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or Name
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Castle Mountain Mining Company Ltd
Symbol CMM
Shares Issued 62,980,168
Close 2014-04-22 C$ 0.85
Market Cap C$ 53,533,143
Recent Sedar Documents

Castle Mtn's Castle PEA shows $352-million (U.S.) NPV

2014-04-24 09:36 ET - News Release

Mr. Gordon McCreary reports

CASTLE MOUNTAIN MINING'S PRELIMINARY ECONOMIC ASSESSMENT DELIVERS PRODUCTION PLANS OF 176,000 OUNCES OF GOLD ANNUALLY OVER 17+ YEARS

Castle Mountain Mining Co. Ltd. has released a preliminary economic assessment for its 100-per-cent-controlled Castle Mountain mine in San Bernardino county, California (all amounts are in U.S. dollars). The study was completed by RPA Inc. with the collaboration David Penswick, PEng, and the Castle Mountain technical team. The PEA considered a base case and two sensitivity cases summarized in the table.

                                 PROJECT SUMMARY

                                          Static        Base   Unconstrained

Recovered Au (koz)                           832       2,994           3,490
Annual Au (koz)                              119         176             291
All-in sustaining costs ($/oz)              $919        $949            $801
Initial capex ($M)                           $98         $98            $421
Pretax NPV 5% ($M)                          $173        $499            $831
Pretax IRR                                 38.9%       27.5%           29.1%
Posttax NPV 5% ($M)                         $122        $352            $576
Posttax IRR                                29.7%       20.1%           21.7%

Assumes flat long-term Au price of $1,300/ounce.

The economic analysis contained in the PEA is based, in part, on inferred resources, and is preliminary in nature. Inferred resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as mineral reserves. There is no certainty that economic forecasts on which the PEA is based will be realized.

Gordon McCreary, Castle Mountain's president and chief executive officer, stated: "We are extremely pleased to have completed this important milestone on the path to reopening of the Castle Mountain mine. The PEA has delivered all that we had anticipated: the scalability of the project, strong economics at various gold prices, with a relatively low preproduction capital expenditures. With an average annual production in excess of 176,000 ounces of gold, a preproduction capex below $100-million, the key mining permit in hand and in a stable jurisdiction, we believe that the Castle Mountain mine is amongst the best gold development projects in the world today. We plan to continue to advance the project through to feasibility study stage before year-end, which combined with the existing mining permit show that this project has a very short path to production.

"Castle Mountain has made significant progress since going public less than one year ago. Producing first a National Instrument 43-101 mineral resource report with over 3.1 million gold ounces of indicated and 1.1 million ounces inferred of heap-leachable gold, and following that the company has continued to advance the project now having completed a National Instrument 43-101 preliminary economic assessment. This is a testament to the quality of the project and the growing management team at Castle Mountain."

Summary of study

The PEA considered three cases:

  • Base case: This scenario is based on a low-capital start-up with a subsequent capital investment and expansion to 8.1 million tonnes per year (Mtpa) in year three of operation. The base case remains within the boundaries of the 3,910-acre environmental impact statement (EIS), but requires an amendment of the current mine and operations plan during operations.
  • Static case: This scenario is limited to the current mine and operations plan, which provides for a disturbance area of 1,375 acres. It is based on a low initial capital requirement for 6.4 Mtpa of leaching, no expansion capital and no amendments to the current mine permit.
  • Unconstrained case: This scenario is unconstrained by either capital or the current mine and operations plan. The unconstrained case assumes an amendment of the mine permit to 18 Mtpa before the commencement of production. This case remains within the boundaries of the 3,910-acre EIS/EIR. This case includes increased capital spending in order to minimize the operating cost structure.

