Mr. Keith Neumeyer reports
FIRST MINING FINANCE ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR ITS SPRINGPOLE GOLD PROJECT
First Mining Finance Corp. has released positive results of an independent preliminary economic assessment for its Springpole gold project in Northwestern Ontario, Canada. The PEA was prepared in accordance with National Instrument 43-101 by SRK Consulting (Canada) Inc. of Vancouver, Canada. The PEA describes the potential technical and economic viability of establishing a conventional open-pit gold mine-and-mill complex for the project. The base case scenario utilizes long-term metal prices of $1,300 per ounce of gold and $20 per ounce of silver.
Overall Springpole site plan
The PEA was prepared on a 100-per-cent ownership basis and all amounts in this news release are stated in U.S. dollars unless otherwise noted.
Highlights of the PEA are as follows:
- Initial capital expenditure of $586-million and sustaining capital expenditures of $117-million for total estimated capital expenditures of $703-million over the projected 12-year mine life (LOM). In addition, closure and reclamation costs are estimated at $20-million;
- Pretax net present value at a 5-per-cent discount rate of $1,159-million calculated at the beginning of the two-year construction period and a pretax internal rate of return of 32.3 per cent for the base case;
- After-tax NPV at a 5-per-cent discount rate of $792-million and after-tax IRR of 26.2 per cent for the base case;
- Estimated payback of initial capital in 3.5 years from the commencement of commercial production;
- Estimated 12-year LOM operation supporting a 36,000-tonne-per-day process plant that includes crushing, grinding, carbon-in-pulp leaching as well as gold recovery via activated carbon to produce dore bullion;
- LOM strip ratio of 2.1 to 1;
- Average annual payable production projected to be 296,500 ounces Au and 1,632,000 ounces Ag for LOM with average production for the nine years at full capacity of 357,100 ounces Au and 2,038,800 ounces Ag per annum;
- Estimated cash costs of $619/ounce gold equivalent (cash costs include on-site mining, processing and G&A (general and administrative) costs, treatment and refining charges, and royalties);
- All-in cash costs (in addition to cash costs including initial/sustaining capital and mine closure) estimated at $806/ounce AuEq;
- Recommends moving forward with a prefeasibility study;
- The company is working toward the filing of an environmental assessment in Q1 2018.
"This updated PEA study represents a significant improvement in both economics and annual and total ounces of gold and silver produced when compared with the previous PEA completed for Gold Canyon in 2013. The results of this PEA indicates that the Springpole project may have economic viability. The PEA demonstrates that the project has excellent margins with low cash costs of $619 (U.S.) per ounce of gold equivalent and an average annual payable production of 322,000 ounces of gold equivalent, over the life of mine. On that basis, once in production as contemplated by the PEA, Springpole would be one of the largest gold mines in North America," said Keith Neumeyer, First Mining's chairman.
Readers are cautioned that the PEA is preliminary in nature, it 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, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Preliminary economic assessment -- project economics
The results of a discounted cash flow analysis for the project are presented in the tables. NPV, IRR and payback values are estimated for both pretax and posttax scenarios. The base case scenario utilizes the long-term metal prices outlined in the table and a discount rate of 5 per cent. IRR and NPV values are calculated at gold and silver prices of $1,300 and $20 per ounce, respectively.
PRETAX DISCOUNTED CASH FLOW ESTIMATES FOR VARYING GOLD PRICES
(in millions, except where noted)
Gold price ($/oz)
$1,000 $1,150 Base case $1,300 $1,450 $1,600
Discount rates 3% $592 $1,000 $1,409 $1,817 $2,226
Base case 5% 457 808 1,159 1,510 1,861
8% 297 580 863 1,145 1,429
IRR (%) 18.1 25.7 32.3 38.2 43.6
Payback (production) (years) 4.3 3.6 3.2 2.8 2.5
* Assumes base case metals prices of $1,300/ounce gold and $20/ounce silver and
discount rate of NPV 5 per cent.
AFTER-TAX DISCOUNTED CASH FLOW ESTIMATES FOR VARYING GOLD PRICES
(in millions, except where noted)
Gold price ($/oz)
$1,000 $1,150 Base case $1,300 $1,450 $1,600
Discount rates 3% 394 686 977 1,268 1,558
Base case 5% 290 541 792 1,042 1,292
8% 168 370 572 774 975
IRR (%) 14.4 20.8 26.2 31.1 35.7
Payback (production) (years) 4.2 3.5 3.1 2.7 2.4
* Assumes base case metals prices of $1,300/ounce gold and $20/ounce silver, and a
discount rate of NPV 5 per cent.
