Dr. Mark Cruise reports
TREVALI REPORTS PRELIMINARY ECONOMIC ASSESSMENT OF CARIBOU ZINC-LEAD-SILVER MINE IN NEW BRUNSWICK
Trevali Mining Corp. has released the results of the independently prepared preliminary economic assessment (PEA) for its wholly owned Caribou zinc-lead-silver mine and mill complex, located in the Bathurst mining camp of New Brunswick, Canada.
The base-case PEA indicates positive economic results for the Caribou underground mining operation and mill complex with a preproduction capital expenditure of $36.3-million, an after-tax internal rate of return of 56.9 per cent, after-tax net present value of $106-million at a 5-per-cent discount rate, and average annual payable production of approximately 93 million pounds zinc, 32.5 million pounds lead, 3.1 million pounds copper, 730,000 ounces silver and 1,500 ounces gold.
CARIBOU MINE PROJECT PRELIMINARY ECONOMIC ASSESSMENT HIGHLIGHTS
(based on $1 (U.S.) per pound Zn, $1 (U.S.) per pound Pb,
$3 (U.S.) per pound Cu, $21 (U.S.) per ounce Ag, $1,200 (U.S.) per
ounce Au and a Canadian dollar exchange rate of 95 U.S. cents)
IRR Pretax IRR of 69 per cent with a 1.9-year payback
After-tax IRR of 56.9 per cent with a 2.1-year payback
NPV Pretax NPV (5 per cent) of $150-million
After-tax NPV (5 per cent) of $106-million
Production costs Direct life-of-mine (LOM) cash costs (C1) of
46 U.S. cents zinc equivalent
Total site operating cost of $74.77 per tonne milled
(includes mining, milling, general and
administrative, and environmental)
Capex Preproduction capital of $36.3-million
Production (payable) Average annual payable production of 93 million
pounds Zn, 32.5 million pounds Pb, 3.1 million
pounds Cu, 730,000 ounces Ag and 1,500 ounces Au
Mine life Planned mine life of 6.3 years
LOM mill feed Estimated plant feed(i) of 6,152,000 tonnes grading
6.11 per cent Zn, 2.49 per cent Pb, 0.34 per cent Cu,
67.9 grams per tonne Ag and 0.86 gram per tonne Au over LOM
Recoveries Average LOM recoveries of 84 per cent for Zn,
65 per cent for Pb, 45 per cent for Cu, 37.5 per cent
for Ag and 10.6 per cent for Au used in the model
Employment and Estimated to provide approximately 300 permanent
local/regional full-time positions
benefits Approximately $57.3-million in direct royalties
and tax payments
(i) The estimated plant feed is partly based on inferred mineral resources
that 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 preliminary economic
assessment based on these mineral resources will be realized.
"We welcome this preliminary economic assessment for our Caribou mine with scheduled commissioning of operations in the first half of 2015," stated Dr. Mark Cruise, Trevali's president and chief executive officer. "These results model a respectable return based on this initial base-case model, and we believe that there is excellent potential for additional optimization given that approximately three million tonnes of mineralized material is presently not included in the mine plan and the deposit remains open for expansion. Given the project's sensitivity and leverage to zinc price, positive consensus forecasts for increasing zinc (and lead) prices should have a beneficial effect on the operations economics."
The restart of the Caribou mine project, through the reactivation of the 3,000-tonne-per-day Caribou mill complex and the associated underground deposit, represents Trevali's initial strategy for its Bathurst mining camp operations in New Brunswick. Longer-term plans, subject to continuing technical studies, include the potential for a second stand-alone milling facility to support development of the company's fully permitted Halfmile mine and the Stratmat deposit, where drilling and baseline permitting programs are in progress.
Study description
The PEA study was conducted in accordance with the definitions in Canadian National Instrument 43-101. SRK Consulting (Canada) Inc. was the lead independent consultant, with contributions from other independent consultants commissioned by Trevali -- Holland & Holland Consulting and Stantec Consulting. The PEA focuses on the polymetallic Caribou mine and mill complex located approximately 50 kilometres west of Bathurst, N.B. Caribou is situated just off of paved Provincial Highway 180, which connects the project to major road, rail and port infrastructure, including the deepwater ocean port and smelting complex at Belledune approximately 80 kilometres to the northeast. Caribou is also connected to the New Brunswick provincial power grid.
