Mr. Morgan Poliquin reports
ALMADEN ANNOUNCES POSITIVE PEA FOR THE IXTACA GOLD-SILVER DEPOSIT, MEXICO
Almaden Minerals Ltd. has released positive results from the maiden National Instrument 43-101-compliant preliminary economic assessment on its 100-per-cent-owned Ixtaca gold-silver deposit, Mexico. This deposit is a blind discovery made by the company in 2010 on claims staked by the company. The PEA was prepared by Moose Mountain Technical Services and Knight Piesold Ltd. The conclusions and recommendations of the PEA are that the Ixtaca deposit may be economically viable and the company should proceed to a prefeasibility study. Highlights of the PEA are summarized herein (all values shown are in U.S. dollars).
It should be noted that this PEA is preliminary in nature as it includes inferred mineral resources, which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA forecast will be realized or that any of the resources will ever be upgraded to reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
PEA highlights:
- Base case ($1,320 (U.S.) per ounce gold and $21 (U.S.) per ounce silver):
- Pretax net present value of $728-million at a 5-per-cent discount rate and
internal rate of return of 29 per cent;
- After-tax (including new Mexican mining duties) net present value (5 per cent) of $437-million and
internal rate of return of 22 per cent;
- Total mill feed of 129 million tonnes and 258 million tonnes of rock (strip ratio of
2 to 1);
- Mine life of 12.1 years with an average processing rate of 30,000 tonnes
per day (10.65 million tonnes per annum);
- Average annual production of 130,000 ounces of gold and 7,798,000 ounces
of silver;
- Estimated preproduction capital of $496-million (U.S.);
- Sustaining capital of
$106-million (U.S.);
- After-tax payback of 4.0 years;
- Based on the Jan. 22, 2014, NI 43-101-compliant updated
resource estimate;
- The mineral resources incorporated into the mine plan composed of
29 per cent measured, 55 per cent indicated and 16 per cent inferred;
- In excess of 135,000 metres of core drilling completed on the
project since the discovery hole was announced by the company in August,
2010;
- Preliminary PEA level metallurgical testwork demonstrating high
recoveries of both gold and silver from a combination of gravity and
bulk flotation concentration, averaging 95 per cent; the PEA considers leaching
the flotation combined gravity/flotation concentrates to produce a gold
and silver dore on site; total metal recovery to dore averages 90 per cent;
- The contribution to the project economics by metal is about 54 per cent from
gold and 46 per cent from silver, making Ixtaca a true dual-precious-metal
deposit.
J.D. Poliquin, chairman of Almaden, reported: "We are very pleased with the results of this PEA illustrating the potential economic viability of a mining operation at Ixtaca. The positive base-case economics demonstrate how valuable good infrastructure, grade continuity, high recoveries and low-cost mining are to a project. The release of a PEA is a significant milestone for our company in less than four years from the initial discovery. The PEA highlights the significance of the Ixtaca deposit on a world scale. The projected average annual silver production could make Ixtaca one of the top-20 silver projects in the world. We now look forward to continued exploration progress, which may grow Ixtaca, as we embark upon a PFS to further derisk the project and initiate the permitting process."
Economic results and sensitivities
A summary of financial outcomes comparing the base-case results with two alternative metal price scenarios (both applied to the base-case mine plan and processing limits) is presented herein, with sensitivities to various inputs. The base-case utilized prices based on a combination of spot prices in 2014 and current common peer usage. The alternative case represents the lowest sustained prices of the metals over the last three years. The three-year trailing average price is shown to represent the upside potential, should metal prices regain their previous strength. It is important to note that cohesive and continuous higher-grade cores to the Ixtaca deposit could potentially be selectively mined at lower metal prices. Such a scenario is not contemplated in this study, but the potential will be presented as an opportunity in the forthcoming PEA report.
SUMMARY OF IXTACA GOLD-SILVER ECONOMIC RESULTS AND SENSITIVITIES
(in U.S.$)
Three-year-trailing
Alternative case Base case average
Pretax After tax Pretax After tax Pretax After tax
Gold price (U.S.$/ounce) $1,200 $1,320 $1,530
Silver price
(U.S.$/ounce) $18 $21 $29
Net cash flow $783-M $497-M $1,194-M $761-M $2,203-M $1,411-M
NPV (5% discount rate) $445-M $255-M $728-M $437-M $1,406-M $875-M
NPV (8% discount rate) $308-M $157-M $537-M $306-M $1,081-M $658-M
Internal rate of
return 21.5% 15.9% 29.3% 22.2% 43.9% 34.1%
Payback 4.3 yr 4.5 yr 3.7 yr 4.0 yr 2.9 yr 3.2 yr
The pretax base-case sensitivities to metal price, operating cost and capital cost changes are shown in the attached pretax sensitivities table.