                           SUMMARY METRICS FOR PEA CASES

                                               Static         Base  Unconstrained

Process feed (kt)                              40,240      132,137        209,271
Waste (kt)                                    173,530      912,135        835,001
Strip ratio (waste to ore)                       4.31         6.90           3.99
Grade (g/t)                                      0.84         0.85           0.62
Contained Au (koz)                              1,082        3,599          4,166
Recovered Au (koz)                                832        2,994          3,490
Recovery(1)                                     76.9%        83.2%          83.8%
Mine life(2) (years)                                7           17             12
Annual Au (koz)                                   119          176            291
All-in sustaining costs ($/oz)                   $919         $949           $801
Initial capex ($M)                                $98          $98           $421
Expansion capex ($M)                               $0         $173             $0
Sustaining capex ($M)                             $90         $250           $339
Closure(3) ($M)                                    $6          $22            $30
Total investment ($M)                            $194         $543           $790
Pretax NPV 0%(4) ($M)                            $239         $953         $1,366
Pretax NPV 5%(4) ($M)                            $173         $499           $831
Pretax IRR(4)                                   38.9%        27.5%          29.1%
Posttax NPV 0%(4) ($M)                           $177         $728         $1,012
Posttax NPV 5%(4) ($M)                           $122         $352           $576
Posttax IRR(4)                                  29.7%        20.1%          21.7%
Simple payback -- initial
capital(4) (months)                                31           31             59
Simple payback -- expansion
capital(4) (months)                               n/a           46            n/a

(1) Includes recovery of 76.9 per cent for crushed leach material and 95 per
cent for milled material.
(2) Excludes three years of rinsing pads following completion of mining
activities.
(3) Net of salvage values of $2.7-million (static), $4.8-million (base) and
$6.9-million (unconstrained).
(4) Assumes flat long-term Au price of $1,300/ounce.

The information presented in the table is based on preliminary mine designs and processing criteria drawn from previous operating performance. Mineral resources are based on NI 43-101 mineral resource estimates filed by the company on SEDAR on Dec. 11, 2013. Financial returns have been forecasted using an assumed long-term gold price of $1,300/ounce.

Opportunities to improve results

Opportunities to improve upon the results of the PEA that will be investigated as the project is advanced include:

  • A significant tonnage of material currently classified as waste within the pit shells has, in fact, not yet been drilled. The presence of mineralization in these areas has the potential to increase the tonnage of mineralization included in the mine plan and/or materially reduce the strip ratio.
  • The historic cut-off of approximately 0.5 gram per tonne is well above the current cut-off of 0.24 g/t for the base case (and 0.13 g/t for the unconstrained case). Material below the historic cut-off was used to backfill the JSLA pit and will be excavated early in the mine plan. There is potential to process and economically recover gold from this material, which is currently classified as waste.
  • It may be possible to recover additional gold from the existing leach pad. There are plans to test this, with a focus on the cells that were developed initially, where higher-grade material was not milled or treated with the gravity circuit. In addition, it may be possible to use the leached material as construction aggregate -- particularly for lining the new leach pads -- and thus reduce capital expenditures.
  • It may be possible to steepen wall slopes beyond the 48-degree overall slope angles that have been assumed, which would reduce the stripping ratio. The previously mined pits achieved interramp slope angles well in excess of 50 degrees throughout the majority of pits and most walls remain in excellent condition, more than 13 years later. Geotechnical studies have been planned for the next round of work.

Mineral resources

The PEA is based on the NI 43-101-compliant mineral resources that were published in the technical report filed on SEDAR on Dec. 11, 2013, summarized in the table.

                                                                         
           MINERAL RESOURCES ESTIMATE -- EFFECTIVE NOV. 21, 2013

Cut-off                    Tonnage             Grade                 Gold
(g/t Au)                       (Mt)          (g/t Au)              (oz Au)

Indicated
0.34                          84.5              0.94            2,560,000
0.26                         112.5              0.78            2,820,000
0.17                         148.8              0.64            3,074,000
0.14                         165.1               0.6            3,150,000
Inferred
0.34                          27.5              0.94              828,000
0.26                          38.6              0.75              934,000
0.17                          52.3              0.61            1,030,000
0.14                          57.8              0.57            1,060,000

1. Canadian Institute of Mining, Metallurgy and Petroleum definitions
were followed for mineral resources.
2. Totals may not add exactly due to rounding.
3. Mineral resources are estimated at a cut-off grade of 0.14 g/t Au.
4. Mineral resources are contained within a Whittle pit shell, generated
using a gold price of $1,300/ounce Au.
5. Sample grades were capped at 34.29 g/t Au prior to compositing and
grade interpolation.
6. The mineral resource estimate may be materially affected by
environmental, permitting, legal, title, taxation, socio-political,
marketing and other relevant issues. Refer to the technical report for
the key assumptions, parameters and risks associated with the mineral
resource estimate.

