Mr. Rob McEwen reports
MCEWEN MINING UPDATES POSITIVE FEASIBILITY STUDY FOR GOLD BAR MINE, NEVADA
McEwen Mining Inc. has released results of the updated feasibility study (FS) for its 100-per-cent-owned Gold Bar mine in Nevada. Construction has started on the Gold Bar mine with a planned completion date in late 2018 and commercial production beginning in 2019. The FS was prepared by M3 Engineering & Technology Corp. of Tucson, Ariz., in accordance with the requirements of Canadian National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
"We are excited that construction of the Gold Bar mine is now under way. We have already invested over 10 per cent of the total capital required to complete the project, and the balance will be financed with cash on hand, supplemented by a combination of debt, equipment leasing and equity,"
said Rob McEwen, chairman and chief owner.
"Exploration is advancing since the mine permits were received, and is already delivering encouraging results, which supports our belief that sustained exploration can extend the mine life,"
he added.
"Key changes were made to the implementation strategy of the Gold Bar mine with the primary goal of reducing overall project risk while maintaining the highest possible capital efficiency. The installation of a crushing and agglomeration plant increased the capital costs by about 30 per cent over our 2015 estimate. However, this is offset by a 20-per-cent increase in total gold production. We believe the increase in the capital investment is prudent, and will result in improved gold recoveries and reliable ore leaching on the pad,"
said Xavier Ochoa, president and chief operating officer.
Highlights of the feasibility study
(1):
-
Capital expenditure of $81-million (of which $9.7-million has been spent to Jan. 31, 2018);
- Project payback period of three years at $1,250 per ounce gold and 2.5 years at $1,350 per oz gold;
- After-tax IRR (internal rate of return) of 23 per cent at $1,250 per oz gold and 32 per cent at $1,350 per oz gold;
- After-tax NPV (net present value) discounted at 5 per cent of $54-million at $1,250 per oz gold and $87-million at $1,350 per oz gold;
- Average annual gold production of 62,800 oz at a cash operating cost of $770 per oz;
- Updated reserve estimate of 16.5 million tons at a gold grade of 0.029 oz per ton (1.0 gram per tonne) resulting in 397,700 oz of gold produced over seven years;
- Updated resource estimate of 629,000 oz M&I (measured and indicated) and 115,000 oz inferred;
- Recent exploration around planned pit limits has returned positive results, including (2):
- Hole GB255: 0.062 oz per ton (2.1 grams per tonne) gold over 125 feet (38.1 metres);
- Hole GB262: 0.028 oz per ton (1.0 gram per tonne) gold over 85 ft (25.9 m);
- Hole GB257: 0.040 oz per ton (1.4 grams per tonne) gold over 55 ft (16.8 m).
Financial analysis
The FS base case uses a gold price assumption of $1,250 per oz and generates a life-of-mine (LOM) after-tax free cash flow of $150-million. FS results are disclosed on an after-tax basis. A summary of key economic metrics is provided herein, along with a comparison with the previous 2015 study.
UPDATED AFTER-TAX ECONOMIC SENSITIVITY
(2018 FS)
Base case $1,250/oz gold Upside case $1,350/oz gold
After-tax IRR 23% 32%
NPV (5% discount rate) (3) $54-million $87-million
Average annual cash flow $21-million $27-million
Average operational margin $364/oz $457/oz
Payback period 3.1 years 2.5 years
Highlights and notes
(1) All amounts are in U.S. dollars. "G/t" means grams per metric tonne, "oz/t" means troy ounces per short ton, "oz" means troy ounce(s), "IRR" means internal rate of return, "M&I" means National Instrument 43-101 measured and indicated mineral resources.
(2) Exploration drilling results contained in this release were not included in the 2018 mineral resource statement disclosed herein.
(3) NPV is discounted to Jan. 1, 2018.
