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Sabina Gold & Silver Corp
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Sabina Gold & Silver releases 43-101 Back River FS

2015-09-14 08:44 ET - News Release

Mr. Bruce McLeod reports

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

Sabina Gold & Silver Corp. has received the results of the initial project feasibility study for its 100-per-cent-owned Back River gold project in Nunavut, Canada.

"We believe this FS demonstrates that Back River is one of the best gold development projects in our sector. At approximately six grams per tonne gold, I believe it contains the highest-grade undeveloped open pits in North America," said Bruce McLeod, president and chief executive officer. "We have completed two feasibility studies on the project focused on two scenarios: a 6,000-tonne-per-day operation (6KFS) and, in this most recent study, a 3,000 tpd operation. Both of these studies delivered very positive economic results which demonstrate the optionality of these high-grade continuous deposits. The 3,000 tpd FS is the most compelling opportunity for Sabina in this current market environment. Utilizing higher cut-off grades it would enable us to mine our initial open-pit reserves while preserving opportunities for future underground expansion in the same deposits along with other existing project resources not in the current mine plan.

"The fit-for-purpose FS delivers significant gold production of approximately 250,000 ounces Au per year through years one to eight and approximately 200,000 ounces per year life of mine with the majority of production coming from three open pits within approximately three kilometres of the process plant. This scenario provides a lower execution risk for the company by simplifying the mine plan and significantly reducing the capital expenditures as we evolve from developer to producer. Back River is a large and emerging mining district controlled 100 per cent by Sabina with significant recent discoveries as well as many years of exploration potential. We are very excited about our path forward."

A unique feature of the Back River project is the combination of high-grade open-pit and underground resources. These resources offer the optionality to selectively mine and process higher-grade zones through the utilization of a higher cut-off grade, providing an opportunity to start smaller at Back River without significantly sterilizing remaining resources in the existing deposits.

The FS was commenced following the completion of the 6KFS entitled "Technical Report and Feasibility Study for the Back River Gold Property, Nunavut," dated June 22, 2015, and filed on SEDAR. This study indicates the project could generate a posttax internal rate of return of 24.2 per cent and net present value (5 per cent) of $480.3-million with a rapid pay back of 2.9 years. The FS is based on a processing rate of 3,000 tpd with an average head grade of 6.3 grams per tonne gold, producing an average of 198,100 ounces Au per year over an 11.8-year mine life at a life-of-mine cash cost of $534 (U.S.)/ounce Au. Initial capital for the project is estimated at $415-million with sustaining capital of $185-million.

Permitting

The Back River project commenced its formal environmental assessment in 2012 and is currently approximately 75 per cent through the process. The company plans on filing its final environmental impact statement to the Nunavut Impact Review Board (NIRB) in November of this year, following which, after review by all intervenors, final public hearings are anticipated to be held in Cambridge Bay in first quarter 2016. The company anticipates receiving a project certificate from the Minister of Aboriginal and Northern Affairs Canada during second quarter 2016. Receipt of a project certificate is the most significant milestone in the project authorizations process in Nunavut.

Back River -- future potential

The Back River gold project is located in the West Kitikmeot region of Nunavut, Canada, one of the world's safest mining jurisdictions. It is situated approximately 75 kilometres from tidewater at Bathurst Inlet. The project is made up of a series of five claim blocks underlain by favourable banded iron formation host rock, of which only two (Goose and George) have been the primary focus of exploration and resource development to date. Of the approximately 80 km of favourable stratigraphy in the district, the existing resources are located on only approximately 10 km.

The significant resource growth that the project has seen in the last five years and the evolving exploration potential, in both the banded iron formation and enveloping sediments at the project, demonstrate that Back River has potential to become a world-class gold-mining district controlled 100 per cent by Sabina.

In contrast to the 6KFS, the FS contemplates mining only at the Goose property within the open pits at the Goose Main, Umwelt and Llama deposits, and the underground at Umwelt. Approximately 72 per cent of the reserves would be mined by open-pit methods. All of these deposits also have considerable inferred ounces currently defined at depth, and all of the deposits are open at depth and along strike. The Echo underground deposit at the Goose property (not in the current mine plan) also offers immediate potential for future mill feed from the Goose property.