Project location and description

The project is located in the historic Hart mining district at the southern end of the Castle Mountains, San Bernardino county, California, approximately 112 kilometres south of Las Vegas, Nev. The property comprises 1,298 acres of patented lode claims, 6,160 acres of unpatented lode and millsite claims for an aggregate total of 7,458 acres. Three thousand nine hundred ten acres are covered by the EIS/EIR and 1,375 of these are permitted for disturbance. The property is located in the high desert area near the Mojave National Preserve and is road accessible and workable year-round. The most recent mining activity ended in 2001 with residual leaching ending in 2004. The mine has a valid mine and reclamation plan that was recently extended to Dec. 31, 2025, by the county of San Bernardino as the lead agency, which upheld the validity of the existing EIS/EIR.

Mining

The pit optimization was performed using net present value scheduler software, which utilizes the Lerchs-Grossmann (LG) algorithm. LG output included the following six discrete pits for which engineering designs were produced: Jumbo, Oro Belle, JSLA, Hart-South, Hart-North and South Domes. A key element of the mine plan is that pits will be mined sequentially -- for instance, waste from Oro Belle will be used to backfill Jumbo as soon as mining in that pit is completed. In this way the surface footprint of the operation is minimized, as are haulage profiles.

For the base and unconstrained scenarios, NPV was maximized by mining all six pits in the order listed above and to the limits of the LG shell generated using a $1,300/ounce price. This suggests there is potential that any additional resource discoveries at depth below one or more of the pits would report to an economic mine plan. Note that resources for many of the pits are open at depth.

For the static case, where the footprint for impounding waste is restricted to the 1,375 acres currently permitted for disturbance, the mine plan includes the entire Jumbo pit, and the initial phases of the Oro Belle and JSLA pits only.

The pit optimizations targeted both measured and indicated (MI), and inferred resources. The percentage of contained gold classified as each for the three different cases is as follows:

  • Base case -- 3,599,000 ounces total, 77 per cent MI and 23 per cent inferred;
  • Unconstrained case -- 4,166,000 ounces total, 76 per cent MI and 24 per cent inferred;
  • Static case -- 1,081,000 ounces total, 92 per cent MI and 8 per cent inferred.

Note that cut-off grades have been selected based on maximizing aftertax NPV at 5 per cent. As a result, while the base and unconstrained cases mine the same total material, the lower operating cost structure of the unconstrained case results in a cut-off grade of 0.13 g/t while the cut-off for the base case varies between 0.24 to 0.31 g/t, depending on the specific pit being mined. The cut-off for the static case also varies from 0.24 to 0.34 g/t.

The base and static cases envisage the mine initially delivering 6.4 Mtpa of material to the leach pad. The static case maintains this rate for the entire life of mine while the base case is expanded to the currently permitted limit of 8.1 Mtpa processed starting in year three. The unconstrained case assumes permits for an expanded operation would be obtained before start-up and delivers 18.1 Mtpa to the process from the outset.

For all cases, heap-leachable material would be mined using a fleet of hydraulic excavators with 22-cubic-metre dippers loading 170-tonne haul trucks. For the base case, following expansion waste would be mined using larger rope shovels and 290-tonne haul trucks that are more cost-effective. The unconstrained case uses the larger fleet for mining waste from the outset.

Metallurgical and processing

The conceptual process design is based on historic operating practices. The base and static cases assume all material will be crushed to 100 per cent minus 9.5 millimetres using a mobile crusher and heap leached using an adsorption-desorption-recovery (ADR) circuit for gold recovery.