COMPARISON WITH PREVIOUS STUDY
(2015 FS)
2018 2015 (4) Delta Primary reasons for difference
current now (2018-
update obsolete 2015)
Gold price ($/oz) $1,250 $1,150 +$100 Higher average market
price for gold.
LOM gold production (000s oz) 397.7 325.4 +72.3 Improved mine plan to increase
minable reserves, and heap
leach recovery increased.
Initial capital cost (millions) 80.8 60.4 +20.4 Crushing, conveying and
agglomeration plant added,
changes to heap leach pad
construction, higher capital
for water system and power
generation. Much more advanced
engineering and supplier
quotations.
Mine life (years) 7 5 +2 Larger reserves combined with
slightly lower annual
production.
After-tax IRR 23% 20% +3% Impact of higher gold price
and production, partially
offset by higher capital and
operating costs.
NPV (5% discount rate) (millions) 54 30 +24
Average cash cost ($/oz) 770 728 +42
Payback period (years) 3.1 3.1 -
Note:
(4) Report entitled "NI 43-101 technical report, Gold Bar project feasibility study,
Eureka county, Nevada," filed on Dec. 4, 2015, on SEDAR.
Mining and processing
Oxide ore will be mined from three open pits and transported by 100-ton haul trucks to be crushed, screened, conveyed and agglomerated. The study assumes the use of a contract mining fleet. Ore will be conveyor stacked at a rate of approximately 8,000 tons per day on a conventional heap leach pad. An adsorption-desorption recovery (ADR) carbon plant will produce a final gold-silver dore product.
Over the seven-year LOM, production will total 16.5 million tons of ore at a diluted gold grade of 0.029 oz/t (one g/t) for a total payable gold of 397,700 oz. The planned production schedule is found herein.
MINING AND PRODUCTION SCHEDULE
Year Ore Gold Contained Recovered Waste Strip
tons grade gold gold tons ratio
(000s (oz/ (000s (000s (000s
tons) t) oz) oz) tons)
0 265 0.020 5.2 0 4,370 16.5
1 2,038 0.035 70.7 55.1 14,369 7.1
2 2,773 0.032 87.6 74.2 14,137 5.1
3 2,742 0.030 82.9 68.0 16,193 5.9
4 2,752 0.025 70.0 58.6 13,437 4.9
5 2,665 0.027 71.2 57.2 13,815 5.2
6 2,749 0.029 80.9 66.4 9,082 3.3
7 513 0.032 16.5 18.2 1,065 2.1
LOM 16,497 0.029 485.0 397.7 86,468 5.2
Capital and operating costs
Initial capital cost is estimated at $80.8-million, including $4.6-million for contingencies for the process plant and infrastructure. All costs provided below are in second quarter 2017 U.S. dollars.
Capital cost summary
Site general: $3.6-million
Mobile equipment: $1.3-million
Crushing and agglomeration: $4.8-million
Leach pad stacking: $3.9-million
Heap leach pad and ponds: $13.6-million
Solution transfer systems: $2.9-million
ADR plant: $6.1-million
Refinery: $2.0-million
Water systems: $4.7-million
Power generation and distribution: $4.4-million
Reagent systems: $1.1-million
Laboratory: $2.2-million
Warehouse: $400,000
Administration: $800,000
Fuel station: $500,000
Freight: $2.1-million
Trends: $1.4-million
Direct cost: $56.7-million
Indirects (EPCM (engineering, procurement and construction management services), mobilization, demobilization and commissioning): $8.4-million
Contingency: $4.6-million
County sales tax: $1.2-million
Plant and infrastructure total: $70.9-million
Owner costs: $6.4-million
Mine development and prestripping: $3.4-million
Total capital cost: $80.8-million
LOM OPERATING COST SUMMARY
Cost per ton of ore processed Cost per ounce produced
Mining $11.75 $487
Process $5.23 $217
G&A $1.59 $66
Total cash cost (5) $18.57 $770
All-in cost (6) $1,031
Notes:
(5) Cash cost is calculated by dividing total life-of-mine production
costs by total ounces produced.