The Caribou project has been valued using a discounted-cash-flow (DCF) approach. This method of valuation requires projecting yearly cash inflows, or revenues, and subtracting yearly cash outflows such as operating costs, capital costs, royalties, and provincial and federal taxes. Cash flows are taken to occur at the end of each period. The resulting net annual cash flows are discounted back to the date of valuation, the second quarter of 2014, and totalled to determine net present values (NPVs) at the selected discount rates. The internal rate of return (IRR) is calculated as the discount rate that yields a zero NPV. The payback period is calculated as the time needed to recover the initial capital spent.
The results of the economic analysis represent forward-looking information that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented here.
Many costs within the PEA model are based on direct supplier/contractor quotations, including the following:
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Major mine mobile equipment quotations;
-
Mining contractor quotations as cost base for development and
production;
-
Material supply quotations;
-
Building rehabilitation quotations;
-
Consumables -- fuel, power and explosives.
Economics
The base-case Caribou mine project PEA uses price assumptions of $1 (U.S.) per pound zinc, $1 (U.S.) per pound lead, $3 (U.S.) per pound copper, $21 (U.S.) per ounce silver and $1,200 (U.S.) per ounce gold. These prices are based on a review of consensus price forecasts from financial institutions and similar studies that recently have been published. The after-tax net present value (NPV) at variable discount rates, internal rates of return (IRR) are shown in the attached table, illustrating sensitivities to variable zinc and lead prices.
CARIBOU ECONOMIC SUMMARY -- ZINC AND LEAD PRICE SENSITIVITY
After tax
Zinc Lead
price price NPV (0%) NPV (5%) NPV (8%) IRR
(US$/lb) (US$/lb) (millions) (millions) (millions) (%)
0.80 0.80 $31 $16 $9 13
0.90 0.90 $96 $68 $56 37
1.00 1.00 $141 $106 $89 57
1.10 1.10 $180 $138 $118 74
1.20 1.20 $208 $161 $139 89
1.30 1.30 $246 $192 $167 107
1.40 1.40 $287 $226 $197 126
Pretax
Zinc Lead
price price NPV (0%) NPV (5%) NPV (8%) IRR
(US$/lb) (US$/lb) (millions) (millions) (millions) (%)
0.80 0.80 $45 $27 $19 18
0.90 0.90 $122 $89 $73 45
1.00 1.00 $199 $150 $128 69
1.10 1.10 $275 $212 $182 93
1.20 1.20 $350 $272 $235 116
1.30 1.30 $424 $331 $287 139
1.40 1.40 $498 $391 $340 161
Resources
The Caribou PEA underground mine plan models the extraction and processing of an initial 6,152,000 tonnes of mineralized material using a net-smelter-returns cut-off value of $100 per tonne. This mine plan tonnage includes measured, indicated and inferred mineral resources. The Caribou PEA is based on SRK mineral resources as disclosed in the January, 2013, NI 43-101 technical study by SRK Consulting (Canada) Inc. (see Trevali news release dated Jan. 17, 2013).
ESTIMATED PLANT FEED(I) FOR THE CARIBOU
PROJECT TO THE 1,920 MEL MINE LEVEL
Cut-off Tonnage Grade
(NSR $/tonne) (million Zn Pb Cu Ag Au
tonnes) (%) (%) (%) (g/t) (g/t)
100 6.152 6.11 2.49 0.34 67.89 0.86
Contained metal (millions of ounces Au and Ag;
Cut-off Tonnage millions of pounds lead, zinc and copper) in situ
(NSR $/tonne) (million
tonnes) Zn Pb Cu Ag Au
100 6.152 828.3 337.1 45.6 13.43 0.17
(i) The estimated plant feed is partly based on inferred mineral resources
that 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 preliminary
economic assessment based on these mineral resources will be realized.
