Mr. Richard Hyde reports
WEST AFRICAN SCOPING STUDY DELIVERS HIGH MARGIN,
LOW CAPITAL COST STAGE 1 GOLD PROJECT
West African Resources Ltd. has released the results of its technical and
financial assessment of a heap-leach starter project on its Mankarga 5 project, Burkina Faso. This
assessment constituted an independently managed scoping study (an Australian JORC (joint ore reserve committee) code term) and a
preliminary economic assessment (a Canadian National Instrument 43-101 term) and is herein for convenience referred to
solely as the scoping study. It was prepared in accordance with the requirements of both the 2012 JORC
code and NI 43-101.
Highlights
The base case is stated on a pretax basis, assuming 100-per-cent project basis, at a gold price of $1,300 per ounce. All amounts are
in U.S. dollars unless otherwise stated.
- IRR (internal rate of return) of 57 per cent, with a 16-month payback on capital costs;
- Free cash flow of $103-million after capital costs;
- NPV (net present value) at 5 per cent of $84-million;
- Preproduction capital of $35-million, plus working capital and contingency of $9-million;
- Estimated average annual gold production of 59,400 ounces for first three years;
- Estimated average annual gold production of 44,100 ounces for life of mine;
- Current study mine life of 5.4 years;
- Life-of-mine strip ratio of 1 to 1;
- Cash costs of $614 per ounce;
- All-in sustaining cash costs of $685 per ounce (including cash costs, royalties, refining and sustaining capital).
Managing director Richard Hyde said: "The study has shown that stage 1 of the development of Mankarga
5 has a very short payback, high internal rate of return and NPV two and a half times capital costs.
"The study marks an important milestone for us as we can now transition from explorer to a low-capital-cost developer, which is an excellent achievement only six months after acquiring the Mankarga 5
project."
Cautionary statements
The company advises that the scoping study results and production targets reflected in this announcement
are preliminary in nature, as conclusions are drawn partly from indicated mineral resources (77 per cent and
inferred mineral resources (23 per cent).
The scoping study is based on lower-level technical and economic assessments, and is insufficient to
support estimation of ore reserves or to provide assurance of an economic development case at this
stage, or to provide certainty that the conclusions of the scoping study will be realized. There is a low
level of geological confidence associated with inferred mineral resources, and there is no certainty that
further exploration work will result in the determination of indicated mineral resources or that the
production target itself will be realized.
In discussing "reasonable prospects for eventual economic extraction" in clause 20, the JORC code requires an
assessment (albeit preliminary) in respect of all matters likely to influence the prospect of economic
extraction, including the approximate mining parameters by the competent person. While a scoping study
may provide the basis for that assessment, the code does not require a scoping study to have been
completed to report a mineral resource.
Scoping studies are commonly the first economic evaluation of a project undertaken, and may be based
on a combination of directly gathered project data together with assumptions borrowed from similar
deposits or operations to the case envisaged. They are also commonly used internally by companies for
comparative and planning purposes. Reporting the general results of a scoping study needs to be
undertaken with care to ensure there is no implication that ore reserves have been established or that
economic development is assured. In this regard, it may be appropriate to indicate the mineral resource
inputs to the scoping study and the processes applied, but it is not appropriate to report the diluted
tonnes and grade as if they were ore reserves.
While initial mining and processing cases may have been developed during a scoping study, it must not
be used to allow an ore reserve to be developed.
Additional details will be provided in an NI 43-101 technical report to be filed on SEDAR within 45 days.
Mankarga 5 positive scoping study results
The scoping
study evaluation was managed by engineering consulting firm Mintrex Pty. Ltd., based in Perth, Western
Australia, with input from a range of specialist consultants, and was completed an input cost estimate of plus or minus 35 per cent.
The scoping study assumes annual throughput of 1.6 million tonnes per year, which is in line with the capacity of the second-hand plant the company purchased earlier in 2014 (see news release dated Feb. 20, 2014). The base case is stated
assuming 100-per-cent project basis and a gold price of $1,300 per ounce. All amounts are in U.S. dollars unless otherwise
stated.
ECONOMIC SUMMARY
Pretax (100%) $1,100/oz $1,300/oz $1,500/oz
NPV0% ($M) $58 $103 $145
NPV5% ($M) $45 $84 $119
IRR % 37% 57% 71%
Payback (months) 25 16 12
After tax (90%*) $1,100/oz $1,300/oz $1,500/oz
NPV0% ($M) $47 $80 $111
NPV5% ($M) $35 $64 $90
IRR % 32% 49% 62%
Payback (months) 26 18 14
* Allows for 10-per-cent free-carried government interest.
This scoping study has demonstrated positive results for a starter project focussing on the oxide portion
of the Mankarga 5 resource. There is immediate potential to improve project economics by upgrading
the existing resource incorporating the 14,000 metres drilled since April, 2014, and from optimizing the mining
schedule further, focusing on processing higher-grade ore in years one and two of the project.