The George property, which contains indicated resources of 6.4 million tonnes grading 5.55 g/t Au for 1.1 million ounces and additional inferred resources of 4.8 million tonnes grading 6.32 g/t Au for 980,000 ounces, is located approximately 50 km to the north of Goose (see the table for certain key assumptions and parameters in respect of these resource estimates). These well drilled resources also demonstrate sources for future mining in the district with minimal additional work.

Additionally, exploration work has been continuing to identify new targets for future drilling and Sabina now has over 50 targets that have been developed and prioritized on the George and Goose properties alone. The other claim blocks at Back River, all hosting numerous gold showings, have seen less work and are relatively unexplored.

Initial project feasibility study highlights

The FS was initiated in June, 2015, by the same consultants that completed the 6KFS 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. (processing and layout), Canenco Canada Inc. (metallurgy and gold recoveries), SRK Consulting (Canada) Inc. (geotechnical, hydrology, tailings, waste and water management), AMC Mining Consultants (Canada) Ltd. (geology) and Knight Piesold Ltd. (KP) (geomechanical). All consultants have extensive Arctic experience.

The study's highlights include:

  • The project could generate a posttax internal rate of return of 24.2 per cent and net present value (at a 5-per-cent discount rate) of $480.3-million;
  • The project could generate LOM posttax net cash flow of $782-million on gross revenues of $3.2-billion with a payback period of 2.9 years (from start of operations);
  • A processing rate of 3,000 tpd could produce an average of approximately 198,000 ounces Au per year over an 11.8-year mine life (upon commencement of commercial production), with an average of approximately 244,000 ounces Au per year for the first eight years;
  • The majority of production from open pit (72 per cent LOM), with no underground production scheduled until year three (after payback);
  • Initial capital estimate of $415-million and sustaining capital estimate of $185-million;
  • Total LOM cash cost estimate of $534 (U.S.)/ounce Au (including third party royalties, refining and transport). LOM all-in sustaining cash cost estimate of $620 (U.S.)/ounce Au LOM (including sustaining capital and closure costs);
  • A total of 12.4 million tonnes of ore could be milled over 11.8 years with a LOM average grade of 6.3 grams per tonne Au and metallurgical recoveries of 93 per cent;
  • Base-case assumptions of delivered diesel price of 91 cents/litre for power generation;
  • Open-pit strip ratio of 10.5 over LOM.

Comparison with the 6KFS project

The differences between the 6KFS and the FS are shown in the table. The main differences are:

  • An updated gold price of $1,150/ounce and exchange rate of $1 (U.S.) to 80 cents;
  • The FS has a 49-per-cent improvement on capital efficiency over the 6KFS (NPV/initial capex);
  • Increased cut-off grades resulting in an overall increase in the head grade to 6.30 g/t;
  • Removal of the George property from the mine plan resulting in a lower-cost, simplified mining schedule;
  • A more simplified plan with mining focused on four mining areas (open pit at Llama, Umwelt and Goose Main, and underground at Umwelt) versus 15 mining areas (open pit and underground) that included George and Echo in the 6KFS;
  • A significantly higher proportion of prefabricated modules targeting less on-site labour requirements;
  • Reduced fuel and freight requirements.

            
                  COMPARISON OF 6KFS AND FS ECONOMIC RESULTS

                                                   Unit      6KFS         FS

Gold price                                       US$/oz     1,200      1,150
Exchange rate                                    US$/C$      0.87       0.80
Gold production                                     Moz      3.39       2.32
Mine life                                         Years       9.6       11.8
Initial capex                                        $M       695        415
Sust. capital cost                                   $M       440        185
Closure cost                                         $M        86         64
OP mining cost                                $/t mined      3.95       3.35
UG mining cost                                $/t mined     49.11      63.61
Processing cost                              $/t milled     26.04      37.16
Site services cost                           $/t milled     13.08      11.08
Freight cost                                 $/t milled      4.48       4.42
Ore haulage(1)                               $/t hauled     19.35          0
G&A cost                                     $/t milled     13.61      18.28
Operating cost                               $/t milled     96.25     114.58
Cash costs(2)                                    US$/oz       535        534
All in cash costs(3)                             US$/oz       671        620
AISC(4)                                          US$/oz       850        763
Aftertax IRR                                          %      21.7       24.2
Aftertax NPV5%                                       $M       539        480
Payback                                           Years       2.2        2.9

(1) Ore haulage is zero in the FS due to the removal of George from the mine  
plan.                                                                        
(2) (Refining costs plus insurance plus transport costs plus third party 
royalties plus operating costs) divided by payable Au ounces.
(3) (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.
(4) (Refining costs plus insurance plus transport costs plus third party 
royalties plus operating costs plus initial, sustaining and closure capital 
costs) divided by payable Au ounces.

