Mr. Nick Campbell reports
ARTEMIS ANNOUNCES REVISED PFS FOR BLACKWATER PROJECT
Artemis Gold Inc. has provided the results of a prefeasibility study (PFS) based on a revised development approach to the recently acquired, and 100-per-cent-owned Blackwater gold project in central British Columbia.
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Unlevered after-tax NPV5 (net present value 5 per cent) of $2.2-billion;
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After-tax IRR (internal rate of return) of 35 per cent;
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Payback on initial capital costs of two years.
Key economic outputs of the study
A summary of the technical and financial metrics of the PFS is provided in the "Key results of the PFS, life of mine (including the New Gold Inc. stream)" table.
KEY RESULTS OF THE PFS, LIFE OF MINE (INCLUDING THE NEW GOLD INC. STREAM, DEFINED BELOW)
Description Unit Base case Levered case (3)
Physicals
Ore tonnes Mt 334.0 334.0
Grade (Au) g/t 0.75 0.75
Grade (Ag) g/t 5.78 5.78
Operational strip ratio (1) 2.0 2.0
Recovery (Au) % 93% 93%
Recovered ounces (Au) k oz. 7,450 7,450
Recovery (Ag) % 65% 65%
Recovered ounces (Ag) k oz. 40,374 40,374
Cost metrics
Initial capital cost $ million 592 592
Phase 2 expansion capital cost $ million 426 426
Phase 3 expansion capital cost $ million 398 398
Sustaining and closure capital cost $ million 712 712
Operating costs $/t milled 17.65 17.65
Cash costs/oz k oz 715 715
All-in sustaining costs/oz $/oz 811 811
Economic results
After-tax NPV5 $ million 2,247 2,249
After-tax IRR % 34.8% 49.7%
Payback on initial capital years 2.0 2.2
Cumulative free cash flow (2) $ million 5,906 5,934
(1) Operational strip ratio is calculated as total waste mined divided by ore mined.
(2) Free cash flow is calculated as project operating cash flow minus sustaining/closure
capital and tax.
(3) Levered case assumptions and parameters are disclosed under "Economic results. The
leveraged case reflects the impact of debt. Financing of the project is not a measure of the economic viability and technical feasibility of the project, but a measure of the company's ability to secure debt financing for the project.
The base case economics have been calculated on an unlevered basis, based on a gold price of $1,541 (U.S.) per ounce, a silver price of $19.60 (U.S.) per ounce and a foreign exchange rate of $1 (Canadian) being equal to 76 U.S. cents. The economics include the effect of the Blackwater gold stream, which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. (refer to news release dated Aug. 24, 2020). Under the terms of the stream, New Gold will purchase 8.0 per cent of the refined gold produced from the project. Once 279,908 ounces of refined gold have been delivered to New Gold, the gold stream will reduce to 4.0 per cent. New Gold will make payments for the gold purchased equal to 35 per cent of the U.S.-dollar gold price quoted by the London Bullion Market Association two days prior to delivery.
The "Sensitivity on base case after-tax NPV (5 per cent) (in thousands of dollars) to changes in U.S.-dollar gold price and
U.S.-dollar/Canadian-dollar exchange rate" and "Sensitivity on base case after-tax IRR to changes in U.S.-dollar gold price and U.S./Canadian foreign exchange" tables show the sensitivity of after-tax NPV and IRR to changes in the U.S.-dollar gold price and the Canadian/U.S.-dollar exchange rate.
