose Main                                 4.7                          95.0
Echo                                       5.2                          95.0
George deposits                            5.9                          95.0
LOM                                        5.7                          93.3

Processing and recovery

The 6,000-tonne-per-day process plant will be designed to use conventional crushing, grinding, gravity concentration, gold leaching by cyanidation, gold adsorption by carbon in pulp, and gold recovery from loaded carbon and gravity concentrate to produce gold dore. Cyanide destruction of the tailings would be by an air/sulphur dioxide process. The overall design philosophy uses proven equipment with a simple and conventional single-line process flow that can be operated and maintained effectively in an arctic environment.

Tailings

The project could produce a total of 19.8 Mt/16.5 million cubic metres (Mm3) of tailings over the LOM. The dedicated tailings storage facility (TSF), located adjacent to and south of the Goose Main open pit, was designed to contain the first two years of tailings (3.8 Mt/3.1 Mm3) behind a frozen foundation dam with an integral liner. The balance (16.0 Mt/13.4 Mm3) could be deposited into the mined-out Umwelt open pit (Umwelt tailings facility), followed by the Goose Main pit (Goose Main tailings facility). Ultimately, potentially acid-generating (PAG) and non-potentially acid-generating (NPAG) waste rock will be deposited on the TSF once tailings deposition has relocated to the Umwelt tailings facility, followed by the Goose Main tailings facility.

Freight transportation

Mine construction and operations will have equipment and materials (including fuel) transported mainly from East and West Coast ports to the MLA at Bathurst Inlet by sealift during the summer months. Equipment and materials will then be hauled to the Goose and George sites by a winter ice road. Limited amounts of materials will be transported to the sites by aircraft.

Capital costs

The initial capital cost estimate is $695-million, as summarized in an attached table.

                       CAPITAL COST ESTIMATE SUMMARY

                                   Preproduction     Production          LOM
Capital cost                                  $M             $M           $M

Mining                                    $105.9         $292.4       $398.3
Processing                                 111.7            0.0        111.7
On-site infrastructure                     172.3           54.7        227.0
Off-site infrastructure                     73.4           35.3        108.7
Water and waste management                  19.7           31.9         51.6
Owner's costs                               30.3            0.0         30.3
Indirect costs                             125.6            3.9        129.5
Reclamation                                  0.0           85.5         85.5
Subtotal                                   638.9          503.7      1,146.2
Contingency                                 55.8           22.1         77.9
Total capital costs                        694.7          525.8      1,220.6

The capital cost estimates were prepared using first principles and by applying direct project experience. The estimate is based on feasibility-level engineering, quantity estimates, supplier/contractor quotations for equipment and materials, and estimated labour rates and productivity factors specific to Northern Canadian locations.

The initial capital estimates include all preproduction mining activities (year minus 2 and year minus 1) and are based on owner-performed mining. Equipment leases have not been considered in this FS.

The initial capital cost estimate is based on the execution plans described in this study. Sunk costs and owner's reserve were not considered in the initial capital estimate.

The sustaining capital estimate is based on waste development, mining equipment acquisition and rebuilding, and mining infrastructure installations as defined by the mine plan during operations.

Operating cost estimation

The average LOM unit operating cost is estimated at $96.28/tonne processed and is summarized in an attached table. The mine will use a peak total work force of approximately 1,333 people including all contract labour.

                      OPERATING COST ESTIMATE SUMMARY

                          Average annual       LOM cost            Unit cost
Operating cost (i)           cost ($M/yr)           ($M)      ($/t processed)

Open-pit mining (ii)               $28.5         $273.0               $13.79
Underground
mining (i)                          46.1          440.9                22.28
Processing                          53.8          515.3                26.04
Site surface                        27.0          258.9                13.08
Freight                              9.3           88.7                 4.48
Ore haulage --
George (iii)                         6.2           59.3                 3.00
General and
administration                      28.2          269.4                13.61
Total operating
costs                              199.1        1,905.6                96.28

(i) Operating costs include the working capital during the preproduction 
    period.
(ii) Average LOM open-pit mining cost amounts to $3.95/t mined at a 7.2-to-1
     strip ratio.
(iii) Average LOM underground mining cost amounts to $49.11/t mined. George 
      ore hauling quantities amount to 3.4 Mt LOM at $19.35/t hauled.