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 (such as exploration and resource definition costs, engineering fieldwork and studies costs, and environmental baseline study costs). Note: predevelopment and sunk costs are used in tax calculations;
  • Includes estimated third party net-smelter-return royalties which average 3.64 per cent over LOM;
  • NWT/Nunavut mineral royalties (NTNMR) have been evaluated as part of the aftertax 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;
  • Nunavut fuel tax rebate of 9.1 cents for motive and 3.1 cents for non-motive were applied;
  • The Back River resources considered in the study are on grandfathered properties subject to royalties under the NTNMR;
  • Federal tax rate of 15 per cent and an NT 12-per-cent rate were used to calculate income taxes;
  • Canadian exploration expense (CEE) and Canadian development expense (CDE) tax pools were used with appropriate opening balances to calculate income taxes;
  • Specific capital cost class capital cost allowance (CCA) rates were applied and used to calculate the appropriate CCA the company can claim during the entire life of the project.

Pretax and aftertax financial performance is summarized in the 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     3,202
Operating costs                                                 $M     1,369
Cash flow from operations                                       $M     1,833
Capital costs(i)                                                $M       664
Cash cost(+)                                                US$/oz       534
All-in sustaining cash cost(')                              US$/oz       620
Net pretax cash flow                                            $M     1,122
Pretax NPV5%                                                    $M       699
Pretax IRR                                                       %      28.2
Pretax payback                                               Years       2.9
Break-even pretax gold price (NPV5%=0)                      US$/oz       794
Total taxes                                                     $M       340
Net aftertax NPV5%                                              $M       480
Aftertax IRR                                                     %      24.2
Aftertax payback                                             Years       2.9
Break-Even aftertax gold price (NPV5%=0)                    US$/oz       795

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

A sensitivity analysis was conducted on aftertax net present values (NPV 5 per cent) for individual parameters, including the gold price, foreign exchange rate, operating costs and capital costs. The results are shown in the tables. The project proved to be most sensitive to changes in the foreign exchange rate and gold price. The project showed least sensitivity to operating costs.

                  SENSITIVITY TO CAPEX AND OPEX AFTER TAX
              
                 NPV5% ($M)                                                   
                    IRR (%)     -20%      -10% Base case      +10%      +20%
                            
Capital costs         -20%     $ 715     $ 653     $ 592     $ 529     $ 468
                                36.2      34.1      32.0      29.7      27.3              
                      -10%       659       591       536       474       412                          
                                31.8      29.9      27.8      25.6      23.4              
                Base case        603       542       480       418       356                         
                                28.1      26.2      24.2      22.1        20              
                      +10%       547       486       425       362       300                          
                                24.8      23.3      21.1      19.1      17.0              
                      +20%       492       430       369       306       245                          
                                21.9      20.2      18.3      16.4      14.4

                      SENSITIVITY TO GOLD PRICE POSTTAX

Gold price                                     NPV5%         IRR     Payback
(US$/oz)                                         ($M)         (%)     (years)

$1,000                                         $ 289        17.4         3.6
1,100                                            416        22.0         3.1
1,150                                            480        24.2         2.9
1,200                                            543        26.3         2.6
1,300                                            669        30.3         2.2

FS parameters

The Back River resource consists of two sites: George and Goose. Each site has four minable deposits with the majority of the resources located at the Goose site. The FS is focused on mining at the Goose site only. The project is based on conventional open-pit and underground mining operations that feed a 3,000 tpd whole-ore leach process plant located at Goose. The parameters developed for the FS are shown in the table. The plant could produce an average of approximately 198,100 ounces of gold per year as dore bullion over an 11.8-year mine life with a majority of reserves being mined by open pit.

A total of 12.4 million tonnes (Mt) of ore could be mined at a mill head grade of 6.3 g/t Au and a projected overall recovery of 93 per cent. A total of 2.3 million ounces Au are estimated to be recovered over the life of mine with cash costs of approximately $534 (U.S.) per ounce Au including royalties. All-in life of mine cash costs (including initial, sustaining capital and closure costs) are approximately $763 (U.S.) per ounce Au.