SENSITIVITY ON BASE CASE AFTER-TAX NPV (5%) (IN THOUSANDS OF DOLLARS) TO
CHANGES IN U.S.$ GOLD PRICE AND USD/CAD EXCHANGE RATE
U.S.$ gold price
U.S./Cdn$ $1,050 $1,300 $1,541 $1,800 $2,050
0.60 $1,672,105 $2,654,199 $3,600,002 $4,616,021 $5,596,249
0.65 1,324,653 2,232,499 3,105,715 4,043,857 4,949,033
0.70 1,026,286 1,870,434 2,681,774 3,553,299 4,394,022
0.76 721,073 1,498,745 2,246,820 3,049,606 3,824,263
0.80 540,655 1,281,108 1,992,942 2,755,653 3,491,850
0.85 329,112 1,037,579 1,708,917 2,427,104 3,120,118
0.90 141,887 825,454 1,456,039 2,135,194 2,789,605
0.95 (33,651) 631,179 1,229,101 1,873,937 2,493,860
SENSITIVITY ON BASE CASE AFTER-TAX IRR TO CHANGES IN U.S.$
GOLD PRICE AND $U.S./CANADIAN FOREIGN EXCHANGE
U.S.$ gold price
U.S./Cdn$ $1,050 $1,300 $1,541 $1,800 $2,050
0.60 29% 39% 47% 56% 63%
0.65 25% 35% 43% 51% 58%
0.70 21% 31% 39% 47% 54%
0.76 17% 27% 35% 42% 49%
0.80 14% 24% 32% 40% 46%
0.85 11% 21% 29% 37% 43%
0.90 8% 19% 26% 34% 40%
0.95 4% 16% 24% 31% 37%
The company's revised development approach includes:
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A reduction in initial capital expenditures to $592-million by applying a disciplined three-stage approach to mine throughput ramp-up, while remaining committed to achieving the full-scale project throughput of 20 million tonnes per annum (Mtpa);
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Targeting a higher-grade zone of near-surface mineralization in the southern half of the pit for processing in the first seven years supporting a shorter payback period and a higher IRR;
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Improved gold and silver recoveries from metallurgical optimization work;
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Applying current consensus gold and silver price decks.
KEY RESULTS OF THE PFS BY PHASE
(UNLEVERED, INCLUDING THE NEW GOLD STREAM)
Description Unit Phase 1 Phase 2 Phase 3
Periods years 1-5 6-10 11-23
Annual throughput mtpa 5.5 12.0 20.0
Initial/expansion capital cost $ million 592 426 398
Average grade (Au) g/t 1.57 1.17 0.55
Average strip ratio 1.68 1.92 2.14
Operating costs $/t milled 28.42 23.30 15.13
Average ann. Au production k oz 248 420 316
All-in sustaining costs $/oz 668 696 911
Average annual free cash flow $ million 262 351 219
(1) Operational strip ratio is calculated as total waste mined divided
by ore mined.
(2) Free cash flow is calculated as project operating cash flow minus
sustaining/closure capital and tax.
(3) Levered case assumptions and parameters are disclosed under economic
results.
Steven Dean, chairman and chief executive officer of Artemis, commented: "We are pleased to announce the results of the PFS, which illustrate the robust economics that management believed were achievable when the company made the decision to acquire Blackwater earlier this year. The strategy of staging the ultimate development of the mine, among other derisking initiatives, allows for much improved economics, while allowing the company to phase the development before ramping up to full throughput of 20 million tonnes per annum.
"After applying this approach to the development of the Blackwater project, the study outlines a new project on an unlevered basis and including the gold stream granted to New Gold as part of the acquisition cost, with a payback period of two years, an after-tax IRR of 35 per cent with a financeable, upfront development capital of less than $600-million. On the basis of an expected achievable 60-per-cent debt leverage of initial capital costs, the project after-tax IRR increases to 50 per cent. The phased approach provides the opportunity to build the Blackwater project into a new 250,000-ounce-per-year gold operation growing to more than 400,000 ounces of gold per year with growth financed from free cash flow. We believe that this disciplined approach is the most prudent way to advance one of the largest undeveloped gold projects in Canada. We are looking forward to working with our partners, including Lhoosk'uz Dene Nation, Ulkatcho First Nation, the Carrier Sekani First Nations and Nazko First Nation, and with the support of the B.C. and federal governments, to advance the Blackwater project. With environmental assessment approvals in 2019, the permitting process for the project is already well advanced."
The study
The study was led by Moose Mountain Technical Services (MMTS), along with the support of Knight Piesold Ltd. (KP) and John A. Thomas, all of which are independent of the company. The company presents two cases as part of the study: a base case which is unlevered, and an alternative levered case which assumes 60 per cent of the initial financing requirement is financed through project debt.