Note: Excludes preproduction mining activities.

Mineral resource estimate

The mineral resource estimate is based on geologic block models that incorporated:

  • 896 drill holes (for a total of 244,853 metres and 124,274 assays) at the Goose site on the Llama, Umwelt, Echo and Goose Main deposits;
  • 770 drill holes (for a total of 139,695 metres and 54,273 assays) at the George site on the LCPN, LCPS, LOC1, LOC2, GH and Slave deposits.

Mineralized domains were constructed to constrain the estimates using a 0.3-gram-per-tonne Au threshold for both the Goose and George sites. Capping was employed where required and varied by deposit. Data density allowed for indicated and inferred resources to be classified at all deposits, with measured resources also classified at the Goose Main, Llama and Umwelt deposits.

        SUMMARY OF ESTIMATED MINERAL RESOURCES (AS OF OCT. 21, 2014)

Classification                 Tonnes (Kt)       Au (g/t)      Metal (Koz Au)

Measured                           10,273           5.27               1,740
Indicated                          17,969           6.22               3,593
Measured and indicated             28,242           5.87               5,333
Inferred                            7,750           7.43               1,851

1. Canadian Institute of Mining, Metallurgy and Petroleum definitions were 
   used for the mineral resources.
2. D. Nussipakynova, PGeo, and Dr. A. Fowler, PhD, MAusIMM, CP (Geo), both 
   from AMC and qualified persons under National Instrument 43-101, take 
   responsibility for the mineral resource estimates.
3. Open-pit mineral resources are constrained by an optimized pit shell at a
   gold price of $1,500 (U.S.) per ounce. The cut-off grade applied to the 
   open pit resources is 1.0 g/t Au.
4. The underground cut-off grade is 4.0 g/t Au for all George mineral 
   resources (LCPN, LCPS, LOC1, LOC2, GH and Slave), 3.5 g/t Au for Goose
   Main, Echo and Llama, and 4.5 g/t for the Umwelt deposit.
5. The George mineral resources were estimated within mineral domains
   expanded to a minimum width of two m for the underground mineral 
   resources. Drilling results up to Dec. 31, 2013, are included, except for
   Echo (July 4, 2014), and LOC1 and LOC2 (July 21, 2014).
6. The numbers might not add due to rounding.
7. Measured and indicated mineral resources are inclusive of mineral 
   reserves. Mineral resources that are not mineral reserves do not have 
   demonstrated economic viability.

Mineral reserve estimate

The mineral reserve estimate for the project is based on the mineral resource estimate completed by AMC with an effective date of Oct. 21, 2014.

The mineral reserves were developed by examining each deposit to determine the optimum practical mining method. Cut-off grades (COGs) were then determined based on appropriate mine design criteria and the adopted mining method. Four mining methods were chosen: shovel-and-truck open-pit mining, underground mining using post pillar cut and fill (PPCF), drift and fill (DF), and longitudinal open stoping (LOS).

        SUMMARY OF ESTIMATED MINERAL RESERVES (AS OF APRIL 21, 2015)

                                              Tonnes                 Contained
Area                       Classification        (Kt)     Au (g/t)     Au (Koz)

Total open pit                Proven           7,902         5.35        1,360
                              Probable         2,862         4.79          441
Total underground             Proven             256         5.54           46
                              Probable         8,772         6.32        1,782
Total Back River property     Proven           8,158         5.36        1,405
                              Probable        11,634         5.94        2,223

1. A gold price of $1,250 (U.S.)/ounce is assumed.
2. An exchange rate of $1.05 to $1.00 (U.S.) is assumed.
3. The numbers might not add due to rounding.

