Mr. Renaud Hinse reports
UPDATE OF 43-101 RESOURCES FOR ELDER MINE AND
UPDATE OF THE PRELIMINARY ECONOMIC ANALYSIS (PEA)
PREPARED BY ROCHE, CONSULTING-GROUP IN 2012
A National Instrument 43-101 update report of resources on Abcourt Mines Inc.'s Elder
mine and the Tagami property has been prepared by Jean-Pierre Berube, engineer in
geology. Mr. Berube is an independent consultant. Renaud Hinse, mining engineer, has
prepared an update of the preliminary economic assessment (PEA) report prepared by Roche
Consulting Group in 2012. An independent PEA was not required as there has not been a 100-per-cent
increase in the mineral resource estimate. Both persons are designated as qualified persons
according to NI 43-101, each of whom having pertinent experience in his domain.
The Elder mine is made up of one mining concession, two mining leases and claims.
At the Elder mine, vein No. 1 is the main vein. It extends over a strike distance of about
650 metres, from surface to the bottom of the mine. The dip is 22 degrees to the south. It is
accompanied by vein No. 3 and No. 6 with the same strike and dip. There are also veins No. 2 and
No. 2A, from the fourth level to surface, with the same strike and a dip of 40 degrees south, and vein No. 4 with
a north-south direction and a dip of 22 degrees to the east.
Vein No. 7 is indicated in one hole with marginal values. Additional drilling will be done to assess
the economic potential of this structure.
The Tagami property is made up of 10 claims and is located immediately to the north of the
Elder property. The known mineralization from surface to a depth of 150 metres is found in a
shear zone with a strike of north 40 degrees east and a dip of 50 per cent to the southeast and in the walls of the
shear zone where veins with the same direction are found with a dip of 20 degrees to the southeast.
Abcourt owns 100 per cent of the Elder and Tagami properties.
Table of resources and parameters used
As of May 31, 2018, mineral resources in the measured and indicated categories were as
shown in the attached table.
ELDER AND TAGAMI MEASURED AND INDICATED RESOURCES
Measured Indicated Measured plus
Zone Tonnes Grade Tonnes Grade Tonnes Grade Gold
(metric) (g/t) (metric) (g/t) (metric) (g/t) ounces
Vein 1 32,607 5.09 159,502 6.91 192,109 6.60 40,755
Vein 2 5,343 5.36 75,957 6.39 81,300 6.32 16,516
Vein 3 0 0.00 15,321 6.27 15,321 6.27 3,088
Vein 4 18,181 6.35 104,176 6.26 122,357 6.28 24,691
Vein 6 0 0 52,739 6.53 52,739 6.53 11,077
Subtotal 56,131 5.52 409,695 6.57 463,826 6.45 96,126
Tagami 0 0.00 174,258 6.22 174,258 6.22 34,848
Total 56,131 5.52 581,952 6.47 638,083 6.38 130,974
The technical parameters used for the calculation of measured and indicated resources
Density of 2.70 tonnes per cubic metre; minimum thickness of 1.8 metres;
Lower cutting grade of 3.45 grams per tonne gold;
Higher cutting grade of 31.1 grams per tonne gold;
The total measured and indicated resources for Elder and Tagami are 638,083 tonnes with a
grade of 6.38 grams per tonne gold.
In addition, the inferred resources total 547,746 tonnes with a grade of 5.48 grams per tonne gold (see attached table).
Zone Tonnes Grade Gold
(metric) (g/t) ounces
Vein 1 119,276 5.41 20,749
Vein 2 75,051 5.70 13,755
Vein 3 43,847 5.37 7,571
Vein 4 102,169 7.89 25,920
Vein 6 39,808 5.36 6,877
Subtotal 380,251 6.12 74,872
Tagami 167,495 5.48 29,510
Total 547,746 5.93 104,382
The technical parameters used for the calculation of the inferred resources were the same as
those used for the calculation of the measured and indicated resources.