The company set out to achieve improved economics and financeability on the project against the previous study (refer to the feasibility study technical report entitled "Blackwater Gold Project, British Columbia, NI 43-101 Technical Report on Feasibility Study" with an effective date of Jan. 14, 2014, filed on SEDAR by New Gold on Jan. 22, 2014). Artemis's methodology and approach to development of the project include the following:
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Starting at 5.5 Mtpa throughput and focusing on the near-surface, higher-grade zone of mineralization in the southern half of the deposit to minimize initial capital cost intensity, improve payback and IRR;
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Two subsequent expansion stages ramping up to the original planned capacity of approximately 20 Mtpa outlined in the 2014 feasibility study, with expansions financed from future operating cash flows.
THROUGHPUT LEVELS BY PHASE
Phase Years Annual throughput
1 1 to 5 5.5 million tonnes
2 6 to 10 12 million tonnes
3 11 to 23 20 million tonnes
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The smaller-scale start-up defers a substantial portion of waste prestripping from initial capital, as designed in the 2014 feasibility study, into operating costs in the PFS. While this partly contributes to the slightly higher operating costs as compared with the 2014 feasibility study, it substantially reduces upfront financing requirements and results in a much higher IRR for the PFS;
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Cost benefits from a smaller, off-the-shelf, modular approach for buildings and crushing equipment;
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Staged installation of three similar-sized processing trains to 20 Mtpa;
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Redesigned three-stage crushing with a ball mill provides improved capacity to accommodate variability of ore hardness and maintain name-plate throughput;
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Reduced overall process footprint and laydown area requirements;
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Staged tailings capital costs, including relocation of the start-up dam site downstream to optimize initial capacity and haulage distances, improve constructability by following existing access trails in an area of gentler terrain, and simplify water management during early operations;
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Enhanced water management flexibility with planned installation of a water treatment plant at the start of operations;
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Total project indirect capital costs and owner's costs significantly reduced as planned expansions will take advantage of an operating site with installed infrastructure and an established site management team.
Mineral resource estimate
The mineral resource is estimated from a drill hole database containing 1,002 drill holes and 288,738 assay intervals. Three domains were generated based on the major north-south fault and changes in orientation of the mineralization. The block model has a 10-metre-by-10-metre-by-10-metre selective mining unit, with interpolation of gold done by multiple indicator kriging (MIK) and interpolation of silver using ordinary kriging (OK). The interpolations were limited by the domain boundaries and were clipped to the overburden surface. Blocks were assigned a preliminary classification based on the variography and drill hole spacing by domain, with measured and indicated confidence classifications then adjusted for continuity of blocks.
The base case cut-off grade within the reasonable prospects of eventual economic extraction pit is 0.20 gram per tonne gold equivalent (AuEq), as highlighted in the "Mineral resource sensitivity (effective date of May 5, 2020)" table. At a 0.20 g/t AuEq cut-off, the total measured and indicated mineral resource is estimated at 597 million t at 0.65 g/t AuEq, 0.61 g/t Au and 6.4 g/t Ag for a total of 12.4 million AuEq ounces. Of the total measured and indicated mineral resources, 75 per cent are in the measured category.