PRETAX NPV (5 PER CENT) AND IRR SENSITIVITIES
Operating cost Capital cost Metal price
sensitivity sensitivity sensitivity
Variance NPV (5%) IRR NPV (5%) IRR NPV (5%) IRR
-20% $978-M 34.9% $830-M 36.6% $208-M (i) 14.1% (i)
-10% $853-M 32.2% $779-M 32.7% $468-M (i) 22.5% (i)
Base $728-M 29.3% $728-M 29.3% $728-M 29.3%
+10% $619-M (i) 26.4% (i) $677-M 26.4% $988-M 35.4%
+20% $512-M (i) 23.3% (i) $626-M (i) 23.8% (i) $1,248-M 40.9%
(i) Mine life is shortened to nine years in this scenario.
Production and processing
The Ixtaca gold-silver project is planned as an open-pit mining operation using contractor mining. Contractor mining operating costs are assumed to be 25 per cent higher than expected owner-operated mining costs. Major mining equipment is composed of 177-tonne capacity haul trucks with 27-cubic-metre shovels. The estimated mining inventory is composed of 258 million tonnes of rock and 129 million tonnes of mineralized material with an average mill feed grade of 0.422 gram per tonne gold and 25.27 grams per tonne silver. A total of 1.6 million ounces of gold and 94.4 million ounces of silver would be produced over the life of mine. The PEA includes a 30,000-tonne-per-day process plant to produce gold and silver dore on site. The process plant includes conventional crushing, grinding, gravity, flotation, vat-leach and Merrill-Crowe extraction process. Average process recoveries for gold and silver are expected to be 90 per cent based on testwork carried out at the Blue Coast Research Ltd. laboratory in British Columbia, Canada, under the supervision of MMTS. The attached projected production and processing summary table summarizes the production and processing.
PROJECTED PRODUCTION AND PROCESSING SUMMARY
Total mill feed material 128.7 M tonnes
Processing rate 30,000 tonnes per day
LOM strip ratio 2.0 to 1
Gold Silver
Average mill feed grade 0.422 g/t 25.27 g/t
Average process recoveries 90% 90%
Average annual production LOM
(ounces) 130,000 7,798,000
Total production (ounces) 1,576,000 94,362,000
Capital and operating costs
The total estimated capital cost for the Ixtaca gold-silver project is $496-million (U.S.), and the estimated total life-of-mine operating costs are $14.73 (U.S.) per tonne mill feed.
PROJECTED START-UP CAPITAL COSTS
(in millions U.S.$)
Site infrastructure $20.4
TMF and water management $44.7
Prestripping $163.1
Mining equipment $16.3
Process plant $187.0
Indirects, EPCM, contingency and owner's costs $64.1
Total $495.6
PROJECTED OPERATING COSTS
(in (U.S.$)
Owner-operated mining $1.45 $/tonne
Contractor mining $1.81 $/tonne
General mine expense $0.07 $/tonne
Stockpile rehandling $1.00 $/tonne
Processing $9.00 $/tonne mill feed
G&A $0.94 $/tonne mill feed
TMF management $0.09 $/tonne mill feed
Rock management, environment and community
Almaden recognizes the paramount importance of protecting the environment and to facilitate the development of a sustainable project. Knight Piesold has been retained to help the company with long-lead-item studies concerning environmental monitoring, assessment and permitting matters. Almaden established the following environmental objectives for the project:
- Protect surface and groundwater quality;
- Incorporate environmental enhancement opportunities into the mine and
final reclamation plans;
- Minimize the project footprint.
