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Atac Resources Ltd
Symbol ATC
Shares Issued 115,163,986
Close 2014-07-22 C$ 1.17
Market Cap C$ 134,741,864
Recent Sedar Documents

Atac PEA estimates Tiger aftertax NPV at $33.7-million

2014-07-23 07:47 ET - News Release

Mr. Graham Downs reports

ATAC ANNOUNCES POSITIVE PEA RESULTS FOR THE HIGH-GRADE OXIDE GOLD TIGER DEPOSIT, RACKLA GOLD PROJECT-YUKON

Atac Resources Ltd. has completed a positive preliminary economic assessment for the oxide portion of the Tiger deposit located at the western end of the company's 100-per-cent-owned Rackla gold project, Yukon. The Tiger deposit was discovered in 2007 and is distinct from the more recent larger-scale Carlin-type discoveries located 100 kilometres to the east, which remain the exploration focus of the company.

The lead engineering firm for the PEA was Kappes Cassiday & Associates (KCA) (metallurgy, processing, infrastructure, financial analysis) in co-operation with Tetra Tech Inc. (mining), Giroux Consultants Ltd. (mineral resource), Resource Strategies (environmental and permitting) and Dr. Gerald G. Carlson, PhD, PEng (history, geology, drilling). Unless specified otherwise, all values are shown in Canadian dollars, where $1 equals 92 U.S. cents.

PEA highlights (using $1,250-(U.S.)-per-ounce gold price):

  • Conventional open-pit mining with single-stage, low-intensity crushing followed by size classification -- no grinding or agglomeration needed;
  • Life-of-mine (LOM) production of 2.06 million tonnes of oxide material at an average diluted grade of 3.72 grams per tonne gold;
  • Overall gold recoveries of 89.8 per cent from hybrid heap-leach (87.8-per-cent recovery) and agitated tank (91.0-per-cent recovery) carbon-in-leach (CIL) process;
  • Four-year, seasonal operation with LOM production of 221,558 ounces of gold;
  • Pretax net present value (NPV) of $52.1-million at a 5-per-cent discount rate and internal rate of return of 30 per cent with an all-in sustaining cash cost of $626;
  • At a $1,350-(U.S.)-per-ounce gold price, the pretax NPV increases to $72.6-million at a 5-per-cent discount rate and IRR of 39.5 per cent;
  • Pit slope engineering, Tiger deposit infill drilling and exploration of numerous untested nearby oxide targets have the potential to enhance the value of the project economics.

"Although we remain focused on the Carlin-type gold targets 100 km to the east, we are very pleased with the results of the comprehensive Tiger deposit PEA. It gives the company a clear understanding of the potential viability and value of our first Rackla gold project discovery, and highlights the advantages of a rare high-grade, at-surface, oxide gold deposit that is located in one of the most favourable mining jurisdictions in the world," stated Graham Downs, chief executive officer of Atac. "The simplicity of the mining and processing combined with the approach of modular design and construction for the on-site facilities has resulted in an optimized development scenario for this size of deposit. Additional geotechnical and resource drilling at the Tiger deposit combined with exploration drilling at over six untested satellite oxide targets has the potential to significantly enhance the PEA and the district potential of the Rackla gold project."

Economic results and sensitivities

The table demonstrates the sensitivity of the Tiger deposit economics to the price of gold. A $1,250-(U.S.)-per-ounce gold price was used as the base case and is highlighted in the table.

                        SUMMARY OF GOLD PRICE SENSITIVITY

Gold price (US$/oz)                              $1,100  $1,250  $1,350  $1,500
Pretax cumulative net cash flow ($M)              $36.7   $72.7   $96.6  $132.6
Pretax NPV (5% discount rate) ($M)                $21.4   $52.1   $72.6  $103.3
Pretax IRR                                        15.5%   30.0%   39.5%   53.5%
Pretax payback (years)                              2.9     2.2     1.8     1.3
Aftertax cumulative net cash flow                 $10.4   $51.0   $67.3   $91.5
Aftertax NPV (5% discount rate, $M)               $12.6   $33.7   $47.5   $68.0
Aftertax IRR                                      11.2%   21.5%   27.9%   37.2%
Aftertax payback (years)                            3.2     2.6     2.3     1.9

Mining and processing

The Tiger deposit has been modelled as an open-pit mining operation with a hybrid heap-leach and carbon-in-leach gold recovery process. A summary of: gold production and processing metrics; preproduction costs; and operating costs are presented in the tables.