Mining and processing
The PEA is based on a conventional truck-and-shovel, open-pit mine design at a single pit with milling, crushing, grinding and carbon-in-pulp leaching. Gold recovery is via an activated carbon process to produce dore bullion bars. Based on the preliminary metallurgical work undertaken for the project, the average recoveries are projected to be 80 per cent for gold and 85 per cent for silver. The mineralized material at the project will be processed through conventional milling and processing for an estimated LOM of 12 years. Total processing is based on a 36,000-tonne-per-day operation. Key parameters and assumptions used in the PEA study are discussed below and summarized in the tables.
MINING RATES AND VOLUMES OF MINED MATERIAL
Type of mining Total years Avg. tonnes/year (000) Avg. tonnes/day Total tonnes (000)
Open-pit mineralized material (yrs 0-11) 11 13,764 37,711 151,408
Open-pit waste (yrs 0-11) 11 29,000 79,453 319,002
Total material mined 470,411
Average strip ratio for the life of mine 2.1
PROJECTED METAL PRODUCTION
Metal Total payable production Avg. annual production life of mine
(000 oz) (000 oz)
Gold 3,558 297
Silver 19,583 1,632
BASE CASE HEAD GRADES, RECOVERIES, METAL PRICES AND OTHER DATA
Head grades
Gold (g/t) 1.00
Silver (g/t) 5.28
Metal recoveries
Gold (%) 80.0
Silver (%) 85.0
Payables
Payable gold (%) 99.5
Payable silver (%) 98.0
Metal prices
Gold ($/oz) 1,300
Silver ($/oz) 20
Other parameters
Life of mine (years) 12
Fuel price ($/L) 0.78
Electrical power ($/kwh) 0.08
Exchange rate (CAD/USD) 0.75
Capital costs
Mining capital costs, as detailed in the table, were estimated on the basis of a detailed equipment schedule matched to the mining production schedule. Total mining equipment capital costs were estimated at $193-million for the life of the project inclusive of a 10-per-cent contingency and a 5-per-cent spares allowance.
Processing capital costs for mill and plant infrastructure were estimated to be $252-million inclusive of a $30-million contingency. No major plant rebuild or expansion is considered in the evaluated production scenario. No specific allowance for sustaining capital has been made and the PEA assumes that the continuing operating maintenance cost is sufficient to maintain the equipment in operating condition. No allowance for salvage value was made.
CAPITAL ESTIMATE SUMMARY
(in millions)
Initial capital estimate
Preproduction capital cost $7
Open-pit mining 143
Dike and lake dewatering 32
Process plant 252
Tailings management facility 27
Infrastructure 112
Water management 13
Initial development capital 586
Sustaining capital estimate
Open-pit mining 50
Infrastructure 8
Tailings management facility 60
Total sustaining capital 117
Total capital expenditure for life of mine 703
Closure costs 20
Total capital costs 723
Rounding may result in apparent summation differences.
Operating costs
The PEA estimates that the project can produce approximately 296,500 ounces of payable gold per year and approximately 1,632,000 ounces of payable silver per year at an estimated total cash cost of $619/ounce gold equivalent over the estimated 12-year LOM. Maintenance, parts and repairs are estimated based on industry standard factors for these costs. Mining costs are estimated at $1.60 per tonne of material mined, at a strip ratio of 2.1 which equates to $5.30 per tonne of material processed. Details of the estimated operating costs, and other charges, are presented in the tables.
OPERATING COSTS PER TONNE PROCESSED
Item $/tonne processed
Mining $5.3
Processing 7.5
General and administrative 1.8
Tailings handling 1.5
Total on-site operating costs 16.0
TREATMENT AND REFINING CHARGES AND ROYALTIES
Item Units
Royalty rate (%) 3.0
Gold refining cost estimate ($/oz) 5.0
Payable gold assumption (%) 99.5
Payable silver assumption (%) 98.0
Infrastructure
A 60-kilometre-long-by-23-metre-wide right-of-way will need to be cleared, grubbed and prepared for the installation of a 115-kilovolt wood pole transmission line using a 636,000-mil conductor. The proposed right-of-way would start from Highway 105 near Ear Falls and travel a further 90 km alongside the existing Hydro One corridor overland where it would connect to and follow the access corridor road to the project site.
A 12 m wide, two-lane, unpaved, 39 km access corridor road would extend from the Springpole deposit along the Birch River before it connects up with the planned Wenasaga Road. Other road options are also being considered.