Notes for open pit:
1. Dilution and recovery factors are applied as per open-pit mining method.
2. A COG of 1.39 g/t was used for the Umwelt open-pit mineral reserve estimate.
3. A COG of 1.41 g/t was used for the Llama open-pit mineral reserve estimate.
4. A COG of 1.37 g/t was used for the Goose Main open-pit mineral reserve
   estimate.
5. A COG of 1.30 g/t was used for the Echo open-pit mineral reserve estimate.
6. A COG of 1.90 g/t was used for the LCPS open-pit mineral reserve estimate.
7. A COG of 1.90 g/t was used for the LCPN open-pit mineral reserve estimate.
8. A COG of 1.87 g/t was used for the LOC1 open-pit mineral reserve estimate.
9. A COG of 1.89 g/t was used for the LOC2 open-pit mineral reserve estimate.

Notes for underground:
1. Dilution and recovery factors are applied as per underground mining method.
2. A COG of 3.18 g/t was used for the Umwelt underground mineral reserve
   estimate.
3. A COG of 3.80 g/t was used for the Llama underground mineral reserve
   estimate.
4. A COG of 3.77 g/t was used for the Goose Main underground mineral reserve
   estimate.
5. A COG of 3.21 g/t was used for the Echo underground mineral reserve
   estimate.
6. A COG of 4.02 g/t was used for the LCPS underground mineral reserve
   estimate.
7. A COG of 3.84 g/t was used for the LOC1 underground mineral reserve
   estimate.
8. A COG of 4.09 g/t was used for the LOC2 underground mineral reserve
   estimate.

Both the mineral resource and mineral reserve estimations take into consideration on-site operating costs (such as mining, processing, site services, freight, and general and administration), geotechnical analysis for both open-pit wall angles and underground stope size, metallurgical recoveries, and selling costs. In addition, the mineral reserves incorporate allowances for mining recovery and dilution, and overall economic viability.

Project execution and development

The project execution plan and general project development schedule consider the seasonality of transporting freight. The procurement and staging of equipment, materials and fuel at the respective East and West Coast ports needs to take place at least eight to 12 months before anticipated arrival at the Goose and George sites. The MLA is planned to receive sealift materials in the summer open-water period of August and September. Materials would then be stored until the winter ice road is operational, between January and April. Fixed-wing aircraft landing at Goose site will support construction and operations activities by delivering passengers, and select equipment and materials.

Back River reduced capex opportunity

While the Back River FS offers a strong economic result and is the preferred path to production, it is recognized that financing such a project in current market conditions would be challenging.

A unique feature of the Back River project is the multitude of open-pit and underground resources, along with variability of resource grades. This situation offers the optionality to selectively mine and process higher-grade zones through the utilization of a higher cut-off grade. Therefore, in connection with the FS, a conceptual opportunity was identified for a smaller-throughput, higher-grade, lower-capex start-up operation.

This high level, while very preliminary and not to be relied upon, showed the potential for project scalability, targeting a capex in the $300-million range and production of approximately 150,000 to 200,000 ounces of gold annually for over 10 years.

Work on an alternative reduced-capex scenario has not been included as part of the FS, other than in the recommendations and opportunities section of the National Instrument 43-101 report. JDS has recommended further work be undertaken in order to evaluate a potentially more easily financeable project in the current capital market environment.

Permitting

New and modified mining projects in Nunavut are subject to environmental assessment (EA) and review prior to certification and issuance of permits to authorize construction and operations. The primary environmental review and approval process applicable to the project is the territorial EA administered by the Nunavut Impact Review Board (NIRB). A project certificate, if recommended by NIRB, might be issued by the Minister of Aboriginal Affairs and Northern Development Canada (AANDC) at the conclusion of the EA process, which represents government approval, and allows the proponent to pursue the necessary regulatory authorizations needed to construct and operate the project.