Initially, tailings could be stored in a purpose-built storage facility followed by deposition into the exhausted Llama open pit. Mine construction and operations could be facilitated by sealift during the summer months and an ice road from the marine laydown 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       8,868         72%
Underground ore to process                        kt       3,492         28%
ROM to process -- total                           kt      12,359        100%
Ore grade                                                                   
ROM grade to process -- O/P                   g/t Au         5.9            
ROM grade to process -- U/G                   g/t Au         7.4            
ROM grade to process -- average               g/t Au         6.3            
Operating metrics                                                           
LOM production -- O/P                         koz Au       1,675         67%
LOM production -- U/G                         koz Au         829         33%
LOM production -- total                       koz Au       2,503        100%
Avg. annual production                   koz Au/year       198.1            
Mine life                                      Years        11.8            
O/P strip ratio                                           10.5:1            
Mill design throughput                           tpd       3,000            
Gold recovery                                      %        93.0  
          
                                 CAPITAL COSTS ($M)  
                                                       
Direct costs                           Preproduction  Sustaining       Total

Mining                                        $ 45.9      $112.5      $158.3
Processing                                      71.1           0        71.1
On-site infrastructure                          83.5        16.2        99.7
Tailings management                              6.2         1.8         7.9
Off-site infrastructure                         51.3        41.7        93.0
Subtotal direct costs                          257.9       172.1       429.9
Indirect costs                                                              
Owner's costs                                   24.6           0        24.6
EPCM                                            29.7           0        29.7
Project indirects                               65.5           0        65.5
Contingency                                     37.2        13.2        50.5
Total                                          414.9       185.3       600.3
Closure costs                                      0        63.8        63.8

Operating costs                                 $M/a  $/t milled   US$/oz Au

Mining                                        $ 44.1     $ 43.64            
Process                                         37.0       37.16            
Surface services                                11.2       11.08            
G&A                                             19.1       18.28            
Freight costs (ocean/port/ice roads)             4.6        4.42            
Total                                          116.0      114.58            
Total cash costs (including                                                 
royalties, refining and transport)                                     $ 534
All-in cash costs (including all                                            
capital)(i)                                                              763

                          FINANCIAL METRICS                                                           

Base-case gold price                       US$/oz Au      $1,150            
Exchange rate                                 C$:US$       $0.80            
Average NSR royalty                                %         3.6            

(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. The Goose Main, Umwelt and Llama deposits are the focus for mining on the Goose property in the FS. Gold mineralization is predominantly hosted within the lower iron formation (LIF) 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, disrupted and cut by axial planar felsic dikes which apparently trace the fluid pathways and are related to mineralization.

Infrastructure

The MLA and Goose sites would have bulk fuel storage tanks, laydown yards, diesel power plants, maintenance shops, accommodation camps, water and domestic waste management facilities, and satellite communications. An all-weather airstrip (existing) would be located at the Goose site. In winter, the two sites would be connected by ice roads.

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 (WRSA), water management drainage and storage ponds, and haul roads.

The MLA would support the seasonal staging and trans-shipment 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.

The accommodation camps would be portable, modular units constructed off-site. The construction and mine site operations phases at the Goose site would require accommodation for up to 280 and 291 workers, respectively. The construction and port operation phases at the MLA site would require accommodations for up to 94 workers.

Power

The FS includes 100-per-cent-on-site-diesel-generated power at Goose and the MLA. A diesel price of 91 cents/l for power generation was assumed. The estimated power unit cost averages 26 cents/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 19.2 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 3,000 tonnes per day, or 1.1 Mt/annum for 11.8 years. Annual mine production of ore and waste peaks at 13.7 Mt/annum from the open pits, with a LOM waste-to-ore strip ratio of 10.5. Ore production from underground mining will peak at 569,000 t/annum 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 the Goose property in year minus-one. Open-pit mining at Goose would begin with the Umwelt pit in year minus-one 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 and Goose Main open pits. Open-pit mining would be completed by year eight at Goose. Underground ore production would begin in year three at the Umwelt mine and continue through year nine.

Open-pit mining operations would use a fleet comprising seven-cubic-metre shovels, a seven cubic m front-end loader, four cubic m 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 a post pillar cut-and-fill mining method. Underground mining would use a combination of two-boom jumbos, 10-tonne load-haul-dump (LHD) vehicles and 30 t trucks.