(6) All-in cost is calculated by dividing the sum of all capital,
operating, tax, royalty and reclamation costs by total ounces produced.
PRODUCTION COST BY YEAR OF OPERATION
$/oz gold payable $/ton of ore
Year Mining Process G&A Total Mining Process G&A Total
1 $575.77 $229.76 $73.76 $879.30 $13.79 $5.50 $1.77 $21.05
2 451.75 191.11 54.81 697.67 12.09 5.11 1.47 18.67
3 538.16 207.83 59.86 805.84 13.34 5.15 1.48 19.97
4 538.67 241.11 69.43 849.20 11.47 5.13 1.48 18.08
5 549.20 242.22 71.13 862.55 11.78 5.20 1.53 18.51
6 374.07 212.57 61.25 647.90 9.04 5.13 1.48 15.65
7 229.13 172.91 100.50 502.54 8.14 6.15 3.57 17.86
Average 487.35 216.79 65.97 770.11 11.75 5.23 1.59 18.57
Exploration
Exploration at Gold Bar has been limited after 2012 due to mine permitting activities. Upon permit approval in November, 2017, a propertywide exploration program started with the objectives of expanding the mineral inventory surrounding the planned open pits and testing new targets.
Initial drilling has focused on three areas: northwest of the planned Gold Pick open pit, northwest of the planned Gold Ridge open pit, and in between Gold Pick and Gold Ridge. Thirty-seven reverse circulation (RC) holes have been completed, and assay results from 29 holes have been received. A new shallow oxide zone of mineralization has been identified in hole GB257, which returned 0.040 oz/t (1.4 g/t) gold over 55 ft (16.8 m) starting at a depth of 30 ft (nine m). Seventeen holes encountered significant mineralization, with a weighted-average grade and thickness of 0.030 oz/t (one g/t) gold over 50 ft (15.2 m), comparable with the average grade of the deposit. Results from the new drilling are summarized herein.
2017-2018 EXPLORATION DRILLING RESULTS
U.S. standard units Metric units
Hole ID (8) From To Thickness Gold From To Thickness Gold grade
(ft) (ft) (ft) (7) grade (m) (m) (m) (7) (g/t)
(oz/t)
GB251 300 320 20 0.078 91.4 97.5 6.1 2.66
And 355 370 15 0.051 108.2 112.8 4.6 1.74
GB252 185 195 10 0.012 56.4 59.4 3.0 0.42
GB253 375 400 25 0.074 114.3 121.9 7.6 2.53
GB254 290 330 40 0.017 88.4 100.6 12.2 0.58
GB255 190 315 125 0.062 57.9 96.0 38.1 2.13
GB256 25 80 55 0.023 7.6 24.4 16.8 0.78
GB257 30 85 55 0.040 9.1 25.9 16.8 1.36
GB260 220 240 20 0.029 67.1 73.2 6.1 1.00
GB261 220 255 35 0.020 67.1 77.7 10.7 0.69
GB262 185 270 85 0.028 56.4 82.3 25.9 0.97
And 290 305 15 0.029 88.4 93.0 4.6 0.99
GB264 625 650 25 0.040 190.5 198.1 7.6 1.37
GB265 440 490 50 0.014 134.1 149.4 15.2 0.48
GB267 320 390 70 0.016 97.5 118.9 21.3 0.55
GB274 270 345 75 0.021 82.3 96.0 22.8 0.73
GB275 255 265 10 0.012 77.7 80.8 3.0 0.40
GB276 315 405 90 0.021 96 123.4 27.4 0.72
GB280 255 280 25 0.013 77.7 85.3 7.6 0.45
Notes:
(7) All intercepts are true width.
(8) Holes GB250, 263, 266, 268, 269, 270, 271, 272, 273, 277, 278 and 279 did not
return significant gold values.
