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Seafield Resources Ltd
Symbol SFF
Shares Issued 168,916,249
Close 2012-04-20 C$ 0.15
Market Cap C$ 25,337,437
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Seafield's Miraflores PEA shows IRR of 50%

2012-04-23 07:23 ET - News Release

Mr. Cesar Lopez reports

SEAFIELD ANNOUNCES PRELIMINARY ECONOMIC ASSESSMENT FOR ITS MIRAFLORES DEPOSIT, INDICATING AN IRR OF 50% AND 709,349 OUNCES OF RECOVERED GOLD

Seafield Resources Ltd. has released the results of an independent preliminary economic assessment for its 100-per-cent-owned Miraflores deposit, located in the Quinchia district of the Department of Risaralda, Colombia. The PEA was completed by SRK Consulting of Denver, Colo. All figures are shown in U.S. dollars, unless otherwise specified.

Highlights:

  • Open pit mine life of eight years, underground mine life of 10 years and full process production life of 14 years;

  • Average annual gold production of 71,007 ounces in the first eight years produced from open pit and underground mining; 114,173 ounces total from processing of low-grade stockpile after year 8 until end of mine life;

  • Average mill throughput rate of 4,000 tonnes per day;

  • minable resource of 11.97 million tons of gold: 6.97 million tonnes at 1.38 grams per tonne gold (open pit mining); 5.0 million tonnes at 2.27 g/t Au (underground mining);

  • Strip ratio of 2.04:1 (waste:mill feed including low-grade stockpile);

  • Average cash operating cost of $524 per ounce during the first eight years of production when 82 per cent of the gold is produced (excluding royalties of 6.4 per cent and refining charges);

  • Initial capital expenditures of $93.7-million;

  • Internal rate of return of 50 per cent and pretax net present value (8 per cent) of $249-million (based on a gold price of $1,500 per ounce).

"We are very pleased with SRK's recommendation to move Miraflores forward," commented Cesar Lopez, Seafield's president and chief executive officer. "The PEA presents a production scenario with robust economics achieved through manageable capital expenditures and below-average industry cash costs. Our team will continue to develop our project and secure Seafield's position as an emerging gold producer in Colombia."

Details

The PEA models the mining of the Miraflores breccia pipe deposit using a combination of open pit and underground mining methods. Seafield plans to develop a lower tonnage operation with a focus on processing the higher grade materials of the deposit in the first eight years of the mine life. Below are the details of the results from the PEA on the company's Miraflores deposit.

Project description

Location

Seafield's Miraflores deposit is located within the company's 100-per-cent-owned, 6,757-hectare Quinchia gold project in the Department of Risaralda, Colombia. The mineral contract of Miraflores consists of a 124-hectare claim located around 55 kilometres north of Pereira, the capital of the Department of Risaralda, and approximately 100 km south of Medellin. The elevation of the deposit area ranges from 1,000 to 1,500 metres above sea level.

Infrastructure

Miraflores is located in a sparsely populated district approximately 2.5-hour drive on paved road from Pereira. The main trunk line for power in the region runs five to 10 km from the deposit, running parallel to the Cauca River. Water sources for the project include the Cauca River, located three km east of the Miraflores deposit, as well as tributaries that flow through the property.

Geology

Miraflores is a magmatic-hydrothermal breccia pipe, located within a fertile hypabyssal porphyry cluster. The low sulphidation epithermal deposit contains free gold associated with cement materials, and high-grade structures where gold is associated with zinc, lead, copper and iron. The Miraflores breccia pipe has a drill-tested diameter of 280 metres by 250 metres and a vertical extent of 600 metres. The deposit widens and remains open at depth.