With the base case a modified milling circuit is added as part of the expansion in year three. Material with a grade above 0.85 g/t is ground to 80 per cent passing 150 microns in a ball mill using cyanide solution. The ground material discharges to a gravity recovery circuit. The gold recovery from the milling circuit is estimated to be 50 per cent. Tailings from the gravity process are then agglomerated with cement, mixed with lower-grade crushed material and placed on the leach pad, which eliminates the need for a tailings storage facility. Over time, a recovery of 90 per cent of the remaining gold is expected, which brings the total recovery for material processed in the milling circuit to 95 per cent. The percentage of process feed that is treated through the mill ranges from 10 per cent to 15 per cent, less than the 20-per-cent limit established by the previous operator, based on maintaining the structural integrity of the leach pads.

The unconstrained case is similar to the base case, though the leaching operation starts up at its ultimate limit of 18.1 Mtpa and the mill is also included at start-up. The mill for this scenario is larger than the base case (5,000 tpd versus the 3,000 tpd base case); however, it treats a smaller percentage of total process feed (10 per cent).

Infrastructure

The project is located 35 km from Searchlight, Nev., and 112 km from Las Vegas, Nev. The nearest powerline, which supplied power to the previous operation, is located 29 km from site along the access road. The base and static cases assume the mine would start up using diesel-powered generators, with the base case converting to grid power as part of the expansion in year three. The unconstrained case assumes the power line would be constructed from the outset.

Currently the only existing infrastructure on-site is a laydown yard, a 950 cubic m tank for water and two operating water wells. It is proposed that the following infrastructure be added for the initial phase of the project:

  • Maintenance garage, warehouse and administration complex;
  • Fuel storage facilities;
  • Additional water wells;
  • Internal roads, gate house, and weigh station and dumps.

Operating and capital costs

A key element of the mine design is the sequential mining of pits, with immediate backfilling of pits as they become depleted with run-of-mine (ROM) waste from current mining. This strategy not only minimizes the surface footprint of the operation but also leads to short average one-way haulage distances of two km for the static case and less than three km for both the base and unconstrained cases. This is a key factor allowing relatively low mining costs to be achieved. The estimates of processing costs are based on the historical labour complement, and consumption rates for reagents and current prices for all consumables. The estimates for general and administrative costs are based on the historical complement and current labour rates, while estimates for taxes, insurance and other administrative items are based on historical actual expenditures escalated to present terms.

                  OPERATING COST ESTIMATES BY SCENARIO

Item                                Static      Base    Unconstrained

Mining total ($/t mined)             $1.84     $1.54            $1.47
less capitalized
prestrip(1) ($/t mined)              $0.12     $0.02            $0.05
Mining expensed ($/t mined)          $1.72     $1.51            $1.42
Mining expensed ($/t process feed)   $9.14    $11.94            $7.09
Processing ($/t process feed)        $5.73     $4.87            $3.54
Milling ($/t mill feed)              $0.00     $6.70            $6.34
Leaching ($/t leach feed)            $5.73     $4.07            $2.91
G&A ($/t process feed)               $0.98     $0.73            $0.32
Total site operating
costs ($/t process feed)            $15.84    $17.55           $10.96

(1) Prestrip of 14.9 million tonnes (static and base cases) and 42.3
million tonnes (unconstrained case).

Estimated capital costs for the three scenarios are given in the table. the base and static scenarios include the following elements to achieve a low initial capital cost:

  • The fleet of mine equipment includes available for-sale used equipment.
  • New fleet purchases would be leased, using terms supplied by OEMs operating in the region.
  • Mobile three-stage crushing would be utilized to achieve the crush size of 80 per cent passing 9.5 mm.
  • Crushed material would be trucked to the leach pad instead of using grasshopper conveyors that were employed historically.
  • Diesel generators would be employed instead of installing a connection to the grid.