Mineral resource estimate
SRK Consulting (U.S.) Inc. of Reno, Nev., developed the updated resource estimate included in the FS in accordance with the requirements of National Instrument 43-101. The resource estimate is composed only of gold resources that fall inside the boundaries of a conceptual pit and the permitted mine area.
MINERAL RESOURCE ESTIMATE
U.S. standard units Metric units
Gold Bar project resources Tonnage Gold grade Contained gold Gold grade Contained gold
(000s tons) (oz/t) (000s oz) (g/t) (kg)
Measured 2,800 0.035 98 1.22 3,151
Indicated 20,039 0.027 532 0.91 17,104
Measured and indicated 22,839 0.028 629 0.95 20,223
Inferred 4,776 0.024 115 0.82 3,697
Notes:
Mineral resources are not mineral reserves and do not have demonstrated economic viability.
There is no certainty that all or any part of the mineral resources estimated will be
converted into mineral reserves.
Resources stated as contained within a potentially economically minable open pit. Pit
optimization assumptions are: $1,350 per ounce gold, 82-per-cent recovery, $5-per-ounce-
gold sales cost, $1.85-per-tonne waste mining cost for Cabin Creek, $1.80-per-tonne waste
mining cost for Gold Pick, $1.78-per-tonne waste mining cost for Gold Ridge, $2.74-per-
tonne ore mining cost for Gold Pick, $2.83-per-tonne ore for Cabin Creek, $6.74-per-tonne
ore processing and general and administrative cost, 54-degree pit slopes for Gold Pick
and Cabin Creek, and a 42-degree pit slope for Gold Ridge. Portions of the Cabin pit were
subject to an NPI (net profit interest) royalty of 4.0 per cent.
Resources are reported using a 0.008-ounce-per-ton CoG on gold for Gold Ridge, and the NPI
portion of Cabin Creek, Gold Pick and the rest of Cabin Creek is reported at a 0.007-ounce-
per-ton CoG on gold.
Numbers in the table have been rounded to reflect the accuracy of the estimate and may not
sum due to rounding.
Reserves
Independent Mining Consultants (IMC) of Tucson, Ariz., developed the mineral reserve estimate in accordance with Securities and Exchange Commission industry guide 7 and National Instrument 43-101. In accordance with NI 43-101, only resources in the measured or indicated resource category can be included as proven or probable reserves. The mineral reserve estimate is guided by a pit optimization routine that used a $1,000-per-ounce gold price. The $1,000-per-ounce cone was selected to maximize the project return on investment.
MINERAL RESERVE ESTIMATE
Gold grade
Cut-off Tons Contained Recovered Contained Recovered
grade (000s) (oz/t) (oz/t) (g/t) (g/t)
(oz/t)
Proven 0.008 2,253 0.037 0.030 1.27 1.04
Probable 0.008 14,244 0.028 0.023 0.97 0.79
Proven
and
probable 16,497 0.029 0.024 1.01 0.83
Contained metal
Cut-off Tons Contained Recovered Contained Recovered
grade (000s) (000s oz) (000s oz) (kg) (kg)
(oz/t)
Proven 0.008 2,253 83 68 2,594 2,127
Probable 0.008 14,244 401 329 12,481 10,234
Proven
and
probable 16,497 485 397 15,074 12,360
Notes:
Reserves stated in the table are contained within an engineered pit design
based on a floating cone optimization (see additional assumptions related
to the reserve estimate).
Since the completion of the pit optimization, there have been changes to
project cost and metal prices. The stated reserve is robust to these
changes.
Mineral reserves stated are contained within and are not additional to the
mineral resource.
Numbers in the table have been rounded to reflect the accuracy of the
estimate and may not sum due to rounding.