Open pit mining

The open pit is defined by two discrete mine phases with the first phase focusing on processing the higher grade materials of the deposit in the first eight years of production. The open pit model contains measured, indicated and inferred resources. The higher grade component contains only materials above 0.6 gram per tonne gold and is estimated to contain 6.97 million tonnes of rock with a grade of 1.38 g/t Au and 310,184 ounces of contained Au in situ before recovery. The open pit contribution to mill throughput is approximately 2,400 tonnes per day. Lower grade materials between 0.3 g/t to 0.6 g/t Au will be stockpiled and fed into the mill after year 8 of full production. The lower grade materials are estimated to contain 8.32 million tonnes of rock with a grade of 0.43 g/t and 115,000 ounces of contained Au in situ before recovery.

The ultimate pit will be 550 metres from east to west, 500 metres north to south, with a maximum highwall height of 440 m and volume of 17.02 million cubic metres. At a cut-off grade of 0.3 g/t Au, the overall strip ratio (waste: mill feed) is estimated at 2.04.

Underground mining

Within the Miraflores breccia pipe are a series of north-south-trending veins that contain higher grade gold than the background breccia system. To date, Seafield has identified eight higher grade structures within the deposit (see company's press release dated Jan. 31, 2012). The underground mining component of production will target the higher grade features below the open pit.

The minable resource in the underground mine is estimated to contain 5.0 million tonnes (diluted) at an average gold grade of 2.27 g/t. Before process recovery, the underground portion of the deposit is estimated to contain 363,808 ounces gold. The underground contribution to mill throughput is approximately 1,600 tonnes per day during the time open pit operations are in full production (first eight years).

Available geotechnical data to date indicate that a sublevel longhole stoping method with 15 m sublevel spacing and backfill would be successful in obtaining a high extraction ratio in the economic portion of the deposit. The company is currently conducting further geotechnical studies to gather more information for the next level of study.

The main ramp access development is situated on the east side of the deposit close to the process plant site. The main ramp is currently designed with a cross-section of four metres wide by five metres high and a total length of 5,260 metres at a grade of 15 per cent. Development on the sublevels will have a minimum cross-section of three metres wide by four metres high. The first section of the ramp will run west then spiral down to access the stope areas.

                          MIRAFLORES PRODUCTION SUMMARY

Description                      Units    Open pit  Underground    Stockpile

Tonnes processed                    Mt        6.97         4.99         8.32
Gold grade                         g/t        1.38         2.27         0.43
Cut-off grade                      g/t        0.60         0.88    0.30-0.60
Average contribution to mill feed  Tpd       2,400(i)     1,600(i)     4,000
Throughput                         Tpd                    4,000                
Gold recovery                        %                       90                 
Total gold production               Oz                  709,349               
Full production period                           8           10            7 
                                   Yrs  (years 1-8) (years 1-10) (years 8-14)

(i) Average for first eight years, actual rates vary on an annual basis 
    and underground production.                                                     

The company cautions that the PEA is preliminary in nature, and is based on technical and economic assumptions which will be evaluated in more advanced studies. The PEA is based on a resource model that contains measured, indicated and inferred mineral resources. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

Metallurgy

An extensive metallurgical study was recently completed by Inspectorate under the design and supervision of SRK (see company press release dated March 26, 2012). The table, "Estimated Miraflores gold recoveries," provides estimates of overall gold recoveries for the process option based on the relative contribution of each rock type in the resource and includes an adjustment for miscellaneous plant losses (2 per cent).

Processing by a flowsheet that includes gravity concentration followed by flotation and cyanidation of the flotation concentrate is estimated to recover 90 per cent of the gold. This process offers the optimal advantage of higher overall gold recovery and a smaller cyanidation circuit, which could significantly improve options for tailings disposal.

       ESTIMATED MIRAFLORES GOLD RECOVERIES (2-PER-CENT PLANT LOSSES)

Rock type               Contribution   Gravity + flotation + cyanidation
                                  (%)                                 (%)

White breccia                     56                                  93
Green breccia                     22                                  90
Basalt                            12                                  89
Argillized(i)                     10                                  93
Over all                         100                                  92
Gold recovery % (plant loss                                              
adjusted)                                                             90

(i) Assume argillized materials are blended with other rock types      

Tailings facility

Waste material will be used for the progressive construction of the tailings dam embankment. A tailings storage facility has been located and designed capable of storing up to 19.1 million tonnes of mill tailings. The impoundment site will be west of the mill location in the valley below the deposit. The impoundment volume has been divided into two storage cells to accommodate 2.60 million cubic metres of fine residual concentrator tailings and 11.97 million cubic metres of slime mill tailings.