Metallurgy

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

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 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 15.8 kwh/tonne was determined, indicating moderate hardness in terms of grinding requirements.
  • The optimum grind for the ore was determined to be 50 microns (P80).

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

                            GOLD RECOVERY PROJECTIONS

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

Umwelt OP                                           6.49                92.0
Umwelt UG                                           7.38                92.0
Llama OP                                            7.15                91.1
Goose Main OP                                       5.00                95.0
LOM                                                 6.30                93.0

Processing and recovery

The 3,000-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 (CIP), and gold recovery from loaded carbon and gravity concentrate to produce gold dore. Cyanide destruction of the tailings would be by a sodium metabisulphite 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 12.4 Mt/10.3 million cubic metres 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 four years of tailings (4.4 Mt/3.6 million cubic m) behind a frozen foundation dam with an integral liner. The balance (eight Mt/6.7 million cubic m) could be deposited into the mined-out Llama open pit (Llama 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 Llama 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 site 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 $415-million, as summarized in the table.

                         CAPITAL COST ESTIMATE SUMMARY

Capital cost                          Preproduction     Production       LOM
                                                ($M)           ($M)      ($M)

Mining                                       $ 45.9         $112.5    $158.3
On-site development                            15.3            1.3      16.6
Ore crushing and handling                      15.6              0      15.6
Process plant                                  55.5              0      55.5
On-site infrastructure                         68.1           14.9      83.0
Off-site infrastructure                        25.0           39.6      64.7
Marine laydown area                            26.3            2.0      28.3
Tailings                                        6.2            1.8       7.9
Owner's costs                                  24.6              0      24.6
EPCM                                           29.7              0      29.7
Indirect costs                                 65.5              0      65.5
Contingency                                    37.2           13.2      50.5
Subtotal                                      414.9          185.3     600.2
Reclamation                                       0           63.8      63.8
Total capital costs                           414.9          249.1     664.0

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

The initial capital estimates include all preproduction mining activities (year minus-one) 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 life-of-mine (LOM) unit operating cost is estimated at $114.58/t processed and is summarized in the table. The mine will use a peak total work force of approximately 844 people including all contract labour.

                        OPERATING COST ESTIMATE SUMMARY

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

Mining(i)                        $ 44.0         $520.0               $ 43.64
Processing                         37.0          436.2                 37.16
Site surface                       11.2          132.0                 11.08
Freight                             4.6           54.6                  4.42
G&A                                19.1          226.0                 18.28
Total operating costs             116.0        1,368.7                114.58

(+) Operating costs include the working capital during the preproduction  
period.                                                                     
(i) Average LOM open-pit mining cost amounts to $3.35/t mined at a 10.5-to-1
strip ratio; average LOM underground mining cost amounts to $63.61/t mined.

Mineral resource estimate

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

  • 896 drill holes (for a total of 244,853 m 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 m 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 g/t 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 RESOURCES AS OF OCT. 21, 2014, INCLUDING RESERVES

Classification                          Tonnes            Au           Metal 
                                           (kt)         (g/t)        (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

Canadian Institute of Mining, Metallurgy and Petroleum definitions were used 
for the resources.                                
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.                                             
Open-pit resources are constrained by an optimized pit shell at a gold price
of $1,500 (U.S.)/ounce. The cut-off grade applied to the open-pit resources 
is one gram per tonne gold.
The underground cut-off grade is four g/t Au for all George 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.                                  
The George resources were estimated within mineral domains expanded to a    
minimum width of two metres for the underground resources.                         
Drilling results up to Dec. 31, 2013, are included, except for Echo (July
4, 2014), and LOC1 and LOC2 (July 21, 2014).                                 
The numbers might not add due to rounding.                                  
Measured and indicated resources are inclusive of reserves.                 
Resources that are not reserves do not have demonstrated economic viability.

Mineral reserve estimate

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

The 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. Two mining methods were chosen: shovel-and-truck open-pit mining and underground mining using post pillar cut and fill (PPCF).