The base cases includes implementation of the following concurrent with expansion in year three to ensure the longer-term operating cost structure is attractive:

  • Purchase of larger fleet (rope shovels and 290-tonne haul trucks) for mining waste;
  • A power grid connection;
  • Addition of a second mobile crusher in order to achieve the expanded production rate;
  • Grasshopper conveyors to transport crushed material to the leach pads.

The unconstrained case includes these efficiency items from the outset. The unconstrained case also assumes a fixed, three-stage crushing plant.

Closure costs assume that the operation's exemption from the California obligation to backfill mined-out pits will continue to be maintained. The strategy of mining pits sequentially will significantly mitigate any risks associated with this exemption being revoked at some point in the future -- the base case plan results in five of the six pits being backfilled with ROM waste during the course of normal operations.

                 CAPITAL COST ESTIMATES BY SCENARIO
                          (In millions)

Initial capex(1)           Static        Base      Unconstrained

Mine(2,3)                     $41         $41               $107
Processing                    $24         $24               $174
Infrastructure                $10         $10                $19
Subtotal directs              $74         $74               $300
Indirects                     $11         $11                $57
Contingency                   $14         $14                $64
Total initial                 $98         $98               $421
expansion capex
Mine(3)                        $0         $57                 $0
Processing                     $0         $57                 $0
Infrastructure                 $0          $9                 $0
Subtotal directs               $0        $123                 $0
Indirects                      $0         $25                 $0
Contingency                    $0         $24                 $0
Total expansion                $0        $173                 $0
Sustaining capex
mine(3)                       $71        $178               $230
Leach pad an
conveyors                      $8         $48                $85
Site general                  $11         $23                $24
Total sustaining              $90        $250               $339
Closure
Decommissioning                $5         $10                $15
Reclamation                    $4         $17                $22
Subtotal                       $9         $27                $37
Less salvage(4,5)              $3          $5                 $7
Net closure costs              $6         $22                $30

(1) Initial capital includes all expenditures prior to start-up
of process plant.
(2) Static and base include $6.6-million for used fleet (four
drill, two excavator, two FEL and two truck).
(3) New mining fleet leased, with 25-per-cent down payment,
five-year repayment and 5-per-cent interest rate.
(4) Includes allowance for scrap plant of $100,000 (static),
$1-million (base) and $2.5-million (unconstrained).
(5) Includes value of $200,000 for all drills, excavators,
trucks and FEL with life less than 40,000 hours at end of mine
life.

Project economics

The table provides summarized estimated production, costs and cash flows for the base case. The following should be noted:

  • The leach curve assumes a three-year tail following the completion of mining -- annual output during the tail has not been included in the tables, but production and associated costs during the tail years have been included in the life of mine totals.
  • Castle Mountain production includes recoverable quantities of silver, with payable output based on the historic ratio of 0.3 ounce silver per one ounce gold.
  • The deposit is covered by a number of royalties. The current interpretation of these royalties results in a weighted average of approximately 2 per cent of net-smelter-returns royalties and a range from 0 per cent to 5 per cent. A more detailed interpretation of the royalties will be completed during the next round of work.
  • The cash flow model assumes surety equal to the total closure liability would be required from the start of operations. It has been further assumed that the surety would be borrowed and the cash flow model includes the carrying cost of this loan.

                          CASH FLOW FOR BASE CASE
                    (In millions, except where noted)

Production                 Total(1)    Yr -1          Yr 1        Yr 2

Ore (kt)                 132,137           0         5,874       6,350
Waste (kt)               912,135      14,881        25,922      39,203
Total mined (kt)       1,044,273      14,881        31,796      45,553
Refined Au (koz)           2,994           0           106         134
Cash flow
NSR(2)                    $3,899          $0          $138        $174
Mine opex                 $1,578          $0           $55         $74
Process opex                $644          $0           $35         $37
G&A opex                     $97          $0            $6          $6
C1 cash costs             $2,319          $0           $96        $118
Royalty(3)                   $74          $0            $1          $2
Interest(4)                  $10          $0            $0          $0
Total operating
expenses(3,4)             $2,403          $0           $98        $120
Cash taxes                  $225          $0            $8          $9
Initial capex                $98         $98            $0          $0
Expansion capex             $173          $0           $16        $151
Sustaining capex            $250          $0            $4          $2
Closure                      $22          $0            $0          $0
Total investment            $543         $99           $20        $152
Free cash flow              $728        ($99)          $13       ($107)