To achieve these objectives, Almaden and KP have instituted the following management strategies toward the submission of a Mexican environmental impact statement:
Water management
Almaden with KP has developed a comprehensive 2014 water management strategy, including the commencement of a hydrometric and climate-monitoring program, and the drilling of water measurement wells. Studies into regional weather patterns suggest that the Ixtaca mine plan will not require water from local aquifers, with the latest modelling indicating that management of rainfall and runoff from within the project area will provide sufficient water for continuous operations. Currently local communities use existing water supplies that come from natural springs located at higher elevations and upstream of the Ixtaca deposit. Stream flow upstream of the project will be either diverted around or collected, potentially creating a new freshwater supply source for local use, or used for mining and milling processes and before any would be discharged it would be treated to meet environmental guidelines.
Management of rock
The limestone host rock, which will constitute much of the waste rock of the project, has a high buffering capacity. Static geochemical testing is currently under way to characterize this further.
Environmental monitoring
Groundwater monitoring to ensure compliance with all applicable best-management-practice technologies is a fundamental component of the project. Flora and fauna studies are also under way.
Community
The Ixtaca deposit and any potential mining operation will be located in an area previously logged or cleared. Existing land use in the project area is minimal. The company has employed up to 70 local people in its drilling program, who live local to the Ixtaca deposit. Local employees make up virtually all the drilling staff, who have been trained on the job, to operate the company's wholly owned drills. The company has implemented a comprehensive science-based and objective community relations and education program for employees and all local stakeholders to transparently explain the exploration program under way, as well as the potential impacts and benefits of any possible future mining operation at Ixtaca. The company regards the local communities to be major stakeholders in the Ixtaca deposit's future, along with the company's shareholders. Every effort is being made to create an open and clear dialogue with stakeholders to ensure that any possible development scenarios that could evolve from the anticipated future studies are properly understood and communicated throughout the course of the company's exploration and development program. The company invites all interested parties to visit the company's website to find out more about community development, education and outreach programs.
Economic impacts
The economic analysis set out in the PEA also provides some possible indications of the potential economic impact of the Ixtaca project on the local, Puebla state and Mexico economies, should the future work and permitting support development of a mining operation. Highlights include:
- Direct employment of more than 400 people during the construction phase
and 430 people during the subsequent approximately 12-year operating
phase;
- Gross investment of approximately over $163-million (U.S.) in capital
equipment and equipment manufacturing during the construction phase,
with an additional $14-million (U.S.) or more during operations;
- Approximately $434-million in direct taxes to all levels of government,
including payments to the local municipality ($54-million), Puebla state
($98-million) and federal ($282-million) governments over the
approximately 12-year operating life of the project, but excluding
payroll taxes, sales taxes and income taxes paid by employees.
Geology and mineral resources
The Ixtaca deposit is an epithermal gold-silver deposit, mostly hosted by veins in carbonate units (calacareous clastic rocks) and crosscutting premineral altered dikes with a minor component of disseminated mineralization hosted in overlying volcanic rocks. Wire frames constraining mineralized domains were constructed based on geologic boundaries defined by mineralization intensity and host rock type. Higher-grade zones occur where there is a greater density of epithermal veining. These higher-grade domains have good continuity and are cohesive in nature.
On Jan. 31, 2013, the company announced a maiden resource on the Ixtaca zone. Since that time, drilling has been focused on expanding and infilling the known resource base for this PEA, which utilized the NI 43-101-compliant updated mineral resource estimate released Jan. 22, 2014, performed by Gary Giroux, PEng, qualified person under the meaning of NI 43-101. The data available for the resource estimation consisted of 423 drill holes assayed for gold and silver. The estimate was constrained by three-dimensional solids, representing different lithologic and mineralized domains. Of the total drill holes, 400 intersected the mineralized solids and were used to make the resource estimate. Capping was completed to reduce the effect of outliers within each domain. Uniform downhole three-metre composites were produced for each domain and used to produce semi-variograms for each variable. Grades were interpolated into blocks 10 by 10 by five metres in dimension by ordinary kriging. Specific gravities were determined for each domain from drill core. Estimated blocks were classified as either measured, indicated or inferred based on drill hole density and grade continuity.
