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Exeter Resource Corp
Symbol XRC
Shares Issued 88,660,253
Close 2017-01-17 C$ 1.075
Market Cap C$ 95,309,772
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Exeter Resource secures second water source at Caspiche

2017-01-17 10:23 ET - News Release

Mr. Wendell Zerb reports

EXETER SECURES SECOND WATER SOURCE -- OUTLINES PATHWAY FOR FIRST STAGE DEVELOPMENT OF CASPICHE OXIDES

Exeter Resource Corp. has secured a second water source, which will provide a timely development pathway for its 100-per-cent-owned Caspiche gold-oxide/gold-copper project in Chile.

The company will now proceed with technical studies intended to advance the first-stage 1.7-million-ounce gold-oxide project through to a production decision.

Caspiche is one of the largest gold discoveries made in Chile in recent years. Unique characteristics of the deposit include its sizable oxide-gold zone and underlying higher-grade gold-copper core. This combination offers mining opportunities that range from modest-scale oxide heap-leach gold production to larger-scale open-pit/underground mining of the gold-copper zone.

Development options were assessed in the preliminary economic assessment released in 2014. This report reviewed three potential development alternatives, all of which require significantly less capital than earlier studies.

Over the course of the last 18 months, the company has been optimizing Caspiche oxide development requirements, including detailed metallurgical studies, and, importantly, infrastructure alternatives, as well as now securing a second water source.

The second water source

To ensure an immediate development pathway for Caspiche oxides, Exeter has signed an option agreement with Cleanairtech Sudamerica SA (CAT) to supply 50 litres per second of desalinated water. It is the company's intention to use this water in construction, commissioning and operation of the first-stage heap-leach gold facility at Caspiche, subject to the outcome of a feasibility study.

The plant and pipeline that CAT operates to Tierra Amarilla already have the capacity available to deliver this water. Exeter will now initiate design, engineering and permitting of the required pipeline from Tierra Amarilla to Caspiche.

Wendell Zerb, Exeter's president and chief executive officer, stated: "Securing the water option now allows the company to advance planning and studies for the development of the oxide heap-leach gold project.

"Any question regarding potential development of the oxides due to the uncertain timeline for approval of water rights at Exeter's large Penas Blancas water discovery, by the Chilean government, is eliminated by the water option.

"In the medium to long term, the development of the Maricunga region's huge mineral potential will depend on sustainable and low-cost supplies of water and energy. The area has both, in terms of large volumes of unused subterranean water, including Exeter's Penas Blancas water discovery, and world-class solar and wind power resources."

Next steps

Background engineering studies for Caspiche have been continuing and are now sufficiently advanced that new studies leading to a production decision can be fast-tracked. Exeter initially plans to conduct a 6,000-metre infill and expansion drill program starting early in the first quarter of 2017. The program is designed to improve the definition of the oxide-gold zone and other potentially leachable gold zones currently not included in the oxide-gold heap-leach mine plan. While the gold-oxide zone is well defined by previous drilling, potentially leachable material defined as occurring within a transition zone below the oxides has not been well defined. Additional drilling and expanded metallurgical studies on this material open the potential for future leachable gold mineralization at Caspiche.

Upon completion of the drilling program, Exeter expects to initiate new advanced studies on the oxide-gold project using updated capital and operating cost estimates, as well as alternative infrastructure requirements associated with the desalination water source.

In the 2014 preliminary economic assessment, the heap-leach oxide-gold project produced a projected average of 122,000 ounces gold equivalent annually over a planned 10-year mine life, including 148,000 ounces gold equivalent annually in the first five years. A very low strip ratio (0.27:1) and favourable gold recoveries produced excellent economics at $1,300 (U.S.) per ounce gold, including after-tax (27-per-cent tax rate) net present value (discounted at 5 per cent) of $252-million (U.S.), internal rate of return of 28.5 per cent, projected average total cash operating costs of $589 (U.S.) per ounce gold equivalent and all-in sustaining costs of $676 (U.S.) per ounce gold equivalent.

The company's 2014 preliminary economic assessment included $65-million (U.S.) in capital costs (direct and indirect) to reticulate water from Penas Blancas, and the company estimates only moderately higher capital costs to reticulate water from the CAT site. Exeter expects a desalination alternative used in a new gold heap-leach model will, however, result in an increase in operating costs when compared with using the high-altitude Penas Blancas water source. That being said, Exeter anticipates that cost reductions, including lower power, fuel, consumables, and currency exchange ratios, together with the higher initial gold recoveries, as reported earlier by the company, will mitigate the impact of an increase in water costs.

The water option agreement

The option, which has an initial term of three years, can be extended for an additional year. To maintain the option over the four-year period, Exeter will make escalating annual option payments totalling $1.25-million (U.S.).