MINERAL RESOURCE SENSITIVITY (EFFECTIVE DATE OF MAY 5, 2020)
In situ grades In situ metal
Cut-off Tonnage AuEq Au Ag AuEq Au Ag
Classification (g/t) (ktonnes) (g/t) (g/t) (g/t) (koz) (koz) (koz)
Measured 0.20 427,123 0.68 0.65 5.5 9,360 8,905 75,802
0.30 313,739 0.84 0.80 5.9 8,463 8,109 59,009
0.40 238,649 0.99 0.96 6.1 7,627 7,347 46,727
0.50 186,687 1.15 1.11 6.2 6,881 6,656 37,333
0.60 149,261 1.30 1.26 6.4 6,223 6,039 30,521
0.70 120,916 1.45 1.41 6.6 5,633 5,479 25,619
Indicated 0.20 169,642 0.56 0.51 8.5 3,046 2,766 46,578
0.30 123,309 0.68 0.61 10.4 2,677 2,431 41,112
0.40 86,473 0.81 0.74 12.4 2,264 2,057 34,419
0.50 64,305 0.94 0.85 14.8 1,947 1,763 30,681
0.60 50,527 1.05 0.95 17.2 1,705 1,537 27,957
0.70 40,317 1.15 1.03 19.6 1,493 1,340 25,458
Measured + indicated 0.20 596,765 0.65 0.61 6.4 12,406 11,672 122,381
0.30 437,048 0.79 0.75 7.1 11,140 10,540 100,120
0.40 325,122 0.95 0.90 7.8 9,890 9,404 81,146
0.50 250,992 1.09 1.04 8.4 8,828 8,419 68,014
0.60 199,788 1.23 1.18 9.1 7,928 7,577 58,478
0.70 161,233 1.37 1.32 9.9 7,125 6,819 51,077
Inferred 0.20 16,935 0.53 0.45 12.8 288 246 6,953
0.30 11,485 0.66 0.57 16.2 245 210 5,971
0.40 8,690 0.77 0.65 19.2 214 182 5,373
0.50 5,552 0.95 0.79 26.0 169 142 4,648
0.60 4,065 1.10 0.90 32.7 143 118 4,279
0.70 3,328 1.20 0.97 36.9 128 104 3,951
Notes
(1) The mineral resource estimate has been prepared by Sue Bird, PEng, an independent qualified person.
(2) Resources are reported using the 2014 CIM definition standards and were estimated in accordance with
the CIM 2019 best practices guidelines.
(3) Mineral resources are reported inclusive of mineral reserves.
(4) Mineral resources that are not mineral reserves do not have demonstrated economic viability.
(5) The mineral resource has been confined by a reasonable prospects of eventual economic extraction pit
using the following assumptions: $2,000 (U.S.) per ounce Au and $21.43 (U.S.)/oz Ag at a currency
exchange rate of 75 U.S. cents per $1 (Canadian); 99.9 per cent payable Au; 95.0 per cent payable Ag;
$8.50/oz Au and 25 cents/oz Ag off-site costs (refining, transport and insurance); a 1.5-per-cent
net smelter returns royalty; and uses a 93-per-cent metallurgical recovery for gold and 55-per-cent
recovery for silver.
(6) The AuEq values were calculated using $1,400 (U.S.)/oz Au, $15 (U.S.)/oz Ag, a gold metallurgical
recovery of 93 per cent, silver metallurgical recovery of 55 per cent and mining smelter terms for
the following equation: AuEq being equal to Au g/t plus (Ag g/t multiplied by 0.006).
(7) The specific gravity of the deposit has been determined by lithology as being between 2.6 and 2.74.
(8) Numbers may not add due to rounding.
There are no other known factors or issues that materially affect the mineral resource estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors.
Mineral reserve estimate
The mineral reserves for Blackwater are a subset of the measured and indicated mineral resources, described above. Proven and probable mineral reserves are modified from measured and indicated mineral resources and are summarized in the "Mineral reserve estimate" table. Inferred mineral resources are set to waste. Mineral reserves are estimated in accordance with the CIM 2019 best practices guidelines and are classified using the 2014 CIM definition standards.
MINERAL RESERVE ESTIMATE
Run AuEq Gold Contained Silver Contained
of mine grade grade metal grade metal
Classification (Mt) (g/t) (Au g/t) (Au Moz) (Ag g/t) (Ag, Moz)
Proven 325.0 0.78 0.74 7.8 5.8 60.5
Probable 9.1 0.84 0.80 0.2 5.5 1.6
Total reserve 334.0 0.78 0.75 8.0 5.8 62.1
Notes
(1) The mineral reserve estimates were prepared by Marc Schulte, PEng (who is
also the independent qualified person for these mineral reserve estimates),
reported using the 2014 CIM definition standards, and have an effective date
of Aug. 18, 2020.
(2) Mineral reserves are based on the PFS life of mine plan.
(3) Mineral reserves are mined tonnes and grade, the reference point is the mill
feed at the primary crusher and includes consideration for operational
modifying factors.
(4) Mineral reserves are reported at an NSR cut-off grade of $13/t.