MINERAL RESOURCES
Measured resource
AuEq cut- Tonnes greater than
off cut-off Grade greater than cut-off
(g/t) (tonnes) Au (g/t) Ag (g/t) AuEq (g/t)
0.3 44,590,000 0.48 30.27 1.07
0.5 30,440,000 0.61 39.44 1.38
0.7 22,320,000 0.73 48.00 1.67
1.0 15,620,000 0.88 58.66 2.03
2.0 6,000,000 1.33 86.51 3.01
Indicated resource
AuEq cut- Tonnes greater than
off cut-off Grade greater than cut-off
(g/t) (tonnes) Au (g/t) Ag (g/t) AuEq (g/t)
0.3 109,150,000 0.38 20.76 0.79
0.5 62,610,000 0.52 28.88 1.08
0.7 39,520,000 0.65 37.09 1.37
1.0 23,850,000 0.81 47.06 1.73
2.0 5,910,000 1.39 72.81 2.81
Inferred resource
AuEq cut- Tonnes greater than
off cut-off Grade greater than cut-off
(g/t) (tonnes) Au (g/t) Ag (g/t) AuEq (g/t)
0.3 43,410,000 0.36 17.52 0.70
0.5 22,700,000 0.50 24.99 0.98
0.7 13,630,000 0.63 31.56 1.25
1.0 7,700,000 0.79 39.81 1.57
2.0 1,200,000 1.18 73.69 2.61
Measured resource
AuEq cut- Tonnes greater than
off cut-off Contained metal
(g/t) (tonnes) Au (oz) Ag (oz) AuEq (oz)
0.3 44,590,000 682,000 43,400,000 1,528,000
0.5 30,440,000 599,000 38,600,000 1,351,000
0.7 22,320,000 525,000 34,450,000 1,196,000
1.0 15,620,000 444,000 29,460,000 1,018,000
2.0 6,000,000 256,000 16,690,000 581,000
Indicated resource
AuEq cut- Tonnes greater than
off cut-off Contained metal
(g/t) (tonnes) Au (oz) Ag (oz) AuEq (oz)
0.3 109,150,000 1,344,000 72,850,000 2,762,000
0.5 62,610,000 1,049,000 58,140,000 2,182,000
0.7 39,520,000 828,000 47,130,000 1,746,000
1.0 23,850,000 624,000 36,090,000 1,327,000
2.0 5,910,000 265,000 13,830,000 534,000
Inferred resource
AuEq cut- Tonnes greater than
off cut-off Contained metal
(g/t) (tonnes) Au (oz) Ag (oz) AuEq (oz)
0.3 43,410,000 498,000 24,450,000 974,000
0.5 22,700,000 362,000 18,240,000 717,000
0.7 13,630,000 277,000 13,830,000 546,000
1.0 7,700,000 197,000 9,860,000 389,000
2.0 1,200,000 45,000 2,840,000 101,000
Metallurgical gold and silver testwork
Almaden has previously reported preliminary metallurgical test results (for details consult Almaden's news release of Jan. 31, 2013, and the 2013 Tuligtic project NI 43-101 technical report filed on SEDAR). These first test results showed that standard gravity and flotation techniques could result in non-optimized gold and silver recoveries that are roughly equivalent for each geological domain. This preliminary testwork indicates that leaching the combined gravity/flotation concentrate can produce a gold and silver dore on site. All geologic domains were tested using whole core composites selected to represent a range of grades.
Subsequent to the publication of the preliminary results, in 2013, additional metallurgical work, on the original and new whole core composites, focused on optimizing gravity and rougher flotation results over a broader range of head grades. At present, the preliminary testwork performed to date indicates overall gold and silver recoveries from a combination of flotation and gravity concentration and intensive leaching of this combined concentrate to average 90 per cent for Au and Ag across all geologic domains. Further prefeasibility-study-level metallurgical testwork focusing on process optimization is currently under way on existing and fresh domain samples collected from whole drill core. This program will focus on the optimization of the gravity/bulk flotation/concentrate-intensive leaching process, with lock cycle cleaner flotation tests and intensive leaching testwork on the resulting concentrates. Offsite refining of the concentrates will also be evaluated.
Next engineering and development steps
The company plans to immediately embark upon a prefeasibility engineering program. Apart from further metallurgical studies, the work outlined includes geomechanical and geotechnical drilling, static geochemical tests to characterize rock chemistry, and long-lead-time environmental and water monitoring. Work under way currently includes additional metallurgical studies, environmental baseline monitoring such as flora and fauna studies, climate monitoring, water quality sampling, and surface water hydrology monitoring. An NI 43-101 technical report for the Ixtaca deposit PEA will be filed on SEDAR within 45 days.