          SUMMARY OF ESTIMATED MINERAL RESERVES AS OF AUG. 15, 2015

Area                    Classification        Tonnes          Au  Contained Au
                                                 (kt)       (g/t)         (koz)

Total open pit                  Proven         6,983        5.97         1,340
                              Probable         1,885        5.52           335
Total underground               Proven            20        9.52             6
                              Probable         3,471        7.37           822
Total Back River                                                            
property                        Proven         7,003        5.98         1,346
                              Probable         5,356        6.72         1,157

A gold price of $1,250 (U.S.)/ounce is assumed.                                  
An exchange rate of $1.15 to $1.00 (U.S.) is assumed.                      
The numbers might not add due to rounding.                               
Notes for open pit: dilution and recovery factors are applied as per open-pit 
mining method; a cut-off grade (COG) of 2.08 g/t was used for the Umwelt 
open-pit mineral reserve estimate; a COG of 2.14 g/t was used for the Llama 
open-pit mineral reserve estimate; a COG of 2.07 g/t was used for the Goose 
Main open-pit mineral reserve estimate.                                                                   
Notes for underground: dilution and recovery factors are applied as per 
underground mining method; a COG of 3.86 g/t was used for the Umwelt 
underground mineral reserve estimate.

Both the mineral resource and mineral reserve estimates take into consideration on-site operating costs (such as mining, processing, site services, freight, general and administration), geotechnical analysis for both open-pit wall angles and underground stope size, metallurgical recoveries, and selling costs. In addition, the 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 sea-lift materials in the summer open-water period of July and October. Materials would then be stored until the winter ice road is operational from 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.

Benchmarking

The table benchmarks against relevant studies of other operations in northern Canada and elsewhere to demonstrate the context of Back River relative to other's costs and findings. All information has been sourced from company technical disclosures.

                       SUMMARY OF BENCHMARKED STUDIES

Parameter                             Units           Back River      Meliadine(1)

                                              September, 2015 FS        2015 FS

Au price                             US$/oz                1,150          1,300
Posttax iRR                               %                 24.2           10.3
Posttax NPV5%                            $M                  480            307
Payback                               years                  2.9            5.0
Opex                                    $/t        114.58 (OP/UG)    135.27 (UG)
LOM cash costs                       US$/oz                  534            531
Preproduction capex                      $M                  415          1,047
Sustaining capex                         $M                  185            411
Total reserves                          koz                2,503          3,335
                                         kt               12,359         13,944
                                        g/t                 6.30           7.44
LOM payable Au                          koz                2,319          3,214
Annual production                       koz                  198            350

Parameter                          Hope Bay(2)    Meadow Bank(3)       Torex(4)

                                   2015 PFS         Producing        2012 FS

Au price                              1,250      400 (2005 FS) Average 1,386
Posttax IRR                            40.0    12.8% (2005 FS)         24.2%
Posttax NPV5%                           626    155.2 (2005 FS)           900
Payback                                 1.7               N/a            3.6
Opex                                 168.00       73.00 (2014)         30.00
                                        (UG)              (OP)           (OP)
LOM cash costs                          638         599 (2014)           504
Preproduction capex                                 710 (2007)                
                                        206        1.5B (2012)           663
Sustaining capex                        393               N/a             15
Total reserves                        3,507             1,165          4,090
                                     14,194            11,795         48,800
                                       7.60              3.08           2.61
LOM payable Au                        3,200          4,273(i)          4,090
Annual production                       160               453            337

(1) Information retrieved from Agnico Eagle's "Updated Technical Report on   
the Meliadine Gold Project, Nunavut, Canada," dated Feb. 11, 2015, from 
SEDAR.
(2) Information retrieved from TMAC Resource's "Technical Report on the Hope 
Bay project, Nunavut, Canada," dated May 28, 2015, retrieved from SEDAR.
(3) Information retrieved from financial results of Agnico Eagle's website, 
various dates. (i) Cumulative production plus 2013 reserves and resources.                                              
(4) Information retrieved from "Morelos Gold Project -- 43-101 Technical      
Report Feasibility Study, Guerrero, Mexico," dated Oct. 1, 2012, from SEDAR.

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 NIRB. A project certificate, if recommended by NIRB, may 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 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 (FEIS).

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 potentially acid-generating/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.

The FS infrastructure remains in line with the already presented DEIS as well as the planned FEIS submission.

Based on the information available and the proposed design, no significant adverse environmental or socio-economic effects are anticipated that would 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 Tuesday, Sept. 15, 2015, at 6 a.m. PT.

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 min 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 under National Instrument 43-101. The QPs have reviewed and approved the content of this news release. The consultants and QPs that participated in the FS are shown in the table.

                              QUALIFIED PERSONS

Qualified person,       Company                 QP responsibility/role      
designation                                                                 

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

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.

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