Exeter can exercise the option at any time and negotiate a water sales and purchase contract with CAT, following which option payments cease. The supply contract will be in line with existing sales and purchase contracts that CAT has with other customers, where water costs are based on a transparent model of fixed and variable costs. Once the supply contract has been signed, CAT must supply the agreed quantity of water to Exeter at Tierra Amarilla within 12 months.

CAT currently operates a 400-litre-per-second desalination plant at Punta Totoralillo and a pipeline to Tierra Amarilla, located 120 kilometres from the Caspiche project. It will supply the optioned water at Tierra Amarilla from existing capacity. CAT also has permits and infrastructure in place to expand supply to 600 litres per second.

CAT is a company jointly owned by CAP SA and Mitsubishi Corp. CAP, listed on the Santiago Stock Exchange, is the Chilean holding company for the largest Chilean iron ore miner and steel producer, as well as the third-largest port operator in the country. CAP has invested substantially in infrastructure for its operations, such as ports, energy and water, and markets access to its infrastructure to third parties.

2014 preliminary economic assessment

The 2014 preliminary economic assessment showed three potential development options:

  1. A 30,000-tonne-per-day heap-leach oxide gold project producing a projected average of 122,000 ounces gold equivalent annually over a planned 10-year mine life, including 148,000 ounces gold equivalent annually in the first five years; a very low strip ratio (0.27:1) and favourable gold recoveries, drive excellent economics;
    • Projected average total cash operating costs $589 (U.S.) per ounce gold equivalent and all-in sustaining costs of $676 (U.S.) per ounce gold equivalent;
    • Pretax net present value (discounted at 5 per cent) of $355-million (U.S.) at $1,300 (U.S.) per ounce gold and internal rate of return of 34.7 per cent;
    • After-tax (27-per-cent tax rate) net present value (discounted at 5 per cent) of $252-million (U.S.) and internal rate of return of 28.5 per cent;
    • Payback period of 3.4 years from initial construction;
    • Estimated initial capex of $210-million (U.S.) plus $41-million (U.S.) in contingencies;
    • Required water of 44 litres per second;
  2. A larger, scalable 60,000-tonne-per-day open-pit, heap-leach oxide-gold operation, followed by expanded open-pit mining (27,000 tonnes per day) of the gold-copper sulphide zone; planned mine life is 18 years with projected average annual production of approximately 289,000 ounces gold equivalent per year;
  3. A scalable 60,000-tonne-per-day open-pit, heap-leach oxide-gold operation transitioning to underground sublevel open-stope mining (27,000 tonnes per day) of the higher-grade gold-copper sulphide zone; projected annual average production is 250,000 ounces of gold equivalent in years 1 to 3 and 425,000 ounces gold equivalent in years 4 to 13; over a planned 42-year mine life, projected average production is 344,000 ounces gold equivalent per year.

                             MINERAL RESOURCES
 
Material         Class          Tonnes      Au     Cu     Ag    AuEq    AuEq 
                             (millions)   (g/t)    (%)  (g/t)   (g/t)   (Moz)
 
Oxide            Measured         65.9    0.46      -   1.55    0.46     1.0  
Oxide            Indicated        55.6    0.39      -   1.63    0.40     0.7  
total oxide      M&I             121.5    0.43      -   1.58    0.43     1.7  
Sulphide         Measured        554.2    0.58   0.23   1.16    1.02    18.3 
Sulphide         Indicated       727.9    0.48   0.18   1.17    0.84    19.6 
Total sulphide   M&I           1,282.1    0.52   0.20   1.17    0.92    37.9 
Total M&I                      1,403.6    0.51   0.19   1.20    0.88    39.6 

Notes: 
Oxide and sulphide materials above cut-offs of 
0.18 g/t AuEq and 0.30 g/t AuEq.
Higher-grade gold-copper zone at cut-offs of 
1.5 g/t, one g/t and 0.75 g/t AuEq.

Material         Class          Tonnes      Au     Cu     Ag    AuEq    AuEq 
                             (millions)   (g/t)    (%)  (g/t)   (g/t)   (Moz)

Total sulphide   M&I             177.1    1.05   0.41   1.71    1.83    10.4 
Total sulphide   M&I             510.0    0.80   0.33   1.45    1.43    23.5 
Total sulphide   M&I             810.2    0.67   0.29   1.35    1.22    31.8 

Note: This is an underground operation.

About Exeter

Exeter is focused on the exploration and development of the Caspiche project in Chile. The project is situated in the Maricunga gold district, between the Maricunga mine (Kinross Gold Corp.) and the Cerro Casale gold deposit (Barrick Gold Corp. and Kinross Gold).

The company currently has cash reserves of $16-million and no debt.

We seek Safe Harbor.

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