Potential stage 2 sulphide project
The company believes that significant potential also exists to
define additional sulphide resources proximal to the existing resource area. Recent metallurgical testwork confirms sulphide mineralization is non-refractory and amenable to conventional milling and CIL
(carbon in leach) processing, with gold recoveries of up to 98.5 per cent and averaging 93.8 per cent in direct cyanidation testwork (see news release dated July 9, 2014). The company intends to conduct a scoping study for a stage 2 sulphide project
in 2015.
The company also has a number of drill-ready targets in a short trucking distance from the starter project, which
will be targeted with an aggressive drilling campaign following the current wet season later this year.
The company intends to transition directly into feasibility studies on the low-capital-cost stage 1 project,
expanding on the components of the scoping study. The company has already received a number of
proposals from reputable consulting firms for the environment and social impact assessment (ESIA)
portion of the study, and it will appoint a study manager in the near future.
Scoping study details
The scoping study was managed by Mintrex Pty. Ltd. with additional input from a range of specialist mining
consultants (see accompanying table). Mintrex has current experience in West Africa and has undertaken scoping and
feasibility studies on gold deposits in Burkina Faso and West Africa.
The scoping study was completed with plus or minus 35-per-cent accuracy on operating and capital cost estimates.
MINING CONSULTANTS
Consultant Study item
Mintrex Study manager, process plant design, capital
and operating cost estimates
Ravensgate Mining Mineral resource estimate
Crosscut Consulting Mining studies, mining cost estimate
Aurifex Pty. Ltd., ALS Metallurgy Metallurgical testwork
Tenure
West African Resources holds a 90-per-cent interest in the Tanlouka permit, which hosts the Mankarga 5
mineral resource, the subject of this scoping study. The company entered into an agreement in March,
2014, to acquire the remaining 10 per cent of the Tanlouka permit (see news release dated March 5, 2014), which is conditional on
completion of a positive feasibility within 18 months. The Tanlouka permit was renewed in 2012 for a further three years. West African Resources intends to
apply for a mining permit in the second half of 2014. The Burkina Faso government has a right to a 10-per-cent
free-carried interest in all mining projects. The payment of gross production royalties are payable for gold
price ranges from $1,300 (5 per cent) as defined by the Burkina Faso mining code.
Mineral resources
The Mankarga 5 mineral resource estimate used for the scoping study was prepared by Ravensgate
Mining Consultants and was reported in accordance with NI 43-101 standards and JORC (2012) guidelines.
The Mankarga 5 mineral resource contains:
- Indicated resource (at a cut-off of 0.5 gram per tonne) estimated at 10.8 million tonnes grading 1.3 g/t gold,
containing 437,000 ounces gold;
- Inferred resource (at a cut-off of 0.5 g/t) estimated at approximately 32.7 million tonnes grading one
g/t gold, containing 1.05 million ounces gold;
- 29 per cent of the Mankarga 5 deposit classified as indicated and 77 per cent of the oxide and transitional
mineralization classified as indicated;
- Near-surface oxide and transition indicated resources (at a cut-off of 0.5 g/t) estimated at 6.6
million tonnes at a grade of 1.2 g/t gold, containing 252,000 ounces gold; remaining near-surface
oxide and transitional inferred resources (at a cut-off of 0.5 g/t) estimated at approximately 2.7
million tonnes grading 0.9 g/t gold, containing 75,000 ounces gold.
MANKARGA 5 APRIL, 2014, RESOURCE
Indicated resource Inferred resource
Cut-off Grade Grade
(Au g/t) Vol (m3) Tonnes (Au g/t) Au oz Vol (m3) Tonnes (Au g/t) Au oz
0.5 2,520,000 5,500,000 1.2 214,000 910,000 2,000,000 0.8 52,000
Oxide 1 1,210,000 2,700,000 1.7 145,000 160,000 400,000 1.5 17,000
0.5 420,000 1,100,000 1.1 38,000 260,000 700,000 1.1 23,000
Transitional 1 180,000 500,000 1.6 23,000 70,000 200,000 2.2 13,000
0.5 1,550,000 4,200,000 1.4 184,000 11,120,000 30,000,000 1.0 974,000
Fresh 1 970,000 2,600,000 1.7 146,000 4,020,000 10,800,000 1.5 538,000
0.5 4,490,000 10,800,000 1.3 437,000 12,290,000 32,700,000 1.0 1,050,000
Total 1 2,360,000 5,700,000 1.7 315,000 4,250,000 11,400,000 1.6 568,000
The Mankarga 5 mineral resource was drilled using reverse circulation (RC), air core (AC) and diamond
drill holes (DD) on a nominal 100-metre-by-25-metre grid spacing with infill on 50-metre spaced lines in several areas. In total, 116 AC holes (4,601 metres) and eight DD holes (1,283.2 metres) were drilled by West African Resources in
2013-2014. Sixty RC holes (7,296.2 metres) and 71 DD holes (15,439.6 metres) were drilled by Channel
Resources (CHU) in 2010-2012. Holes were angled toward 120-degree or 300-degree magnetic at declinations of
between 50 degrees and 60 degrees, to optimally intersect the mineralized zones.