(5) Cut-off grade assumes $1,400 (U.S.)/oz Au and $15 (U.S.)/oz Ag at a currency
exchange rate of 75 U.S. cents per Canadian dollar; 99.9 per cent payable gold;
95.0 per cent payable silver; $8.50/oz Au and 25 cents/oz Ag off-site costs
(refining, transport and insurance); a 1.5-per-cent NSR royalty; and uses a
93-per-cent metallurgical recovery for gold and 55-per-cent recovery for silver.
(6) The cut-off grade covers processing costs of $10/t and general and administrative
(G&A) costs of $3/t.
(7) The AuEq values were calculated using commodity prices of $1,400 (U.S.)/oz Au,
$15 (U.S.)/oz Ag, a gold metallurgical recovery of 93 per cent, silver metallurgical
recovery of 55 per cent and mining smelter terms for the following equation: AuEq
is equal to Au g/t plus (Ag g/t multiplied by 0.006).
(8) Numbers have been rounded as required by reporting guidelines.
There are no other known factors or issues that materially affect the mineral reserve estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing and political factors.
Project description
Location
The project is located in central British Columbia, approximately 160 kilometres southwest of Prince George and 446 km northeast of Vancouver. The project is accessible by major highway and access/service roads.
Artemis has a 100-per-cent recorded interest in 328 mineral claims covering an area of 148,688 hectares distributed among the property and the Capoose, Auro, Key, Parlane and RJK claim blocks. Surface rights over the project area are controlled by the Crown.
Project development plan
The Blackwater project will comprise the construction, operation and closure of an open-pit gold and silver mine and ore processing facilities commencing with a nominal milling rate of 15,000 t/d (5.5 million tpa). The ore processing facilities will be expanded to achieve 33,000 tpd (12 million tonnes per year (t/y)) starting in year six with a final expansion to achieve 55,000 t/d (20 million t/y) starting in year 11 of operation. A combined gravity circuit and whole ore leaching (WOL) will be used for recovering gold and silver.
The proposed mine plan involves mining 334 million t of ore, 584 million t of waste rock and 83 million t of overburden. The material will be sourced via conventional open-pit mining methods, initially targeting high-grade, near-surface ore for processing, with lower-grade material being stockpiled for processing at the end of the mine life.
Most of the waste material sourced from the pit will be used for construction of the tailings storage facility (TSF) or placed in the TSF itself. Overburden and non-potentially acid-generating waste rock not required for construction will be placed in stockpiles adjacent to the open pit. Potentially acid generating waste rock, along with tailings, will be deposited into the TSF located to the north/northwest of the open pit.
At closure, all buildings will be removed, disturbed lands rehabilitated, and the property returned to otherwise functional use according to future approved reclamation plans and accepted practices at the time of closure.
In addition to the site infrastructure, it is assumed that a 134 km, 230-kilovolt transmission line will be constructed from the B.C. Hydro Glenannan substation near Endako, B.C., to the site to supply power to the project.
Mining
Mining will be based on conventional open-pit methods (drill, blast, load, haul) suited for the project location and local site requirements. Open-pit operations are anticipated to run for 18 years, excluding 15 to 18 months of preproduction mining. Following mining operations, stockpiled low-grade material will be processed for an additional five years, resulting in a total life of mine (LOM) of 23 years. The open pit will be developed with a series of pushbacks. The first stage will target suitable waste rock for construction whilst exposing near-surface, high-grade material. The second phase will target higher-grade, lower-strip-ratio ore providing mill feed over the initial years of the project. The remaining stages expand the pit to the north targeting progressively deeper ore. LOM activities are summarized in the "Average proposed annual mine production for the Blackwater project" table.
Owner-managed mining and fleet maintenance operations are planned for 365 days per year, with two 12-hour shifts planned per day. Initially, mining will be undertaken using 400-tonne class hydraulic shovels and 190 t payload class haul trucks. As production requirements increase, the load and haul fleet will be expanded with 550 t class hydraulic shovels and 220 t payload class haul trucks. The initial drill and loading fleet is planned to be diesel drive, with expansion fleet requirements being electric drive. The mine equipment fleet is planned to be purchased via lease arrangements.
Metallurgy and process
The process flowsheet has been designed based on historical test work and more recent test work carried out in 2019 for New Gold.