Qualified persons, quality control and assurance
The following companies have undertaken work in preparation of the PEA:
- Apex Geoscience Ltd. (exploration and drill data quality assurance/quality control);
- Giroux Consultants Ltd. (mineral resource estimation);
- Moose Mountain Technical Services (overall report preparation, mine plan
and mineral processing, infrastructure, and financial model)
- Knight Piesold Engineering (geotechnical, environmental, and rock and
tailings management).
The independent qualified persons responsible for preparing the Ixtaca preliminary economic assessment are: Jesse Aarsen, PEng, and Tracey Meintjes, PEng, of MMTS, Ken Embree, PEng, of KP, Kris Raffle, PGeo, of Apex Geoscience Ltd., and Gary Giroux, MASc, PEng, of Giroux Consultants Ltd., all of whom act as independent consultants to the company, are qualified persons as defined by National Instrument 43-101, and have reviewed and approved the contents of this news release.
MMTS is an association of geologists, engineers and technicians providing experienced knowledge in geology and mine engineering services and support to the mining industry for over 15 years. Through its network of associates, it provides an integrated team of experts and qualified persons. Services range from early grassroots exploration and development, block model builds, resource and reserve estimates, advanced planning and studies for mine proposals (including operational support), process design, and permitting process guidance and support. MMTS has experience working on coal deposits around the world, as well as gold, silver and copper deposits throughout North and South America. A list of specific projects worked on by MMTS can be found on-line.
Knight Piesold is an international consulting firm and recognized leader in providing engineering and environmental services.
The analyses used in the preparation of the mineral resource statement were carried out at ALS Chemex Laboratories of North Vancouver using industry standard analytical techniques. For gold, samples are first analyzed by fire assay and atomic absorption spectroscopy. Samples that return values greater than 10 grams per tonne gold using this technique are then reanalyzed by fire assay but with a gravimetric finish. Silver is first analyzed by inductively coupled plasma-atomic emission spectroscopy. Samples that return values greater than 100 grams per tonne silver by ICP-AES are then reanalyzed by HF-HNO3-HCLO4 digestion with HCL leach and ICP-AES finish. Of these samples, those that return silver values greater than 1,500 g/t are further analyzed by fire assay with a gravimetric finish. Blanks, field duplicates and certified standards were inserted into the sample stream as part of Almaden's quality assurance and control program, which complies with National Instrument 43-101 requirements. In addition to the in-house quality assurance/quality control measures employed by Almaden, Mr. Raffle, PGeo, of Apex Geoscience, completed an independent review of Almaden's drill hole and quality assurance/quality control databases. The review included an audit of approximately 10 per cent of drill core analyses used in the mineral resource estimate. A total of 10,885 database gold and silver analyses were verified against original analytical certificates. Similarly, 10 per cent of the original drill collar co-ordinates and downhole orientation survey files were checked against those recorded in the database; and select drill sites were verified in the field by Mr. Raffle, PGeo. The quality assurance/quality control audit included an independent review of blank, field duplicate and certified standard analyses. All quality assurance/quality control values falling outside the limits of expected variability were flagged and followed through to ensure completion of appropriate reanalyses. No discrepancies were noted within the drill hole database, and all quality assurance/quality control failures were dealt with and handled with appropriate reanalyses. The mineral resource estimate referenced in this press release was prepared by Mr. Giroux, PEng, an independent qualified person as defined by NI 43-101. All drill sections and related assay data from the 2013 drilling program used in the resource estimate have been posted to the company's website.
Exploration opportunities
The Ixtaca deposit is one of several exploration targets on the wholly owned Tuligtic property. The 14,000-hectare Tuligtic claim covers an area of high-level epithermal clay alteration. The project area is partially covered by volcanic ash deposits, which mask underlying alteration, potential vein zones and associated soil responses. In areas devoid of this covering ash, soil sampling has defined several distinct zones of elevated gold and silver values and trace elements typically associated with epithermal vein systems. The Ixtaca zone is one of the largest areas of gold/silver soil response, but it is also one of the areas with the least ash cover on the project. Management believes that the other altered and geochemically anomalous areas could represent additional zones of underlying quartz-carbonate epithermal veining like the Ixtaca zone. In 2014, the company anticipates redirecting drilling efforts to the exploration of high-priority epithermal targets outside of the Ixtaca zone but within the project boundaries.
We seek Safe Harbor.
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