Springpole Lake dewatering
Three dewatering dikes with a total length of approximately 510 metres will need to be constructed in Springpole Lake to allow a small portion of the lake to be dewatered. It is estimated that only approximately 6.1 per cent of the surface area of the lake will be affected. The depth of the lake at the point where the dikes are proposed to be constructed ranges from 1.2 to 5.1 metres and the height of the dikes will need to be three metres above the lake level. The dikes would be constructed under wet conditions; therefore, two silt entrapment curtains will need to be deployed downstream of the dike locations to prevent high suspended solids in the remainder of the lake. Prior to the placement of fill material, the foundation of the dam will need to be dredged to remove any soft lakebed sediments. The rock fill material would be placed, and then the grout curtain and plastic concrete cut-off wall would be built through the completed dike.
An estimated 21.7 million cubic metres of water will have to be removed from the area of Springpole Lake within the dewatering dikes. The PEA estimates it will take approximately one year to pump this water over the dikes. This can be accomplished during the mill construction phase.
The capital cost of construction of the dikes and dewatering is estimated by the PEA to be $32-million which is included in the total capital cost of the project.
Mineral resource estimate
The mineral resource estimate set out in the table, and which formed the basis of the PEA, was completed by Dr. Gilles Arseneau, PGeo (APEGBC No. 23474), an independent qualified person as defined in National Instrument 43-101. The effective date of this resource estimate is March 17, 2017. The mineral resource estimate prepared by SRK considers diamond drill holes drilled by different operators during the period 2003 to 2016. The majority of the drilling has been completed by the project's previous owner, Gold Canyon Resources Inc. The mineral resource for the Springpole project is supported by 644 core boreholes drilled by Gold Canyon. The geological and assay databases have been reviewed and audited by SRK. Dr. Arseneau is of the opinion that the current drilling information is sufficiently reliable to interpret with confidence the boundaries of the pit shell and that the assay data are sufficiently reliable to support the mineral resource estimation.
Differences between the previously reported mineral resource estimate (as reported in the technical report dated Oct. 17, 2012) are primarily related to the addition of drill holes completed by Gold Canyon in late 2012 and early 2013, as well as the four drill holes completed by First Mining in 2016 for metallurgical test purposes. The Gold Canyon drilling specifically targeted inferred category material with the result that over 95 per cent of the contained gold in the resource is now classified as indicated and First Mining anticipates no further need for drilling to convert the remaining inferred resources in preparation for a prefeasibility level assessment.
Additional information about the resource modelling methodology will be documented in the upcoming NI 43-101 technical report for the PEA.
RESOURCE ESTIMATE FOR THE SPRINGPOLE PROJECT
Category Quantity (Mt) Grade Au (g/t) Grade Ag (g/t) Contained metal Au (Moz) Contained metal Ag (Moz)
Indicated 139.1 1.04 5.4 4.67 24.19
Inferred 11.4 0.63 3.1 0.23 1.12
1. These resource estimates have been prepared in accordance with NI 43-101 and the 2014 Canadian Institute
of Mining, Metallurgy and Petroleum definition standards. Mineral resources that are not mineral reserves do
not have demonstrated economic viability, see cautionary notes at the end of this news release.
2. Open-pit mineral resources are reported at a cut-off grade of 0.4 g/t gold. Cut-off grades are based on a
gold price of $1,400/ounce and a gold processing recovery of 80 per cent, and a silver price of $15/ounce and
a silver processing recovery of 60 per cent.
3. Appropriate mining costs, processing costs, metal recoveries and interramp pit slope angles were used to
generate the pit design.
4. The estimated life of mine strip ratio for the resource estimate is 2.1.
5. Rounding may result in apparent summation differences between tonnes, grade and contained metal content.
6. Tonnage and grade measurements are in metric units. Contained gold and silver ounces are in troy ounces.
7. All composites have been capped where appropriate.
Project sensitivities
Project cash flow is highly sensitive to changes in the price of gold and silver as indicated in the vertical axis in the table. The project is also sensitive to variations in capital and operating costs as indicated in the horizontal axis in the table. This table shows the effect of increasing or decreasing the price of gold and silver and capital expenditure and operating expenditure estimates for the project by plus or minus 45 per cent.