The most recent metallurgical program, completed in 2019, was carried out with the primary objective of confirming and optimizing the flowsheet and design criteria using a combination of new test work, results from the historical and previous test work programs, and trade-off studies completed since the 2014 feasibility study. Drill core from site was sent to Base Metallurgical Laboratories Ltd. (BaseMet) in Kamloops, B.C., for test work that included core splitting, sample preparation, interval assaying, mineralogy, gravity concentration, cyanide leach and cyanide destruction.
The test program included three larger composites for optimization test work and 48 samples covering the deposit to establish the variability of the ore to the chosen flow sheet.
The mineralogy indicated that the sulphur content is mainly associated with pyrite, pyrrhotite and sphalerite. The comminution test work included semi-autogenous grind (SAG) mill comminution (SMC) on the new drill core, Bond rod mill work index (RWi), Bond ball mill work index (BWi) and abrasion index (Ai) tests. The results indicate the material is hard with results ranging from 11.8 to 24.6 kilowat-hours/t and the 75th percentile of the samples tested was 21.1 kilowatt-hours/t for the variability samples. A correlation between gold extraction and head grade was not observed. The variability composite results averaged 93.7-per-cent total gold extraction with gravity gold recovery of 34.2 per cent.
Based on the test results, a gold dore can be produced with a primary grind size of 80 per cent passing (P80) 150 micrometres followed by gravity concentration, two-hour preoxidation, a 48-hour cyanide leach at an initial cyanide concentration of 500 parts per million and a pH of 10.5, carbon-in-pulp (CIP) adsorption, desorption and refining process. The weighted average of the year composites, based on the mine plan, is estimated to achieve an overall average gold recovery in the range of 93 per cent to 94 per cent.
The initial design daily throughput is 15,000 tonnes per day, with an availability of 75 per cent used in designing the crushing circuit and 93 per cent for the design of the rest of the plant.
The process will consist of:
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Three-stage crushing, consisting of a primary jaw crusher with grizzly feeder, a secondary cone crusher and two tertiary cone crushers. The primary jaw crusher, the three cone crushers and the three vibrating screens will each be housed in steel-framed buildings, with covered conveyors transporting material between each stage. The crushed ore stockpile will be covered to prevent freezing;
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Crushed ore will be conveyed from the stockpile to a single, 7.3 m by 12.5 m, 14-megawatt ball mill for grinding, with the circuit being closed by cyclones. Gravity concentration will be incorporated into the grinding circuit using centrifugal concentrators and an intensive cyanide leach unit for recovering gold from the gravity concentrate;
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The leach circuit will consist of eight tanks fitted with mechanical agitators, an initial preoxidation tank with cyanide being added to the second and subsequent tanks. The leach residence time will be 48 hours;
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Carbon in pulp adsorption of gold and silver will be carried out in a carousel unit, with pump cells moving leached slurry between the six tank units while the carbon remains in the same tank until fully loaded;
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The loaded carbon will be treated in a Zadra elution and electrowinning circuit consisting of an acid wash column and two elution columns operating at 140 C. A propane heater will provide the necessary temperature and two additional heat exchangers will control the temperature around the circuit. A rotary kiln operating at 700 C will be used to maintain carbon activity. Electrowinning will be carried out to recover gold and silver from the elution solution and the resulting metallic precipitate will be dried and smelted to dore bullion;
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Cyanide destruction using an SO2 air system will be carried out in the final tailings slurry, with the sulphur dioxide being produced by the combustion of elemental sulphur.
Economic results
Capital cost estimate
The study outlines an initial capital cost estimate of $592-million for phase 1 (5.5 million tpa), expansion capital of $426-million for the phase 2 expansion to 12.0 million tpa, expansion capital of $398-million for the phase 3 expansion to 20.0 million tpa. Sustaining capital over the life of mine is estimated at $637-million while closure costs are estimated at $117-million, partially offset by proceeds from equipment salvage values, estimated at $42-million. The PFS factors a 15-per-cent contingency into all capital cost estimates with the exception of reclamation costs.