MINERAL RESOURCE STATEMENT(I), CARIBOU PROJECT, BATHURST, N.B.,
SRK CONSULTING, JAN. 17, 2013
Cut-off Tonnage Grade
ZnEq(i) (million Zn Pb Cu Ag Au ZnEq (i)
(%) Class tonnes) (%) (%) (%) (g/t) (g/t) (%)
5 Measured 5.61 6.91 2.93 0.46 84.64 0.84 10.58
Indicated 1.62 7.28 2.94 0.34 83.68 1.06 10.83
M&I 7.23 6.99 2.93 0.43 84.43 0.89 10.64
Inferred 3.66 6.95 2.81 0.32 78.31 1.23 10.47
Contained metal (millions of ounces Au and Ag;
Cut-off Tonnage millions of pounds lead, zinc and copper) in situ
znEq(i) (million
(%) Class tonnes) Zn Pb Cu Ag Au
5 Measured 5.61 855.36 362.69 56.94 15.28 0.15
Indicated 1.62 259.87 104.95 12.14 4.36 0.06
M&I 7.23 1115.23 467.64 69.08 19.64 0.21
Inferred 3.66 560.44 226.60 25.80 9.21 0.14
(i) ZnEq equals ((Cu grade multiplied by Cu price multiplied by Cu recovery)
plus (Pb grade multiplied by Pb price multiplied by Pb recovery) plus
(Zn grade multiplied by Zn price multiplied by Zn recovery) plus
(Au grade multiplied by Au price multiplied by Au recovery) plus
(Ag grade multiplied by Ag price multiplied by Ag recovery)) divided by
Zn price. In calculating ZnEq, SRK Consulting (Canada) utilized the
long-term metal prices provided by Energy & Metals Consensus Forecast.
The prices are $1,470 per ounce gold, $26 per ounce silver, $3.39 per
pound copper, $1.18 per pound lead and $1.14 per pound zinc. A recovery
of 83 per cent was applied to Zn, 71 per cent was applied to Pb,
57 per cent was applied to copper, 45 per cent was applied to silver,
and 40 per cent was applied to Au. The pounds of metal are in situ and
have not had any mining factors applied to them.
The total mineralized materials above $100 per tonne tonne net-smelter-returns cut-off value within the crown pillar and below the 1,920 mEL level, the future mine plan area, are 532,000 tonnes at grades 6.85 per cent zinc, 2.85 per cent lead, 0.37 per cent copper, 85.31 grams per tonne silver and 1.12 grams per tonne gold. They are not included in the current mine plan. In addition, there are 3.06 million tonnes of mineralized materials excluded from current mining plan at grades 7.11 per cent zinc, 2.91 per cent lead, 0.39 per cent copper, 82.88 grams per tonne silver and one gram per tonne gold. Reasons for the excluded amounts include parallel zones where only one zone can be mined, stand-off distances from historical mining areas, areas too narrow relative to the current minimum mining width and isolated areas.
Based on potential opportunity identified by SRK, Trevali is currently assessing the requirements to potentially incorporate some of this additional resource tonnage into the mine plan.
The Caribou deposit mineralization remains open for expansion, with drill intercepts encountering significant mineralized intervals outside of the current resource shell.
Mining and processing
Underground operations will take advantage of the extensive in-place historical development and infrastructure. A centralized ramp-trucking system will serve as the main access for the mine. The main mining method will be modified Avoca with waste rock backfill, with the exception of a long-hole-retreat mining method for partial sill-pillar recovery near the end of mine life.
The processing circuit will consist of a 3,000-tonne-per-day semi-autogenous grinding and milling circuits (including fine-grinding IsaMills) with standard sulphide flotation recovery circuits to produce three concentrates: zinc, lead-silver and copper-gold. The average life-of-mine modelled head grade for mill feed is 6.11 per cent zinc, 2.49 per cent lead, 0.34 per cent copper, 67.9 grams per tonne silver and 0.86 gram per tonne gold. Life-of-mine metallurgical recoveries used in the PEA are 84 per cent for zinc, 65 per cent for lead, 45 per cent for copper, 37.5 per cent for silver and 10.6 per cent for gold. No optimization of precious metal recoveries has occurred to date but is being evaluated.
Projected payable metal production from the planned Caribou mine operation is summarized in the attached table, and the annual production schedule based on the initial base-case mine plan is presented in a separate attached table.
PROJECTED PAYABLE METAL PRODUCTION
Commodity Average annual payable production LOM payable production
Zinc 93,000,000 lb 584,500,000 lb
Lead 32,500,000 lb 204,500,000 lb
Copper 3,100,000 lb 19,500,000 lb
Silver 730,000 oz 4,600,000 oz
Gold 1,500 oz 10,000 oz
Life-of-mine concentrate grades are expected to average 50 per cent zinc in the zinc concentrate, 45 per cent lead in the lead concentrate and 20 per cent copper in the copper concentrate. The precious metals report to both the lead and copper concentrates, which maximizes payability. Future metallurgical test work will seek to enhance recoveries.