                PROJECTED PRODUCTION AND PROCESSING SUMMARY

Total process feed                                       2.06 million tonnes
Processing rate
(158 days per year)                                         3,300 tonnes/day
LOM strip ratio                                                        5.6:1

                                                                    Combined
                                    Heap leach            CIL     average or
Proportional processing feed              (42%)          (58%)         total

Average process feed grade         3.45 g/t Au    3.91 g/t Au    3.72 g/t Au
Average recovery                         87.8%          91.0%          89.8%
Average annual production LOM (oz)      21,132         34,257         55,389
Total production (oz)                   84,528        137,029        221,558

Silver is a minor byproduct of gold production with an assumed recovery of
19 per cent and process feed grade of five g/t. Total recovered silver
ounces over LOM are 63,057 ounces.

                 PREPRODUCTION AND SUSTAINING CAPITAL COSTS 
                                (In millions)
                                                   Sustaining               
Capital costs                    Preproduction        capital            LOM

Site infrastructure                       $1.7                          $1.7
Heap leach/tailings(i)                    $5.7          $20.4          $26.1
Mining equipment                         $10.1           $1.7          $11.8
Prestripping and stockpiling             $10.5                         $10.5
Process plant                            $40.3                         $40.3
Contingency (20%)                        $11.6           $4.4          $16.0
Indirect costs                           $12.3                         $12.3
Total(ii)                                $92.3          $26.5         $118.8

(i) Preproduction and annual heap-leach cell and tailings development.      
(ii) Totals may not add exactly due to rounding.

                                OPERATING COSTS
Operating costs                                                  LOM average

Mining costs(i) ($/tonne mined)                                        $4.46
Processing ($/tonne processed)                                        $20.10
G&A ($/tonne processed)                                                $7.11

(i) Not including capitalized preproduction mining costs.

Project description

The Tiger deposit is located approximately 55 kilometres northeast of Keno City, Yukon. Access to the Tiger deposit would be by a proposed 51.6-kilometre winter road that utilizes 24.6 km of the existing and permitted Wind River winter trail. The deposit is currently accessed by air via a 2,500-foot airstrip located eight km from the deposit.

An owner-operated open-pit mine, with one year of prestripping followed by four years of production, is envisioned in the PEA. Average annual production would be approximately 55,389 ounces gold with year one production projected to be 78,500 ounces gold. A total of 2.06 million tonnes of oxide material at an average diluted grade of 3.72 g/t would be extracted by hydraulic excavator. Based on a geotechnical study, no blasting of mineralized material would be necessary due to its highly weathered and sandy nature. Mining and stockpiling would take place year-round, while processing of mineralized material would occur during May through September (158 days annually) at a rate of 3,300 tonnes per day.

Processing has been designed to begin near the open-pit where material would be fed into a single skid-mounted low-intensity mineral sizer. Material would then be transported downhill by overland conveyor to a modular processing facility to be scrubbed and sized into two size fractions. The study proposes a hybrid approach where approximately 42 per cent of the material (plus-0.212 millimetre) would be sent to the heap-leach facility. The remaining 58 per cent (finer material) would be sent to the CIL plant. A 50-day heap-leach cycle has an estimated gold recovery of 87.8 per cent while the retention time for the CIL plant is 24 hours with an estimated gold recovery of 91.0 per cent.

All major project components for the Tiger deposit would be engineered and constructed to achieve efficient closure. Heap-leach cells would be built annually and progressively reclaimed, while the tailings facilities would be expanded annually and fully reclaimed at closure.