ASSUMPTIONS RELATING TO THE RESERVE PIT
Assumptions for reserves Gold zones (deposits) Units Values
Gold price $/oz $1,000
Mining cost Gold Pick ore $/ton 3.12
Gold Ridge ore $/ton 3.89
Cabin Creek ore $/ton 3.11
Gold Pick waste $/ton 1.95
Gold Ridge waste $/ton 1.81
Cabin Creek waste $/ton 1.68
Processing and G&A $/ton 6.24
Recovery % 82%
Sales cost $/oz gold 5
NPI royalty (portions of Cabin) % 4%
Gold cut-off grade oz/ton 0.008
Road design Road width Feet 85
Road grade % 10%
Interramp pit slope angles Gold Pick Degrees 54
Gold Ridge Degrees 42
Cabin Creek Degrees 54
Metallurgical testing
Gold Bar ore is a Carlin-style carbonate sedimentary sequence with strong fracture-controlled oxidation above the water table to the full depth of planned mining. Testwork shows that ore is amenable to heap leach cyanidation with high gold recoveries and relatively rapid leaching kinetics. There is a significant amount of metallurgical testing on the Gold Bar orebodies, including new work completed since the last feasibility study published in 2015. The terminal gold recovery used in the FS is 82 per cent, which is based on the crushed and agglomerated ore testing. The assumption of 82-per-cent recovery is conservatively set below representative results from laboratory testing. For example, actual empirical results for the 36-inch column test predict 82-per-cent recovery after 30 days of leaching and ultimate recovery of 89 per cent after 120 days. The FS assumes 50-per-cent recovery after 30 days and ultimate recovery of 82 per cent after 180 days.
About McEwen Mining Inc.
McEwen has the goal to qualify for inclusion in the S&P 500 Index by creating a profitable gold and silver producer focused in the Americas. McEwen's principal assets consist of: the San Jose mine in Santa Cruz, Argentina (49-per-cent interest); the El Gallo gold mine in Mexico; the Black Fox mine in Timmins, Canada; the Gold Bar mine in Nevada, currently under construction; and the large Los Azules copper project in Argentina, advancing toward development.
McEwen has a total of 337 million shares outstanding. Mr. McEwen owns 24 per cent of the shares.
Qualified persons
The following people are independent qualified persons as defined by National Instrument 43-101 in their specified areas of expertise.
Disclosure related to process plant, infrastructure capex (capital expenditures) and economic analysis: This news release has been reviewed and approved by Daniel Roth of M3.
Disclosure related to recovery methods and opex (operating expenses): This news release has been reviewed and approved by Ben Bermudez of M3.
Disclosure related to heap leach costing and infrastructure: This news release has been reviewed and approved by Ryan Baker of Newfields Mine Design and Technical Services.
Disclosure related to mining and the reserve estimate: This news release has been reviewed and approved by Joe McNaughton of IMC.
Disclosure related to the mineral resource estimate: This news release has been reviewed and approved by J.B. Pennington, MSc, CPG, of SRK Consulting.
Disclosure related to metallurgy: This news release has been reviewed and approved by Daniel Sepulveda, BS, of SRK Consulting.
The following people are qualified persons as defined by NI 43-101 in their specified areas of expertise.
Disclosure related to exploration: This news release has been reviewed and approved by Robert L. Kastelic, MSc, CPG, McEwen Mining's senior staff geologist, who is responsible for program design and quality control of mineral exploration undertaken by the company at its Nevada exploration properties. Holes drilled by reverse circulation were sampled on five-foot intervals. Core from diamond drill holes was split and sampled on intervals from one to five feet in length. All gold assays are uncut, with analyses conducted by ALS Laboratories utilizing a 30-gram fire assay charge with an AA finish. Samples returning greater than 10 parts per million gold were reanalyzed using gravimetric fire assay. Quality assurance/quality control is implemented by inserting standards and blanks every 40th sample and check assays sent to a second lab every 20th sample.
Discussion and interpretation of technical information in this news release have been reviewed and approved by Xavier Ochoa, chief operating officer of McEwen Mining.
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