PRODUCTION SCHEDULE BASED ON THE INITIAL BASE-CASE 6.3-YEAR LOM PLAN
Unit 2015 2016 2017 2018
Tonnes per day t/d 2,333 2,724 3,000 2,987
Total production kt 852 994 1,095 1,090
Zn grade % 5.82% 6.27% 6.13% 5.98%
Pb grade % 2.49% 2.63% 2.52% 2.45%
Cu grade % 0.33% 0.33% 0.34% 0.40%
Ag grade g/t 68.74 73.71 67.58 70.78
Au grade g/t 0.59 0.70 0.85 0.84
Contained Zn 000s lb 109,241 137,552 147,977 143,704
Contained Pb 000s lb 46,768 57,639 60,718 58,993
Contained Cu 000s lb 6,225 7,219 8,324 9,563
Contained Ag 000s oz 1,882 2,356 2,379 2,482
Contained Au 000s oz 16 22 30 29
Unit 2019 2020 2021 Total
Tonnes per day t/d 3,000 2,586 225
Total production kt 1,095 944 82 6,152
Zn grade % 6.44% 5.97% 5.55% 6.11%
Pb grade % 2.64% 2.20% 1.97% 2.49%
Cu grade % 0.30% 0.32% 0.29% 0.34%
Ag grade g/t 71.31 56.13 43.66 67.89
Au grade g/t 0.84 1.28 1.26 0.86
Contained Zn 000s lb 155,571 124,270 10,030 828,345
Contained Pb 000s lb 63,648 45,776 3,554 337,096
Contained Cu 000s lb 7,225 6,571 516 45,643
Contained Ag 000s oz 2,511 1,703 115 13,428
Contained Au 000s oz 30 39 3 170
Capex and opex
Projected capital and operating costs in the PEA over the planned 6.3-year mine life are summarized in the attached tables.
ESTIMATED LOM CARIBOU PROJECT CAPITAL COSTS
LOM capital Initial capital Sustaining capital
Items (millions $) (millions $) (millions $)
UG mine mobile
equipment $ 21.5 $ 0.0 $ 21.5
UG mine infrastructure 23.0 9.0 14.0
UG contingency (mobile
and infrastructure) 6.0 0.0 6.0
UG mine mobile and
infrastructure
Subtotal 50.5 9.0 41.6
Underground mine
Development 26.5 6.2 20.3
Mine energy 1.1 0.1 1.0
Mine total 78.2 15.3 62.9
Tailings and other ponds 23.4 1.1 22.3
Grinding 3.5 3.4 0.1
Flotation, including
Adding Cu circuit 5.4 5.4 0.0
Dewatering Zn/Pb/Cu 1.6 1.6 0.0
Concentrate storage
and handling 2.7 1.2 1.6
Reagent mixing 0.8 0.8 0.0
Services 1.3 0.8 0.5
Miscellaneous equipment 1.2 1.2 0.0
Milling and tailing
Total 39.9 15.5 24.4
Environmental 1.6 1.2 0.3
Project general
and administration 5.4 4.2 1.2
Project grand total 125.1 36.3 88.8
ESTIMATED LOM CARIBOU OPERATING COST
Items Unit Values
Mining $/t milled 37.06
Milling $/t milled 30.14
General and
administrative $/t milled 5.99
Environmental $/t milled 1.59
Total site operating cost $/t milled 74.77
A direct life-of-mine cash cost (C1) of 46 U.S. cents per pound of ZnEq is modelled in the PEA.
Key assumptions used in the economic analysis within the PEA are summarized in the attached table.
