Mr. Benoit La Salle reports
SRG ANNOUNCES POSITIVE FEASIBILITY STUDY RESULTS FOR ITS LOLA GRAPHITE PROJECT - PRE-TAX NPV OF USD 277M AND IRR OF 28% OVER A 29-YEAR MINE LIFE
SRG Mining Inc. has provided the results of its feasibility study (FS) for the development of the Lola graphite project in the Republic of Guinea, West Africa. The FS was prepared by Montreal-based DRA/Met-Chem, a division of DRA Americas Inc. All dollar figures are in United States dollars.
The FS was officially started in September, 2018, and has been produced with the input of numerous engineering and consulting firms, notably DRA/Met-Chem, Epoch, BBA, Sahara Natural Resources, MDEng, SGS Canada, CCIC, and Jenike & Johanson. Included in the FS is an updated resource calculation, which follows the company's 2018 drilling campaign, bringing the total resource to 46.0 million tonnes (Mt) of measured and indicated resources grading 4.09 per cent graphitic carbon (Cg).
The following lists the highlights of the feasibility study:
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Average annual production of 54,600 tonnes of graphite flakes over a 29-year mine life;
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Proven and probable reserves of 42.0 million tonnes at 4.17 per cent Cg;
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Capital costs of $123-million including a power plant of $5.8-million, concentrate transport equipment of $3.6-million and contingency of $12-million;
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Added flexibility of the plant to process soft saprolite and fresh rock, provides optionality and the ability to expand the production profile;
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Average operational costs of $470/tonne and $38/t of transport. For the first 16 years of production, the average operational costs are $447/t;
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Pretax net present value (NPV) (8 per cent) of $277-million and internal rate of return (IRR) of 28 per cent;
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Posttax NPV (8 per cent) of $159-million and IRR of 21 per cent;
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Average grade of graphite flakes over 95 per cent
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A low strip ratio of 0.69.
"These results are the culmination of many months of studies to derisk the project and add to its robustness," said Ugo Landry-Tolszczuk, president and chief operating officer of SRG. "The economic highlights present a highly profitable business using reasonable estimates for graphite selling price. Basic engineering will focus on improvements in the front-end of the plant, tailings management and reducing the mining footprint."
A technical report detailing the completed feasibility study in accordance with National Instrument 43-101 guidelines will be filed and available on SEDAR within 45 days from July 4, 2019. The effective date of the technical report is June 18, 2019.
Commercial sales, revenues and project economic sensitivities
Over the life of the mine, the Lola project will produce an average of 54,600 tonnes of saleable graphite flakes per year. At an average sale price of $1,321/t, this represents $72.2-million annual revenue incurring average operating costs of $508/t representing $27.7-million annually. Given the volatility of graphite prices in recent years and the bilateral nature of sales contracts, a sensitivity analysis of the project's economics is presented in the "Project economics sensitivity analysis" table.
PROJECT ECONOMICS SENSITIVITY ANALYSIS
LOM average sale price ($/t) $1,056 $1,189 $1,321 (1) $1,453 $1,585
Average annual revenue (million) (2) 57.8 65.0 72.2 79.5 86.7
Pretax returns
Average annual cash flow (million) 225.6 32.9 40.1 47.3 54.6
NPV (million) at 8% discount 135 206 277 348 420
IRR (%) 18.5% 23.4% 28.1% 32.6% 36.9%
Payback (years) 5.0 4.0 3.4 3.0 2.7
Posttax returns
Average annual cash flow (million) 217.4 22.2 27.0 31.8 36.6
NPV (million) at 8% discount 64 111 159 206 253
IRR (%) 13.7% 17.6% 21.2% 24.6% 27.8%
Payback (years) 5.8 4.8 3.9 3.6 3.2
(1) Base case.
(2) Does not include years one and 29 as they do not represent full production.
Mineral resource update
The resource estimate was established using data from boreholes drilled and sampled up to Dec. 1, 2018. The total resource estimate of the Lola project includes 6.84 million tonnes (Mt) grading 4.39 per cent total carbon in graphite (Cg), indicated resources of 39.2 Mt grading 4.04 per cent Cg and inferred resources of 4.25 Mt grading 3.75 per cent Cg. The resource estimate has been prepared using a cut-off grade of 1.65 per cent Cg, and has an optimized physical pit shell constrained at $1,400/t of concentrate.
The mineral resources update was estimated as of June 18, 2019, in accordance with the definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum and incorporated into National Instrument 43-101 -- Standards of Disclosure for Mineral Projects (NI 43-101). The mineral resources estimate update for the Lola graphite project was carried out by Desmond Subramani (PriSciNat -- 400184/06), independent qualified person and principal geologist -- mineral resource estimation at Caracle Creek International Consulting MINRES Pty. Ltd. (CCIC MINRES).
Mining
The Lola deposit is characterized by its saprolite surface mineralization, which continues at depth into the fresh rock bed. For the FS, mining operations considered the mineralized material contained in the weathered zones (lateritic and saprolitic ore), as well as the mineralized material contained in the fresh rock formation.
This results in a total mineral reserves estimate of approximately 42.0 Mt grading 4.17 per cent Cg, and an overall strip ratio of the operation (all the pits combined) of only 0.69.
PROVEN AND PROBABLE RESERVES
Category Tonnage (Mt) (1) Cg grade (% Cg)
Proven reserves 6.7 4.43%
Probable reserves 35.4 4.13%
Proven and probable reserves 42.0 4.17%
(1) The totals may not add up due to rounding.
The average grade fed to the processing plant over the 29-year mine life is 4.17 per cent Cg, and the total material mined per year is 2.5 Mt (ore and waste). Mining costs were established at $2.23/t material moved, considering pit design and access roads.