BLACKWATER INITIAL CAPITAL COSTS
(in thousands of dollars)
Description
Mining $68,230
Process plant 109,412
Tailings management 37,271
On-site infrastructure 68,423
Off-site infrastructure 81,042
Total direct costs 364,380
Indirects and EPC 119,599
Owners costs 30,634
Total indirect costs 150,233
Total directs and indirects 514,612
Contingency 77,192
Total capex 591,804
The biggest drivers associated with the estimated expansion capital costs are the mobile fleet lease payments ($121-million), modular expansion of the process plant ($272-million) and indirect costs ($108-million). Sustaining capital is estimated to average $26-million per year in phase 1, ramping up to $40-million per year in phase 2 and $23-million per year in phase 3. Mobile fleet lease payments ($289-million) and tailings management ($190-million) are the primary drivers of sustaining capital costs.
Operating costs
OPERATING COST ESTIMATE
Units Prestrip Phase 1 Phase 2 Phase 3 LOM
Mining* $/t mined $3.31 $2.15 $2.14 $2.62 $2.37
$/t milled - 14.61 12.12 4.98 7.03
Process $/t milled - 9.17 8.31 8.24 8.33
G&A $/t milled - 4.64 2.87 1.91 2.30
Total $/t milled - 28.42 23.30 15.13 17.65
* Mining costs includes stockpile rehandle, LOM mining costs exclude
prestripping.
The LOM operating cost estimates for Blackwater peak in phase 1 at $28.42/t, with economies of scale and driving down costs to $23.30 (Canadian)/t in phase 2 and $15.13/t in phase 3. Over the LOM, the project has estimated average operating costs of $17.65 (Canadian)/t.
All-in sustaining cash costs per ounce (AISC)
The study outlines robust economics for the Blackwater project during all three stages of growth with annual production of 248,000 ounces of gold at an AISC of $668/oz in stage 1, growing to 420,000 ounces of gold per year at AISC of $696 in stage 2 and smoothing out to 316,000 ounces of gold per year at an AISC of $911 per ounce in stage 3. The higher AISC in phase 3 is mainly attributed to the inclusion of closure costs at the end of the life of mine. Over the LOM, the study estimates an AISC of $811 per (or $616 (U.S.)/oz) ounce on production of 7.45 million ounces of gold, which places the project in the bottom quartile of the global cost curve for gold project (source: World Gold Council).
Selling costs, royalties and taxes
Selling costs
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Payable factor (Au) of 99.9 per cent;
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Payable factor (Ag) of 95.0 per cent;
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Refining, treatment, transport and insurance charges of $3/oz.
Royalties
The study economics consider two private royalties at 1.0 per cent and 1.5 per cent over parts of the mineral reserve. Estimated payments to indigenous nations are also included in the economic cash flow model for the project.
Taxes
Key provincial and federal tax considerations for Blackwater include:
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British Columbia mining tax -- 2-per-cent provincial minimum tax payable on operating profits immediately upon the start of production which is creditable against the 13-per-cent effective mining tax rate which is calculated based on operating profit less applicable capital cost deductions. The mining tax is deductible in computing provincial and federal income tax;
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British Columbia provincial income tax -- 12.0 per cent, payable after applicable deductions are used;
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Canadian federal income tax -- 15.0 per cent, payable after applicable deductions are used.
Levered case assumptions
In the economic results for the project, the company presents a base case economic analysis, being unlevered, plus an alternative levered case. The levered case is based on the following assumptions:
- Initial capital 60 per cent debt financed;
- Annual interest rate of 5.5 per cent;
- Upfront financing fee of 3 per cent;
- Seven-year term postcommencement of commercial production with a balloon payment of 30 per cent of the principal at maturity;
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Expansion capital is assumed to be financed through operating cash flow.
Next steps
Over the next 12 to 18 months, the company will be focused on the following activities:
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Completing a National Instrument 43-101 technical report in respect of the study, which will be filed on SEDAR and on the company's website within 45 days of this news release;
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Commencing a feasibility study based on this revised development approach with detailed engineering on the project;
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Continuing engagement and negotiations with indigenous nations who may be impacted by the project;
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Completing supplemental geotechnical and hydrogeological site investigation work;
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Progressing and achieving final permitting required to commence project construction;
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Commencing a preconstruction grade control drilling program;
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Planning for an exploration core drilling program to test for potential extensions of the known mineralization;
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Awarding of lump-sum fixed price engineering, procurement and construction contracts in respect of various Project construction components;
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Arranging of requisite debt and equity financing to support development activities.