Opportunities to enhance the project

Atac is very pleased with the base-case results from the detailed PEA and believes that opportunities exist that could greatly enhance the economics of the project. Some key opportunities include:

  • Future geotechnical studies may permit steeper pit slopes, which could potentially capture a greater percentage of the presently known resource and/or reduce the strip ratio.
  • Trade-off studies between owner-operator and contract mining or mining fleet leasing could decrease preproduction capital.
  • Resource expansion and upgrading inferred resources to the indicated category may be achieved with a modest drill program.
  • Significant potential exists to increase the resource base and life expectancy of the project with the exploration of more than six untested satellite oxide gold targets and geochemical anomalies.

Environment and community engagement

Since 2007, the company has completed comprehensive environmental, water, heritage, geotechnical and metallurgical studies, which have resulted in a highly advanced project at the PEA stage. Due to the nature of the geology of the deposit and environmental studies completed to date, permitting would likely be without significant problems.

Community and first nation engagement began in 2008 with the first exploration co-operation agreement with the first nation of Na Cho Nyak Dun (NND) signed in 2010. This exploration co-operation agreement with the NND was recently renewed and provides a framework within which exploration activities and environmental regulatory processes on Atac's Rackla gold project have been and will continue to be carried out. The Rackla gold project lies exclusively within the traditional territory of the NND.

Going forward

The company will continue with environmental baseline work and ongoing studies while it explores opportunities to advance or monetize the Tiger deposit through sole development, joint venture or outright sale.

Project mineral resources

Gold occurs in both sulphide and oxide mineralization within the Tiger deposit. The PEA considers the oxide portion of the deposit. The tables show the oxide-only resource used for the PEA and the oxide-plus-sulphide resources for reference only.

                      TIGER DEPOSIT OXIDE-ONLY RESOURCE

                  Cut-off grade                         Grade         Ounces
Category                (g/t Au)        Tonnes        (g/t Au)           (Au)

Indicated                  1.60      2,470,000           4.25        337,500
Inferred                   1.60        180,000           3.00         17,400

                 TIGER DEPOSIT OXIDE-PLUS-SULPHIDE RESOURCE

                  Cut-off grade                         Grade         Ounces
Category                (g/t Au)        Tonnes        (g/t Au)           (Au)

Indicated                  1.60      3,260,000           3.85        403,500
Inferred                   1.60      1,570,000           2.44        123,200

The PEA is based on a National Instrument 43-101-compliant mineral resource estimate completed by Gary Giroux, PEng, MASc (Giroux Consultants), who is a qualified person and independent of Atac, based on the criteria defined by National Instrument 43-101. Quality control data generated during the various drill programs conducted at the Tiger deposit were independently reviewed by Giroux Consultants as part of the resource study. The full report dated effective Nov. 15, 2011, and titled "Preparation of the Tiger Zone Mineral Resource Estimate," was filed on SEDAR on Dec. 1, 2011.

It should be noted that this PEA is preliminary in nature and includes 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. 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. An NI 43-101 technical report for the Tiger deposit PEA will be filed on SEDAR and Atac's website within 45 days.

Qualified persons

The independent qualified persons responsible for preparing the Tiger deposit preliminary economic assessment are Dan Kappes, PEng, of KCA, Dr. Sabry Abdel Hafez, PhD, PEng, of Tetra Tech, Gary Giroux, MASc, PEng, of Giroux Consultants, Rob McIntyre, RET, of Resource Strategies, and Dr. Gerald G. Carlson, PhD, PEng, an independent consultant. All of the aforementioned qualified persons have reviewed and approved the contents of this news release.

Robert C. Carne, MSc, PGeo, the president and a director of Atac Resources, is the company's designated qualified person for this news release within the meaning of NI 43-101, and has reviewed and validated that the information contained in the release is consistent with that provided by the qualified persons responsible for the PEA.

We seek Safe Harbor.

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