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Abcourt Mines Inc
Symbol C : ABI
Shares Issued 288,703,070
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Abcourt issues NI 43-101 Elder, Tagami resource update

2018-10-30 11:10 ET - News Release

Mr. Renaud Hinse reports

UPDATE OF 43-101 RESOURCES FOR ELDER MINE AND TAGAMI PROPERTY 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     
                                                              indicated   
                      
Zone           Tonnes      Grade      Tonnes     Grade     Tonnes     Grade       Gold   
              (metric)      (g/t)    (metric)     (g/t)   (metric)     (g/t)    ounces
Elder
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 were:

  • 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).

                  INFERRED RESOURCES
                                                      
Zone              Tonnes       Grade            Gold
                 (metric)       (g/t)         ounces  
Elder
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 continued exploration.


              RESOURCES WITH A REASONABLE PROSPECT FOR EVENTUAL ECONOMIC EXTRACTION

                   Mineral               Recoverable
                  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 sampling."

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.

Mining method

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 Tagami resources.

Economical analysis

General

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.

Hypothesis

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.

              HYPOTHESIS

Description              Units      Value

Price                $US/ounce      1,230
Exchange rate         $CDN/$US       1.30
Discount rate         Annual %          8

Royalties

The cost of royalties is already incorporated into operating costs.

 
              TECHNICAL HYPOTHESIS

Description                        Units         Value

Recoverable measured 
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 operator:

  • 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 $80-million.

Sensitivity analysis

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 M18465.

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.

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