Qualified persons
The qualified persons that will prepare the technical report on the study include: Marc Schulte, PEng (MMTS), Tracey Meintjes, PEng (MMTS), Sue Bird, PEng (MMTS), Daniel Fontaine, PEng (KP), and John A. Thomas, PEng (JAT Met Consulting). Each of the qualified persons has reviewed and approved the technical information contained in the Study and in this press release in their area of expertise and are independent of the company.
Technical disclosure
Data verification programs have included review of quality assurance/quality control data, resampling and sample analysis programs, and database verification. Validation checks have been performed on data, and comprise checks on surveys, collar co-ordinates and assay data.
In the opinion of MMTS, sufficient verification checks have been undertaken on the databases to provide confidence that the database is virtually error free and appropriate to support resource and reserve estimation.
Conference call details
The company is hosting a live question-and-answer conference call on Aug. 26 at 12 p.m. Eastern Time (9 a.m. Pacific Time) with the Artemis executive team. Participants may join the call by dialling the following.
Participant dial-in numbers
International toll: 1-604-638-5340
Toll-free -- Canada/United States: 1-800-319-4610
Please provide the company name (Artemis Gold) to the operator. A recorded playback of the call will be available shortly after the call's completion for 30 days by dialling:
International toll: 1-604-638-9010
Toll-free -- Canada/United States: 1-800-319-6413
Enter the replay passcode: 5142, an MP3 recording will also be available on the Artemis website.
Updates will be provided in due course.
AVERAGE PROPOSED ANNUAL MINE PRODUCTION FOR THE BLACKWATER PROJECT
Average mine production
Year LOM Y-2 Y-1 Y1 Y2 Y3 Y4 Y5
Average annual resource milled ktonnes 334,048 - - 4,500 5,500 5,500 5,500 5,500
Au g/t 0.75 - - 1.65 1.70 1.61 1.42 1.46
Ag g/t 5.78 - - 8.83 7.12 7.52 8.04 7.22
Total resource mined from pit ktonnes 334,048 - 481 10,808 13,717 12,565 14,381 15,624
Au g/t 0.75 - 0.40 0.92 0.92 0.92 0.77 0.77
Ag g/t 5.78 - 5.73 6.54 5.73 6.30 7.47 5.72
Resource mined directly to mill ktonnes 208,706 - - 4,500 5,500 5,500 5,500 5,500
Au g/t 1.00 - - 1.65 1.70 1.61 1.42 1.46
Ag g/t 5.52 - - 8.83 7.12 7.52 8.04 7.22
Total waste mined ktonnes 667,107 1,100 8,343 16,081 14,891 14,935 36,331 30,466
Operational strip ratio 2.0 - - 3.6 2.7 2.7 6.6 5.5
Total material mined ktonnes 1,001,155 1,100 8,824 26,889 28,608 27,500 50,712 46,089
Total material moved ktonnes 1,126,496 1,100 8,824 26,889 28,608 27,500 50,712 46,089
Gold production 000 oz 7,450 222 280 265 234 240
AISC/oz (Au) $/oz 811 715 629 641 686 686
Year Y6-Y10 Y11-Y15 Y16-Y20 Y21-Y23
Average annual resource milled ktonnes 12,000 20,000 20,000 15,849
Au g/t 1.17 0.75 0.49 0.30
Ag g/t 7.75 3.84 5.85 6.16
Total resource mined from pit ktonnes 23,335 21,794 8,166 -
Au g/t 0.74 0.68 0.76
Ag g/t 7.97 3.41 4.96
Resource mined directly to mill ktonnes 11,600 18,000 6,841 -
Au g/t 1.19 0.77 0.86
Ag g/t 7.79 3.53 5.24
Total waste mined ktonnes 44,775 55,736 8,481 -
Operational strip ratio 3.7 2.8 0.4 -
Total material mined ktonnes 68,109 77,530 16,647 -
Total material moved ktonnes 68,509 79,530 29,807 15,849
Gold production 000 oz 420 446 292 140
AISC/oz (Au) $/oz 696 932 801 1,177
We seek Safe Harbor.
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