PROJECT NPV SENSITIVITY
(in millions)
Total project operating and capital costs
Net present value @ 5% $1,619 $2,061 $2,503 $2,944 $3,386 $3,828 $4,269
-45% -30% -15% 0% 15% 30% 45%
LOM revenue $2,667 -45% 498 241 -22 -316 -624 -931 -1,239
3,394 -30% 851 596 341 83 -179 -462 -770
4,122 -15% 1,203 948 694 439 183 -76 -337
4,849 0% 1,554 1,300 1,046 792 537 282 24
5,576 15% 1,906 1,652 1,398 1,143 889 635 380
6,304 30% 2,258 2,004 1,750 1,495 1,241 987 732
7,031 45% 2,610 2,356 2,101 1,847 1,593 1,339 1,084
Risks and opportunities
As with all mining ventures, a large number of risks and opportunities can affect the outcome of the project. Most of these risks and opportunities are based on uncertainty, such as lack of scientific information (test results, drill results and so on) or the lack of control over external factors (metal prices, exchange rates and so on).
Subsequent higher-level engineering studies would be required to further refine these risks and opportunities, identify new risks and opportunities, and define strategies for risk mitigation or opportunity implementation.
The PEA identified a number of principal risks for the project which are summarized below:
- Geological interpretation and mineral resource classification (13 per cent of the resources used in the mine plan are inferred);
- Due to a relatively small number of metallurgical samples tested, larger variations in mineralogy and metal recovery may exist than have been observed to date;
- Geotechnical and hydrogeological considerations;
- No information on baseline groundwater quality;
- No physical characterization of the tailings material has been done;
- No waste rock characterization has been done;
- Construction management and cost containment during development of the project;
- High exposure to potential escalation of costs associated with latent ground conditions due to need for dewatering dikes and large, shallow tailings management facility;
- Given that most of the Portage zone, which contains the majority of the ounces at the project, lies under a small portion of Springpole Lake, the permitting period associated with the project could be longer than assumed in the PEA study;
- Increased operating cost and/or capital cost;
- Reduced metal prices.
The PEA also identified a number of opportunities to improve the economics of the project. Areas that will be investigated to further enhance the project include:
- More refined pit optimization parameters could result in better optimized open-pit limits than the pit shell selected for the PEA;
- Better hydrogeological and geotechnical understanding may increase pit slope angles over those used in the PEA;
- There are other geophysical targets around the current resource, particularly to the southwest of the current resource. Additional drilling has the potential to add resources;
- Investigations may reveal that sufficient quantities of low permeability material for dam core construction may be available on site and bedrock may be located at a shallower depth than assumed in the cost estimate;
- Lake dewatering could occur at a faster rate if the water was discharged into several different surrounding water bodies;
- Further metallurgical testing and refining milling processes may result in improved recoveries;
- The potential to upgrade the mineral resource classification of the deposit;
- Improved metal prices.
Qualified persons and NI 43-101 technical report
The PEA for the project summarized here was completed by SRK (contributors listed in the table) and will be incorporated in an NI 43-101 technical report which will be available under the company's SEDAR profile and on the company's website, within 45 days of this news release.
PEA CONTRIBUTORS
Qualified person Scope of responsibility
Dr. Gilles Arseneau, PGeo, associate consultant Geology
Dr. Adrian Dance, PEng, principal consultant Metallurgy
Victor Munoz, PEng, senior consultant Water resources
Grant Carlson, PEng, senior consultant Mining, infrastructure
Bruce Murphy, FSAIMM, principal consultant Geotechnical
Michael Royle, PGeo, principal consultant Hydrogeology
Dr. Maritz Rykaart, PEng, principal consultant Tailings management
Mark Liskowich, PGeo, principal consultant Environmental
Readers are cautioned that the PEA is preliminary in nature and includes the use of inferred 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. Mineral resources do not have demonstrated economic viability and future infill drilling and scoping, prefeasibility and feasibility studies will determine what percentage of the inferred resource can be placed into the minable category. Thus, there is no certainty that the production profile concluded in the PEA will be realized. Actual results may vary, perhaps materially. The company is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other issue which may materially affect this estimate of mineral resources. The projections, forecasts and estimates presented in the PEA constitute forward-looking statements and readers are urged not to place undue reliance on such forward-looking statements. Additional cautionary and forward-looking statement information is detailed at the end of this news release.
Qualified person
Dr. Chris Osterman, PGeo, chief executive officer of First Mining, is the qualified person for the purposes of NI 43-101, and he has reviewed and approved the scientific and technical disclosure contained in this news release.
About First Mining Finance Corp.
First Mining is a mineral property holding company whose principal business activity is to acquire high-quality mineral assets with a focus in the Americas. The company currently holds a portfolio of 25 mineral assets in Canada, Mexico and the United States with a focus on gold. Ultimately, the goal is to continue to increase its portfolio of mineral assets through acquisitions that are expected to comprise gold, silver, copper, lead, zinc and nickel.
We seek Safe Harbor.
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