Note: Presently, the inferred resources are not considered as measured and indicated
resources. However, it is reasonably expected that the majority of the inferred
mineral resources could be upgraded to measured or indicated mineral resources with
RESOURCES WITH A REASONABLE PROSPECT FOR EVENTUAL ECONOMIC EXTRACTION
resources mineral Resources as
measured and resources 40% dilution described
indicated 85% herein
Tonnes Grade Tonnes Grade Tonnes Grade Tonnes Grade
(g/t) (g/t) (g/t) (g/t)
Measured 56,131 5.52 47,711 5.52 19,084 0.0 66,795 3.94
Indicated 407,695 6.57 346,541 6.57 138,616 0.0 485,157 4.69
Total 463,826 6.45 394,252 6.32 157,700 0.0 551,952 4.51
The CIM (Canadian Institute of Mining, Metallurgy and Petroleum) definition of resources is as follows:
"A mineral resource is a concentration or occurrence of solid material of economic interest in or on the Earth's
crust in such form, grade or quality, and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade or quality, continuity, and other geological characteristics of a mineral
resource are known, estimated or interpreted from specific geological evidence and knowledge, including
Dilution factor during mining
Commercial production started on Jan. 1, 2016.
From Jan. 1, 2016, to June 30, 2018, a total of 267,064 metric tonnes were mined with a
grade of 4.43 grams per tonne of gold (car samples).
In its preliminary economic study in 2012, Roche used a factor of 85 per cent for the recovery of
resources. The company used the same factor.
In the mining operation, to be sure to extract all the mineralization, it is necessary to take some
waste. If the company takes only 0.15 metre above and below the ore in a 1.8-metre face, the company gets 15-per-cent dilution.
In addition, frequent changes of dip of the mineralization result in getting some uncontrolled
dilution. The company also has to adjust to variations of grade in veins. Blasts in sheared zones also
produce unwanted overbreaks. All these factors combined account for an apparent 40-per-cent
dilution. The company gives no grade to the dilution material.
However, Roche used only 20-per-cent dilution with a grade of 0.69 gram per tonne gold. The Roche estimate
was made without the benefit of test mining as the mine was flooded at that time. According
to the company's experience, by doing its best to control the mining, the company gets 40-per-cent dilution, without any
value given to the dilution material, as explained previously.
Veins generally have a dip angle of 22 degrees and a two-metre thickness.
The mine is serviced by two shafts and 16 levels. Shaft No. 1 is used for the ventilation of the mine
and as an escape way. Shaft No. 2 is used for production. The distance between levels varies
between 41 metres and 61 metres. Drifts (2.7 metres by 2.8 metres) give access to the mineralized zone. Then,
drifts follow the zone to give access to stopping sites. On levels 3, 4 and 6, drifts will follow
the mineralization over a distance of 240 metres.
Mining is conducted with the room-and-pillar method. The roof and part of the walls are secured
with rock bolts and screen. With this method of mining, about 15 per cent of the resources are left in
pillars. Part of these pillars will be recovered at the end of the mine.
The width of rooms and the size of pillars were determined by a geotechnical study done by
Golder Associates in 1986 and by an inspection in 2014.
A stope team is made up of two drillers, two scrapping operators and one mucker.
The monthly rate of production of Elder is about 11,000 tonnes. The company's objective is to get 12,500
tonnes per month. The life of the mine, based on the existing measured and indicated resources,
is 4.25 years. The eventual conversion of inferred resources into measured and indicated
resources would add about 3.5 years for a total of 7.75 years, without taking into account the
A preliminary economical analysis was prepared according to the net present value method.
This method is built on the basis of a constant dollar. There is no provision for inflation or
for payable taxes. The mine is presently in exploitation, without debt. The internal rate of return
was not used in this report as the mine is operating and there is no initial investment.
The hypothesis used is indicated in the attached table. The sensitivity analysis is made for
variations in the price of gold of plus and minus 10 per cent.
Description Units Value
Price $US/ounce 1,230
Exchange rate $CDN/$US 1.30
Discount rate Annual % 8
The cost of royalties is already incorporated into operating costs.
Description Units Value
and indicated resources Tonnes 551,953
Annual rate of extraction Tonnes/year 130,000
Life of mine Years 4.25
Grade of mineralization g/t Au 4.51
Gold recovery in mill % 97
Net recoverable value $CDN/tonne 224.74
Annual gold production Ounces 18,300
Continuing capital costs $CDN/tonne 19.19
Total operating costs
per tonne $CDN/tonne 191.24
Gold refining $CDN/ounce 1.31
Financial model and results
A summary of the technical hypothesis is given in the attached table. A total revenue at the mine
of $124-million is expected; that is $224.74 per tonne. Continuing capital expenditures, necessary in
the course of mining, are estimated at $10.6-million; that is $19.19 per tonne of recoverable measured
and indicated resources.