In June, 2012, Sabina submitted a project description and various applications to the NIRB, Nunavut Water Board and AANDC. In January, 2014, a draft environmental impact statement was submitted to the NIRB. In July, 2014, Sabina responded to project information requests, and in October, 2014, Sabina responded to agency technical comments. In November, 2014, a week-long technical meeting and a prehearing conference were held in Cambridge Bay. A prehearing conference decision report was produced based on these meetings with the government of Canada, the government of Nunavut, the government of the Northwest Territories, the Kitikmeot Inuit Association and the general public. This document summarizes Sabina's commitments and provides further direction for the content of the 2015 final environmental impact statement.

The design of the project includes a comprehensive water management plan for construction, operations and closure. All project components will be decommissioned and reclaimed according to best industry practices, and territorial and federal regulations. The closure plan uses proven practices that include appropriate long-term management of PAG/metal-leaching materials and any affected waters. The objective of final reclamation for the project is to return the site to a productive condition after mining activities are completed.

Based on the information available and the proposed design, there appears to be no adverse environmental or socio-economic aspects that could limit the development of the project.

A technical report for the Back River FS will be filed on SEDAR within 45 days of this news release in accordance with National Instrument 43-101. Readers are encouraged to read the technical report once filed, including the qualifications and assumptions on which it is based.

Conference call

The company will be holding a conference call and webcast on Thursday, May 21, 2015, at 7 a.m. Pacific Time.

Conference call numbers:

Canada and United States toll-free dial in:  1-800-319-4610

Vancouver toll dial in:  604-638-5340

Toronto toll dial in:  416-915-3239

Callers should dial in five to 10 minutes prior to the scheduled start time and simply ask to join the Sabina Gold & Silver call.

Authors and qualified persons statement

The FS was prepared under the direction of JDS Energy & Mining by leading independent industry consultants, all qualified persons (QPs) under National Instrument 43-101. The QPs have reviewed and approved the content of this news release. The consultants and QPs who participated in the FS are listed in an attached table.

Qualified person,         Company                  QP responsibility/role
designation

Gord Doerksen, PEng       JDS Energy & Mining      Executive summary,
                                                   introduction, reliance on
                                                   other experts, mineral
                                                   reserves, infrastructure,
                                                   market studies, capex,
                                                   opex, economic analysis,
                                                   adjacent properties,
                                                   environmental, other
                                                   relevant data,
                                                   interpretations,
                                                   recommendations,
                                                   references,
                                                   abbreviations, project
                                                   execution plan,
                                                   logistics, airstrips, ice
                                                   roads, marine structures,
                                                   G&A
Dino Pilotto, PEng        JDS Energy & Mining      Mining methods
Andrew Fowler, MAusIMM,   AMC Mining Consultants   Mineral resource
CP (Geo)                  (Canada)                 estimates for George
Dinara Nussipakynova,     AMC Mining Consultants   Mineral resource
PGeo                      (Canada)                 estimates for Goose
John Morton Shannon,      AMC Mining Consultants   Property description,
PGeo                      (Canada)                 accessibility, history,
                                                   geology, deposits,
                                                   exploration, drilling,
                                                   sample preparation, data
                                                   verification
Maritz Rykaart, PEng      SRK Consulting (Canada)  Geochemistry, tailings
                                                   management, water storage
Gerry Schwab, PEng        Hatch                    Infrastructure
Gavin Ritson, PEng        Hatch                    Metallurgy, recoveries
Rob Mercer, PhD, PEng     Knight Piesold           Geomechanical

The qualified person under NI 43-101 for Sabina Gold & Silver is Wes Carson, PEng, vice-president, project development, who has reviewed the content of this news release and approved its dissemination.

We seek Safe Harbor.

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