A starter dam will be constructed two years before mill production and will have sufficient capacity for 1.5 years of tailings. The dam embankment construction is anticipated to be a continuous operation to keep ahead of tailings deposition. Tailings deposition will be by multipoint discharge along the dam face with the decant pool and pump barge located on the north beach of the impoundment.

Equipment and development

Mine equipment has been sized to accommodate the relatively low production rate as defined by the production schedule, but also handle the heavy rainfall events common in the region. For the open pit mine component, 40-ton articulated dump trucks combined with suitable loading equipment have been estimated for both capital and operating costs.

Two twin-boom drill jumbos, with a third machine on site to act as a backup, have been estimated to undertake all of the underground development work. Development mucking will be undertaken by three-cubic-yard LHD's dumping into 22-ton trucks. Drilling for ground support will be undertaken by the jumbos or hand-held drills from a scissor lift. The majority of the development will occur in the first two years and development will reduce significantly for the remainder of the mine life.

During the first year of operation, most of the development waste will be stockpiled on surface. Once stoping operations commence, the waste stockpile will be reclaimed as backfill.

Capital and operating costs

The initial capital expenditures are estimated at $93.7-million. Sustaining capital of $43-million will cover underground equipment and development, and the tailings dam expansion throughout the mine life. The total life-of-mine capital cost estimate totals $137-million. A contingency of 20 per cent was applied to all stages of capital expenditures to account for optimizing capital usage and operations efficiency throughout the mine life.

              MIRAFLORES CAPITAL COST ESTIMATES
                  (in thousands of dollars)

Description                Initial  Sustaining        LoM

Open pit mining            $10,427     $ 2,660   $ 13,087
Underground mining          10,335       6,381     16,716
Processing                  42,563           0     42,563
Tailings facility            6,354      18,774     25,129
Infrastructure               6,665           0      6,665
Owner cost                   1,775       8,000      9,775
                           -------     -------   --------
Subtotal                    78,120      35,816    113,935
Contingency (20%)           15,624       7,163     22,787
                           -------     -------   --------
Total capital              $93,744     $42,979   $136,723
                           =======     =======   ========

Operating costs were estimated based on assumptions and productivities that are consistent with conditions encountered in the project area. The life-of-mine operating cost will be approximately $20.79 per tonne RoM.

             MIRAFLORES OPERATING COST ESTIMATES
Description                                       Value
                                         ($/tons milled)

Mining -- open pit and underground               $ 8.29
Processing                                        11.03
Tailings                                           0.47
General and administrative                         1.00
                                                 ------
Total                                            $20.79
                                                 ======

Project economics

SRK's cash flow model in the PEA was based on the production schedule associated with the gold grades, recovery rates, and capital and operating costs presented in this press release. Project value (NPV 8 per cent) at $1,500 per ounce gold on a pretax basis is $249-million with an IRR of 50 per cent. The posttax (NPV 8 per cent) on a posttax basis is $188-million with an IRR of 45 per cent. Full payback, given the base case price of gold, will occur after 1.8 years of operations.

Over the first eight years of the mine life, the project cash cost is estimated to be $524.01 per ounce Au (excluding royalties of 6.4 per cent and refinery charges). The LoM project cash cost is estimated to be $594.50 per ounce Au (excluding royalties of 6.4 per cent and refinery charges).

     BASE-CASE GOLD PRICE SENSITIVITY ANALYSIS

Gold price        NPV        NPV    IRR   Payback
                  (5%)       (8%)          (years)

$1,300          $207M      $166M    38%      2.10
$1,400          $256M      $207M    44%      1.95
$1,500          $306M      $249M    50%      1.80
$1,600          $355M      $291M    55%      1.40

Next steps

Based on the results of this PEA, SRK has recommended advancing the Miraflores project forward. In preparation for a more detailed study on the deposit, the company has begun implementing these programs.