The existing mineral resource is based on drilling data up until March, 2014. The company has completed
about 14,000 metres of drilling since this time, and intends to upgrade the resource during the December
quarter of 2014.
Further information on the resource estimate can be found in the NI 43-101 technical report on the
Tanlouka project, located under the company's profile on SEDAR and on the company's
website.
Mining
The scoping study proposes the development of the Mankarga 5 deposit via conventional truck and
excavator open-pit mining methods, including drill and blast, load, and haul, using mining contractors. The
mine design was completed in Surpac based on modified Whittle optimization shells derived from the
Ravensgate resource model. Various mining rates were considered; however, the optimal result was
achieved based on the assumption of the open pit being mined out over a 26-month period using a mining
contractor and a 100-tonne hydraulic excavator. Mining is proposed to advance continuously, with ore
stockpiled according to gold grade and oxidation state. The final open-pit footprint will be approximately
2,800 metres long by up to 300 metres wide and up to a maximum depth of 60 vertical metres.
Total material movement over the life of mine is estimated at 16.8 million tonnes, including 8.5 million tonnes of ore, for a 1-to-1 life-of-mine
strip ratio. Over 90 per cent of the material is classified as oxide. Strongly oxidized material is expected to be
free dig and paddock scale drill and blast required for the remainder of the material.
Further improvement with regard to ore scheduling is expected to be made following the updated mineral
resource estimate expected in the December quarter.
Processing
The scoping study assumes Mankarga 5 material will be processed by conventional heap-leach processing
with an initial production throughput of 1.6 million tonnes per year. Testwork completed to date confirms heap-leach
potential of oxide material with recoveries of up to 91.5 per cent and averaging 82.5 per cent returned in coarse-feed-size heap-leach-amenability cyanidation testwork (see news release dated May 9, 2014). Testwork also demonstrated
low cyanide consumption of 0.3 to 0.4 kilogram per tonne.
The process design proposes using existing plant and equipment purchased by West African Resources earlier in
2014 with the installation of a new secondary crusher. The design proposes two-stage crushing, cement
addition and agglomeration, and overland conveying to heap-leach pads. The pad area is designed with
full plastic HDPE lining, conveyor stacking in three six-metre lifts and drip irrigation with dilute sodium
cyanide solution. The adsorption plant is based on the purchase of new equipment, which would be a
modular design with gold recovery via elution, electrowinning and smelting to produce gold dore.
The relative proportion of plant feed over the life of mine by mineral resource category is shown in the accompanying table.
PLANT FEED BY RESOURCE CATEGORY
Plant feed
mineral resource category Tonnes (Mt) Grade (g/t Au) Contained gold (oz)
Indicated 6.5 1.10 231,000
Inferred 2.0 0.74 47,000
Infrastructure
There are no existing services currently available to support the proposed development of the Mankarga
5 heap leach project. As such, the development project will require investment in a number of areas.
Site development
The development plan proposes the plant run-of-mine pad and primary crusher to be located approximately
600 metres from the northern side of the heap pad to minimize conveying distance from the agglomerate. The
ADR, reagents, elution and gold room will be located close to the crushing and agglomeration area.
Pregnant solution and storm water ponds will be located southeast of the heap using natural fall of the
surface from northwest to southeast. Plant administration buildings will be located close to the crushing
and agglomeration area. The study assumes that the mining contractor will be responsible for establishing
all of the facilities required for all mining and maintenance.
Power supply
The study proposes three 750-kilowatt diesel-fired generators, which will be modular and complete with acoustic
enclosures and cooling systems. A build-own-operate (BOO) contract will be adopted for the supply of
this facility.
Operational water supply
Raw water will be supplied from a water storage facility (WSF), which will be supplied from rain
water runoff into a nearby drainage system. It is intended to construct the WSF prior to the wet season to
ensure sufficient water is stored when the plant goes into production. Potable water will be drawn from
water bores.
Accommodation
The study proposes building a camp suitable to accommodate 65 personnel (with a financing agreement
being used for provision of the camp) and assumes that the mining contractor will be responsible for the
provision of their own camp.
Roads
The project area is located approximately 90 kilometres east southeast of the capital, Ouagadougou, and is
accessed via Bitumen Highway (RN4) toward Koupela. Approximately 25 kilometres of existing dirt road will need
to be upgraded from the town of Zempasgo to the proposed site. The development plan also accounts
for general site access and haul roads.