KEY ASSUMPTIONS USED IN ECONOMIC ANALYSIS
Metal price Mill
Item Unit In USD In CAD recovery Payable Off-site costs
Zn $/lb 1 1.05 84% 85% TC/RC, deductibles
Pb $/lb 1 1.05 65% 95% vary with smelter
Cu $/lb 3 3.16 45% 95% location, smelter
Ag $/oz 21 22.11 37.50% 95% terms and conditions
Au $/oz 1200 1263.16 10.60% 95%
Base-case discount rate 5%
Exchange rate (US$/C$) 0.95
Schedule 1 -- NB 2% royalty 2%
Schedule 2 -- NB 16% royalty 16%
10% NPI -- Fern Trust
based on taxable profit 10%
Provincial income tax 12%
Federal income tax 15%
PEA CONTRIBUTORS
Company Responsibilities
SRK Consulting (Canada) Inc. Underground mine modelling, general and
in collaboration with Trevali administration costing and project economics
Stantec Consulting Environmental and permitting
Len Holland, Holland & Holland Metallurgical and processing
Consulting
Project risks
There are two major risks identified that could adversely affect the project economics:
-
Mine rehabilitation and drift slashing (for increased size): The mine is
only about 40 per cent dewatered at the time of mine planning. There are
uncertainties related to the time required for full dewatering and
uncertainties regarding the total quantity and scheduling of the
rehabilitation/slashing work that will ultimately be required. An
increased quantity of rehabilitation/slashing work and/or schedule
delays could adversely affect the PEA economic results.
-
External dilution: There is a risk of increased external dilution beyond
the planned amount. This would reduce the mill head grade and impact on
revenue.
Optimization and potential for enhanced economics
Opportunities for optimizations and potential enhanced economics have been identified within the preliminary economic assessment, including:
- There is potential to maximize sill pillar recovery by replacing waste backfill
with paste backfill. The current mine plan models an overall low sill
pillar recovery of 27.2 per cent due to the unconsolidated waste rock backfill
planned for placement immediately above the sill levels. The potential
advantages of using paste backfill include:
-
Increase sill pillar recovery to nearly 100 per cent, which could bring up to
1.5 million tonnes of plant feed into the mine plan at grades of
6 per cent zinc, 2.59 per cent lead, 0.29 per cent copper, 71.75 grams per tonne silver and 0.75 gram per tonne gold, thereby
extending the mine life with minimal additional development
required;
-
Increase stope productivity and shortened stope cycle time, thus
increasing stope stability and improving external dilution control;
-
Reduced backfill operating cost;
-
Reduced ventilation requirements;
-
Reduced requirement for life-of-mine tailings pond capacity and
potentially savings in environmental expenditures.
- Trade-off analysis is recommended to weigh these potential advantages
against the expected increase in capital costs for installing a paste
backfill system.
-
There is potential to bring more mineralized materials into the mine
plan in the PEA planned mining areas. There are 3.06 million tonnes in
situ mineralized materials above the $100-per-tonne net-smelter-returns cut-off grade excluded
from the PEA mining shapes in the planned mining area with an average
grade of 7.11 per cent zinc, 2.91 per cent lead, 0.39 per cent copper, 85.31 grams per tonne silver and 1.12 grams per tonne gold. Reasons for the excluded amounts include parallel zones of
mineralization where only one zone can be mined, stand-off distances
from historical mining areas, areas too narrow relative to the current
minimum mining width and isolated areas. Further design optimization
could potentially bring some of these mineralized materials into the
mine plan.
-
Further stope design optimization will lead to reduced internal dilution
and increased plant feed head grades. Overall internal dilution in the
planned stopes is currently approximately 20 per cent. In SRK's opinion, it
should be possible to reduce internal dilution to less than 15 per cent and
increase plant feed head grades by roughly 4.3 per cent.
-
Definition drilling should convert some of the existing inferred mineral
resources to indicated or measured category.
-
There is significant potential for resource expansion at depth given drill-grade
intervals outside of current resource block and below the PEA modelled
mine plan in the future mine plan area.
-
There is potential for increased metallurgical recoveries, specifically
optimization of the lead, copper and precious metals recovery.
The full PEA technical report will be filed on SEDAR and on the Trevali Mining website within 45 days of the issuance of this news release.
The PEA is considered preliminary in nature and includes economic analysis that is based, in part, on inferred mineral resources. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would allow them to be categorized as mineral reserves, and there is no certainty that the results will be realized. Mineral resources are not mineral reserves because they do not have demonstrated economic viability.
Qualified person and quality control/quality assurance
Dr. Mark D. Cruise, EurGeol, Trevali's president and chief executive officer, and Paul Keller, PEng, Trevali's chief operating officer, who are qualified persons as defined by NI 43-101, have supervised the preparation of the scientific and technical information that forms the basis for this news release. Dr. Cruise is not independent of the company as he is an officer, director and shareholder. Mr. Keller is not independent of the company as he is an officer and shareholder. The lead parties responsible for the PEA, SRK, Holland and Holland, and Stantec, are independent of the company.
We seek Safe Harbor.
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