Operating costs are $191.24 per tonne for a total of $105.4-million, including $6.89 per tonne of
royalties, for a total of $3.8-million. Working capital of about $2.5-million is necessary to cover about
one month of operation costs, but this amount was already available on June 30, 2018. The
financial analysis shows a net cash flow of $7.9-million before taxes and $4.1-million after taxes. The
net present value, discounted at 8 per cent, is $6.5-million before taxes and $3.5-million after taxes.
SUMMARY OF PROJECT EVALUATION
Description Evaluation base
Total mine revenue $124,000,000
Continuing capital expenditures 10,600,000
Total operating expenses,
including royalties 105,600,000
Net cash flow before taxes 7,900,000
Net cash flow after taxes 4,200,000
Taxes and income taxes
The Elder mine is subject to provincial and federal income taxes and Quebec mining taxes. The
income tax is calculated according to the federal and provincial tax legislations. The federal
income tax is 15 per cent. The provincial income tax varies as follows:
2017 -- 11.8 per cent;
2018 -- 11.7 per cent;
2019 -- 11.6 per cent;
2020 -- 11.5 per cent.
The Quebec mining tax is calculated according to the Quebec mining tax law modified in 2014.
According to the new law, a producer has to pay a minimum progressive rate determined by
the value of production at the shaft collar and a progressive mining tax on annual profits. The
new mining tax on annual profits is calculated with a progressive rate of 16 per cent to 28 per cent (replacing
the single rate of 16 per cent with the previous law), determined according to the profit margin of the
- Up to 35-per-cent profit margin -- 16 per cent;
From 35-per-cent to 50-per-cent profit margin -- 22 per cent;
From 50-per-cent to 100-per-cent profit margin -- 28 per cent.
It is obvious that, according to the new law, an enterprise with a high rate of profit will pay a
higher mining tax.
The minimum progressive mining tax corresponds to 1 per cent of the first $80-million of the value of
production at the shaft collar and 4 per cent of the value of production at the shaft collar exceeding
A sensitivity analysis was done, based on the economical and technical hypothesis presented in
preceding sections, to estimate the impact of variations in capital expenditures, operating costs
and the price of gold on the net present value, discounted at 8 per cent. Each variable is analyzed
separately. The analysis was made for variations of 10 per cent for each item.
According to the analysis made, the net present value is not affected greatly by an increase or
a decrease in the capital cost. In fact, the capex (capital expenditure) line is almost horizontal. This indicates that
variations of this item have little effect on the net present value. The proportion of the capital
cost (less than 1 per cent), compared with all the other costs, is not important and that explains the fact
that a variation in costs has a low impact on the present value. The latter is more sensitive to
operating costs and the price of gold.
The net present value is equally sensitive to the grade of the ore. An increase of 10 per cent of grade,
that is to five grams per tonne of gold, would increase the net cash flow before taxes by $15-million and would give
a present value of about $11.9-million. During the latest quarter of the 2018 fiscal period, from
April to June, the average grade of the mineralization was 4.81 grams per tonne of gold. The company's objective for
the next months is to have 5.0 grams per tonne of gold at the mill.
Quality control and assurance
In its operations, Abcourt applies a procedure for the three methods of sampling used -- drill
core (series D), chips (series F) and broken muck (series M) -- to reconcile grade with the ounces
produced at the Sleeping Giant mill. The lab is directed by a chief analyst with adequate
experience in this domain. This lab maintains an internal quality control program. Assay results
of blanks, duplicates and standards appear regularly (three out of 24) on assay reports.
Check assays done for 15 chip samples (F) and 10 muck samples (M) done by an accredited
laboratory (ALS Chemex) indicate that the assay results from both laboratories have a very
good co-efficient of correlation (R2 equal to 0.975) even after including an odd value for sample
About Abcourt Mines Inc.
Abcourt Mines is a gold producer and a Canadian exploration company with strategically
located properties in northwestern Quebec, Canada. The Elder property has gold resources and
a positive PEA study (2012). Abcourt is focusing on the exploitation of the Elder mine.
The Abcourt-Barvue property has silver-zinc resources (2014). A feasibility study was
completed in 2007 by Roche/Genivar.
This press release was prepared by Renaud Hinse, engineer and president of Abcourt Mines. Mr. Hinse is a qualified person under the terms of Regulation 43-101. Mr. Hinse has
approved the scientific and technical disclosure.
We seek Safe Harbor.
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