Geotechnical studies

Open pit and underground mine design in the PEA were based on limited rock characterization data. The company is currently conducting a thorough geotechnical investigation to evaluate rock strength, seismic hazards, stability of the ultimate pit slope and underground stress measurement in the project area. The studies will provide further information for defining the ultimate mine design parameters.

Metallurgical testwork and process design

Seafield plans to perform further testwork to provide a more detailed analysis on the recovery rates and methods. Detailed studies need to thoroughly evaluate the optimum process flowsheet and required process parameters.

Improve resource confidence

A tunnelling and 5,000 m infill diamond drill program is currently under way at the Miraflores deposit to further define the high-grade mineralization within the breccia pipe. Further drilling data will be used to update the current NI 43-101-compliant resource estimate at Miraflores.

Tailings storage

The company is planning to conduct geochemical and characterization studies to facilitate eventual tailings dam foundations and design. Further studies are being planned to characterize the waste and tailings that will be produced from Miraflores.

Environmental baseline studies

Environmental baseline studies are under way to establish the development boundaries of Miraflores. The studies will cover investigations of hydrology, hydrogeology, social characterization, climatic and meteorology data collection, water and air characterization and monitoring, soil characterization, archaeology, and ecosystems characterization.

Corporate social responsibility programs

As a signing member of the United Nations Global Compact, the company is dedicated to adhering to the 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption. Seafield is heavily engaged in corporate social responsibility initiatives in the Quinchia district. Seventy-one per cent of the company's employees in Colombia are from the local town of Quinchia.

The company has partnered with the Technical University of Pereira for the implementation of social responsibility strategies designed to address the needs of local stakeholders. Past initiatives have included landslide relief, community events for youths, cultural events, infrastructure upgrades and educational programs. As Miraflores advances to the next stage toward production, Seafield will continue to place social responsibility as a top priority to ensure it operates to not only the general long-term value for its shareholders, but also to benefit the members of the district.

Assessment authors and qualified persons

SRK Consulting, Denver, was responsible for the compilation of information and preparation of the overall study.

Bret Swanson, BE (mining), MAusIMM, MMSAQP, is a principal mining engineer with 17 years of global mining experience. His recent work has involved contributions to numerous feasibility, prefeasibility, preliminary assessment, due diligence and competent person reports while employed with SRK, Denver. Mr. Swanson was the lead person responsible for completing the PEA for Miraflores. He has reviewed the information in this release as it relates to the Miraflores deposit.

Eric Olin, MSc, MBA, RM-SME, is the principal process metallurgist of SRK in Denver, Colo. Mr. Olin has over 30 years experience in the minerals industry with extensive consulting, plant operations, process development, project management, and research and development experience with base metals, precious metals, ferrous metals and industrial minerals. Mr. Olin was responsible for the information provided under metallurgy.

Scott E. Wilson, CPG, of Scott E. Wilson Consulting, Inc. in Englewood, Colo., prepared the Miraflores deposit resource estimates. Mr. Wilson is an independent qualified person as defined by National Instrument 43-101 and has prepared or reviewed the preparation of the information which forms the basis of the NI 43-101 resource estimate at Miraflores. He is a certified professional geologist, a member of the American Institute of Professional Geologists (CPG No. 10965), and a registered member (No. 4025107) of the Society of Mining and Metallurgy and Exploration, Inc., a professional association and designation recognized by the Canadian regulatory authorities.

Dr. Tom Henricksen, vice-president exploration of Seafield Resources, is a qualified person as defined by National Instrument 43-101 and reviewed the preparation of the scientific and technical information in this press release. Dr. Henricksen is a registered professional geologist in the state of Wyoming, United States (membership No. PG-3069), a professional association and designation recognized by the Canadian regulatory authorities.

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