Capital costs
The capital cost estimate has been prepared to a level equivalent of a scoping study, and is presented in
U.S. dollars to an accuracy level of plus or minus 35 per cent. The preproduction capital cost for the heap-leach starter project
is $35.3-million, plus working capital of $2.8-million and contingency of $5.7-million, for a total preproduction capital cost
of $43.9-million. A summary of the capital cost estimate is presented in the accompanying table.
CAPITAL COST ESTIMATE
(in millions of U.S. dollars)
Cost area Total
Process plant $21.6
Infrastructure $6.1
Owner's costs $7.7
Capital cost $35.3
Working capital $2.8
Contingency $5.7
Total preproduction capital $43.9
A further $3.3-million in sustaining capital costs is estimated over the life of mine.
Operating costs
Mine operating costs for processing, maintenance, mining and administration have been estimated for a
number of sources, including:
- First-principle estimates;
- Consumption rates as provided in the process design criteria;
- Mintrex database of costs for similar operations the West African region.
The life-of-mine total cash costs for the project are estimated to be $671 per ounce, and a breakdown is presented in the accompanying table.
LOM OPERATING COSTS
Operating costs US$/t ore (processed) US$/oz (produced)
Mining $5.70 $206
Processing $9.18 $332
G&A $2.10 $76
Cash operating cost $16.98 $614
Royalties $1.58 $57
Total cash cost $18.56 $671
Sustaining capital $0.39 $14
All-in sustaining cash cost $18.95 $685
Sensitivity analysis
Sensitivity analysis was completed on the Mankarga 5 starter project based on plus or minus 10-per-cent changes in capital
cost, operating cost and gold price.
PROJECT SENSITIVITY NPV5% (PRETAX)
Item 10% 0% -10%
Capital costs ($M) $80 $84 $88
Operating costs ($M) $71 $84 $96
Gold price ($M) $106 $84 $59
Work program
This scoping study supports the development of a starter project focusing on the heap-leachable,
predominantly oxide portion of the Mankarga 5 mineral resource. West African Resources will now be focusing on
the coming feasibility study, which will expand upon the scoping study and target areas where there
are opportunities to improve economics, including a resource upgrade incorporating the 14,000 metres drilled
since the April resource estimate.
The company has recently completed detailed auger drilling over the entire Tanlouka permit (16,000 metres),
results from which will be reviewed over the current wet season. Drilling will commence in earnest
following the current wet season, targeting high-priority prospects and following up significant historical
results outside the current resource area.
The company's focus since completing its merger with Channel Resources in January, 2014, has been on improving
the Mankarga 5 mineral resource and demonstrating that a stand-alone project is a viable proposition.
It can now focus on adding additional near-surface resources by following up targets at historical
prospects, including Mankarga 1 through 4, and tackling untested targets at Manesse and Tanwaka, in addition to
existing targets at Goudre and Moktedu. The proposed project development schedule for Mankarga 5 is
shown in the accompanying table.
TIMELINE OF KEY DELIVERABLES FOR THE MANKARGA 5 PROJECT
2014 2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Drilling X X X X X X
Resource upgrade X X
Scoping study heap leach (stage 1) X X X
Metallurgical tests X X X X
Feasibility study X X
Permitting X X X
Scoping study CIL (stage 2) X
Construction X X X X
Production X
Competent person's statement
Information in this announcement that relates to mineral resources is based on, and fairly represents, information and supporting
documentation prepared by Don Maclean, a consultant of Ravensgate Mineral Industry Consultants, an independent
consultancy group specializing in mineral resource estimation, evaluation and exploration. Mr. Maclean is a member of the
Australian Institute of Geoscientists and is a registered professional geologist (exploration and mining). Mr. Maclean has sufficient
experience that is relevant to the style of mineralization and type of deposit under consideration, and to the activity which he
is undertaking, to qualify as a competent person as defined in the the JORC code and as a qualified person under NI 43-101. Mr. Maclean has reviewed the contents of this news release and consents to the inclusion in this
announcement of all technical statements based on his information in the form and context in which they appear.
Information in this announcement that relates to exploration results and exploration targets is based on, and fairly represents,
information and supporting documentation prepared by Richard Hyde, a director, who is a member of the Australian Institute
of Mining and Metallurgy and the Australian Institute of Geoscientists. Mr. Hyde has sufficient experience that is relevant to the
style of mineralization and type of deposit under consideration, and to the activity which he is undertaking, to qualify as a
competent person as defined in the JORC code and as a qualified person under NI 43-101. Mr. Hyde has
reviewed the contents of this news release and consents to the inclusion in this announcement of all technical statements based
on his information in the form and context in which they appear.
We seek Safe Harbor.
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