Production                        Yr 6         Yr 7        Yr 8

Ore (kt)                         8,165        8,165       8,165
Waste (kt)                      68,438       39,153      25,981
Total mined (kt)                76,603       47,317      34,145
Refined Au (koz)                   228          177         148
Cash flow
NSR(2)                            $297         $231        $192
Mine opex                         $121          $72         $59
Process opex                       $39          $39         $39
G&A opex                            $6           $6          $6
C1 cash costs                     $166         $117        $104
Total operating
expenses(3,4)                     $170         $120        $106
Cash taxes                         $22          $19         $13
Initial capex                       $0           $0          $0
Expansion capex                     $0           $0          $0
Sustaining capex                   $40          $22         $13
Closure                             $0           $0          $0
Total investment                   $40          $22         $13
Free cash flow                     $66          $70         $60

Production                       Yr 12        Yr 13       Yr 14

Ore (kt)                         8,165        8,165       8,165
Waste (kt)                     110,192       73,172      58,038
Total mined (kt)               118,356       81,336      66,202
Refined Au (koz)                   175          169         171
Cash flow
NSR(2)                            $228         $220        $223
Mine opex                         $155         $119        $103
Process opex                       $39          $39         $39
G&A opex                            $6           $6          $6
C1 cash costs                     $200         $163        $148
Total operating
expenses(3,4)                     $204         $173        $156
Cash taxes                         ($3)          $0          $7
Initial capex                       $0           $0          $0
Expansion capex                     $0           $0          $0
Sustaining capex                    $3           $1          $1
Closure                             $0           $0          $0
Total investment                    $3           $1          $1
Free cash flow                     $25          $45         $59

Production                     Total(1)   Yr 3       Yr 4       Yr 5

Ore (kt)                     132,137     8,029      8,165      8,165
Waste (kt)                   912,135    24,322     61,664     67,353
Total mined (kt)           1,044,273    32,350     69,829     75,517
Refined Au (koz)               2,994       163        206        186
Cash flow
NSR(2)                        $3,899      $212       $268       $242
Mine opex                     $1,578       $54       $101       $112
Process opex                    $644       $38        $39        $39
G&A opex                         $97        $6         $6         $6
C1 cash costs                 $2,319       $97       $146       $157
Royalty(3)                       $74        $2         $3         $2
Interest(4)                      $10        $0         $0         $0
Total operating
expenses(3,4)                 $2,403       $99       $148       $159
Cash taxes                      $225       $25        $22        $12
Initial capex                    $98        $0         $0         $0
Expansion capex                 $173        $6         $0         $0
Sustaining capex                $250       $35        $60        $52
Closure                          $22        $0         $0         $0
Total investment                $543       $41        $60        $52
Free cash flow                  $728       $46        $37        $19

Production                       Yr 9       Yr 10         Yr 11

Ore (kt)                        8,165       8,165         8,165
Waste (kt)                     35,754      58,579        84,634
Total mined (kt)               43,919      66,744        92,798
Refined Au (koz)                  150         123           215
Cash flow
NSR(2)                           $196        $160          $280
Mine opex                         $74        $102          $122
Process opex                      $39         $38           $39
G&A opex                           $6          $6            $6
C1 cash costs                    $119        $145          $167
Total operating
expenses(3,4)                    $121        $148          $172
Cash taxes                        $10         ($4)          $13
Initial capex                      $0          $0            $0
Expansion capex                    $0          $0            $0
Sustaining capex                   $1          $1            $4
Closure                            $0          $0            $0
Total investment                   $1          $1            $4
Free cash flow                    $63         $15           $92