MINING HIGHLIGHTS
Mining costs ($/t material moved) 2.23
Average graphite grade (% Cg) 4.17%
Stripping ratio (waste/ore) 0.69
Average ore material mined per year (t/y) 1,450,000
Life of mine (years) 29 years
Process
The mineral processing plant consists of a crushing area and a concentrator where material beneficiation and concentrate dewatering, screening and packaging takes place.
The process flowsheet includes crushing, scrubbing and grinding, rougher flotation, polishing, and cleaner flotation. The back end of the concentrator includes tailings and concentrate thickening, concentrate filtration and drying, dry screening and bagging of graphite products, and material handling.
All the tailings from the concentrator will be thickened and pumped to the tailings ponds. Reclaiming water from the tailings ponds has been considered in the process design to minimize fresh water makeup to the concentrator.
The graphite concentrate will be recovered by a conventional flotation process. Saprolite ore beneficiation process has an overall graphite recovery of 73.1 per cent, producing a graphite concentrate grade of 95.4 per cent Cg. The addition of up to 45 per cent of fresh rock in the feed blend improves the overall graphite recovery to 84.2 per cent. A suitable process flowsheet able to handle saprolite as well as a feed blend with fresh rocks has been developed for the feasibility study.
Over the life of the mine, the plant will produce graphite concentrate divided into four standard-size fractions: plus 48 mesh, minus 48 plus 80 mesh, minus 80 plus 100 mesh and minus 100 mesh presented in the "Size fraction profile and grade" table.
PROCESS HIGHLIGHTS
Processing costs ($/t plant feed) -- 100% saprolite feed 8.91
Processing costs ($/t plant feed) -- blend of 55% saprolite/45% fresh rocks feed 10.86
Average concentrate grade (%Cg) 95.4%
Graphite plant recovery based on 100% saprolite feed 73.1%
Graphite plant recovery based on blend of 55% saprolite/45% fresh rocks feed 84.2%
SIZE FRACTION PROFILE AND GRADE
Size fraction (mesh) LoM expected distribution (%) Grade (% Cg)
+ 48 16.6 97.0
- 48 + 80 27.5 96.0
- 80 + 100 8.8 94.5
- 100 47.1 94.9
Total 100.0 95.4
Capital and operating costs
The capital costs for the project are presented below in the "Capital cost summary" table. The capital costs shown include the company's assumed mining operations, graphite flake transport from-plant-to-port operations and production of its own power using generators. All three of these items could be contracted to third parties. The average annual sustaining capital expenditure over a 29-year period is $4.4-million.
CAPITAL COST SUMMARY
Capital costs Initial ($M)
Mining $9.3
Process 31.5
Tailings 8.4
Site infrastructure 11.8
Off-site infrastructure 1.4
Preliminary and general 16.6
Subtotal 79.2
Power plant 5.8
Graphite transport equipment 3.6
Total direct costs 88.5
EPCM 10.3
Preproduction 5.6
Other indirect costs 0.7
Total indirect costs 16.6
Contingency 12.4
Owner's costs 5.5
Total costs (1) 123.1
(1) The totals may not add up due to
rounding.
The operating costs presented in the "Operating cost summary" table indicate the average operating costs, including graphite flake transport from mine-site to the port of Monrovia as well as port fees. These operating costs also assume the company will mine and produce its own power using generators.
The average operating costs without transport for the first 16 years is $447/t, increasing thereafter.
OPERATING COST SUMMARY
Operating costs breakdown Average annual costs ($M) (2) Average $ per tonne of concentrate
Mining $5.9 $108
Process 16.1 294
General and administration 3.3 60
Tailings 0.4 7
Total operating costs 25.7 470
Graphite transportation to port 2.1 38
Total opex (1) 27.7 508
(1) The totals may not add up due to rounding.
(2) Excludes the first and last year.
Quality control and assurance
Qualified persons (QP) have reviewed and verified that the technical information with respect to the FS contained in this press release is accurate, and have approved the written disclosure of such information. For readers to fully understand the information in this press release, they should read the technical report in its entirety when it is available on SEDAR, including all qualifications, assumptions, and exclusions that relate to the information to be set out in the technical report, which qualifies the technical information contained in the technical report. The technical report is intended to be read as a whole, and sections should not be read or relied upon out of context.
The QPs who will prepare the technical report are:
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DRA: Silvia Del Carpio, PEng, MBA (project manager and financial modelling), Yves Buro, PEng (geology), Patrick Perez, PEng (mineral reserves and mining), Volodymyr Liskovych, PhD, PEng (metallurgy), William Shadeed, PEng (processing);
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CCIC: Desmond Subramani, PriSciNat (mineral resources);
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MDEng: Kathy Kalenchuk, PhD, PEng (geotechnical design);
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BBA: Luciano Piciacchia, PhD, PEng (water management, closure and rehabilitation plan);
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David Sims Inc.: David Sims, Geo, PGeo (hydrogeology);
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Epoch: Guy Wiid, PrEng, CEng, George Papageorgiou, PhD, MSc, BScEng (tailings design).
By virtue of education and relevant experience, the aforementioned are independent qualified persons for the purpose of NI 43-101. Other than as set forth above, all scientific and technical information contained in this press release has been reviewed, verified and approved by Raphael Beaudoin, PEng, director of operations and a qualified person for SRG under NI 43-101.
About SRG Mining Inc.
SRG Mining is a Canadian-based mining company focused on developing the Lola graphite deposit located in the Republic of Guinea, West Africa. SRG is committed to operating in a socially, environmentally and ethically responsible manner.
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