Production                      Yr 15       Yr 16         Yr 17

Ore (kt)                        8,165       8,165         5,744
Waste (kt)                     63,186      38,731        22,934
Total mined (kt)               71,351      46,895        28,678
Refined Au (koz)                  231         218           178
Cash flow
NSR(2)                           $300        $284          $232
Mine opex                        $114         $81           $60
Process opex                      $39         $39           $28
G&A opex                           $6          $6            $4
C1 cash costs                    $159        $126           $92
Total operating
expenses(3,4)                    $170        $137          $100
Cash taxes                        $20         $22           $26
Initial capex                      $0          $0            $0
Expansion capex                    $0          $0            $0
Sustaining capex                   $2          $3            $2
Closure                            $0         $13            $0
Total investment                   $2         $16            $2
Free cash flow                   $108        $109          $103

(1) Includes revenues and associated costs from 17,000 ounces Au
recovered during rinsing of pads postmine closure.
(2) Based on $1,300/ounce Au price and includes contribution from
byproduct Ag and deductions for refining.
(3) Includes royalties that vary from 0 per cent to 5 per cent of
NSR.
(4) Includes interest on borrowings to satisfy requirement for
postclosure bond.

Metal price sensitivities

As can be seen in the tables, a $10/ounce increase in the long-term gold price has the following impact on the base case:

  • NPV 5 per cent is increased by $19-million (pretax) or $13-million (posttax).
  • Internal rate of return is increased by 0.8 per cent (pretax) or 0.6 per cent (posttax).
  • Simple payback is reduced by approximately 1.3 months (both pretax and posttax).

                              PRETAX SENSITIVITIES
                      (In millions, except where noted)

Gold price           $1,200  $1,250  $1,300  $1,350  $1,400  $1,450  $1,500

NPV 5%
Static                 $109    $142    $176    $209    $243    $276    $310
Base case              $323    $417    $510    $603    $696    $789    $882
NPV 0%
Static                 $161    $202    $243    $285    $326    $367    $408
Base case              $677    $824    $970  $1,117  $1,264  $1,411  $1,558
IRR
Static                27.0%   33.3%   39.5%   45.6%   51.6%   57.5%   63.3%
Base case             19.5%   23.7%   28.0%   32.4%   36.9%   41.4%   46.1%
Simple payback
Static (months)          32      29      27      24      23      21      20
Base case (months)       76      68      61      52      45      42      39

                           POSTTAX SENSITIVITIES
                     (In millions, except where noted)

Gold price           $1,200  $1,250  $1,300  $1,350  $1,400  $1,450  $1,500

NPV 5%
Static                  $75    $100    $124    $149    $173    $196    $219
Base case              $220    $289    $359    $427    $493    $558    $622
NPV 0%
Static                 $119    $150    $180    $210    $239    $268    $296
Base case              $520    $628    $740    $846    $949  $1,052  $1,154
IRR
Static                20.5%   25.4%   30.2%   34.8%   39.3%   43.7%   47.9%
Base case             14.5%   17.4%   20.4%   23.4%   26.3%   29.3%   32.3%
Simple payback
Static (months)          49      34      31      29      27      25      23
Base case (months)       93      83      76      70      65      61      54

Risks

Risks associated with the project include:

  • The metallurgical performance of different process feeds. The base-case mine plan includes processing of 3,599,000 ounces contained gold. Of this total, 1,791,000 ounces (50 per cent) are located within the Jumbo, Oro-Belle and JSLA pits previously mined and above the deepest horizon of historic activity, 158,000 ounces (4 per cent) are located within the same pits but below the deepest horizon of historic activity, 482,000 ounces (13 per cent) are located within the Hart Tunnel pits that are immediately adjacent to the three previously mined pits and the remaining 1,188,000 ounces (33 per cent) are located within the South Domes pit that is offset from the other five by approximately 500 m. There is some confidence that the 50 per cent of material located in the pits and horizons mined previously will perform similar to material processed previously. There is less confidence regarding the metallurgical performance of the remaining material. The next round of work will include metallurgical testing that aims to improve the confidence in recovery estimates for all material planned to be processed.
  • A sustained and significant reduction in gold prices. As noted above, financial returns are sensitive to the gold price. To an extent, downside risk is mitigated by the plan that includes mining of six discrete pits, which provides operators with considerable flexibility in responding to short-term fluctuations in price. The NPV 5 per cent break-even price is $1,050/ounce.
  • Captial cost overruns: As with all mining projects, financial returns are sensitive to capital costs. For Castle Mountain, risks associated with capital costs are mitigated by the relative simplicity of the design (the initial project intends to essentially replicate the previous successful design). Risks associated with capital costs are also mitigated by the permitting status -- subject to obtaining the requisite project finance, construction will be able to start in the near term -- and the current non-inflationary environment within the mining industry.
  • Operating cost overruns: The project is more sensitive to operating costs. For Castle Mountain, risks associated with operating costs are mitigated by following the historic design, which proved the viability of operating concepts. Risk will be further mitigated by the current non-inflationary environment within the mining industry and expected short path to production. In particular, it is expected that skilled personnel are available to staff the project.
  • Water: Historically the operation successfully processed approximately 3.6 million tonnes per year over a 10-year period with continued leaching for several years after mining ceased. This PEA projects a higher processing rate which will require more water, and the work has not yet been done to show there is enough water for the projected rate. The company plans to start hydrogeological work on the project in the very near term.
  • Permitting: While the company has the key mining and reclamation permit required for operation, other permits are still required. There are no assurances that these permits will be granted. The base and unconstrained cases also envision using land which while inside the approved EIS/EIR boundary is outside of the area currently permitted for disturbance. There are no assurances the company will be able to amend the mine plan to include additional areas of disturbance.
  • Mineral resources: This PEA is based on MI and inferred resources, there are no assurances that this material will all be converted to reserves.
  • Further risk factors are set out in the company's continuous disclosure documents filed on SEDAR.

Next steps

Castle Mountain is in possession of the key permit required to restart operations. It is expected that the remaining permits will be acquired in parallel with the feasibility study and that, subject to the availability of project finance, it would be possible to start construction during 2015.

Key elements of work that will be completed as part of the feasibility study include:

  • Hydrogeological studies will be conducted to determine the quantity of water available for process operations. This will include near-term testing of the aquifer for recharge since operations ceased in 2004.
  • Geotechnical studies will be conducted to confirm the open-pit slope angles that can be achieved and also confirm the design criteria for the various impoundments.
  • Metallurgical studies will be conducted to improve confidence in the recovery that can be achieved from the different pits, along with confirming the expected consumption of various reagents.
  • Step-out drilling will be conducted to test undrilled areas within the current pit shells that, in the absence of data, are currently classified as waste. Infill drilling will be conducted to upgrade inferred resources that are included in the early years of the mine plan.

Detailed report

The entire preliminary economic assessment will be available within 45 days of this press release at SEDAR and on the company's corporate website.

This preliminary assessment study is conceptual in nature as in addition to the indicated resources it is also based on inferred resources, which at this stage do not have a high enough geostatistical level of confidence to provide the economic basis for a production decision. The company is in the process of completing its infill drilling program to advance the project to the feasibility study level.

Independent qualified persons

QPs who have prepared or supervised the preparation of the technical information relating to the preliminary economic assessment include:

  • Dr. Kathleen Altman, PE, PhD (RPA);
  • Jason Cox, PEng (RPA);
  • David Penswick, PEng (independent);
  • Reno Pressacco, PGeo (RPA).

All four authors are independent qualified persons as that term is defined in National Instrument 43-101. They have each reviewed and approved the contents of this press release.

Conference call

A conference call to discuss Castle Mountain and the PEA will be held at 11 a.m. ET on April 24, 2014. Interested parties are invited to participate by connecting to the call using one of the following dial-in numbers:

North American toll-free:  877-223-4471

Local/international:  647-788-4922 (use outside of North America)

Conference ID:  34196771

Replay

A digital recording of the conference call will be available for replay two hours after the call's completion. To access the recording, use the dial-in number and then the conference ID number shown below:

Replay dial-in:  800-585-8367

Conference ID:  34196771

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