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Otis Gold Corp
Symbol OOO
Shares Issued 162,140,407
Close 2019-08-27 C$ 0.09
Recent Sedar Documents

Otis Gold files amended PEA for Kilgore

2019-08-27 09:48 ET - News Release

Mr. Craig Lindsay reports

OTIS GOLD AMENDS AND FILES KILGORE PRELIMINARY ECONOMIC ASSESSMENT

Otis Gold Corp., further to its news release dated July 30, 2019, has filed on SEDAR a National Instrument 43-101 preliminary economic assessment for the Kilgore volcanic- and sediment-hosted epithermal gold deposit, Clark county, Idaho.

The PEA as filed contains an amendment of the PEA findings released on July 30, 2019, arising from the deepening of the main pit design to allow for the extraction of additional mineralized material, as well as a change to depreciation by more fully depreciating the pretax capital over the mine life. The amendments, which are summarized in this release, have enhanced both the net present value and internal rate of return of the project, reduced the payback period, increased the mine life and total recovered gold, and reduced operating cash costs and all-in sustaining costs per ounce.

PEA highlights:

  • After-tax NPV (5-per-cent discount rate) of $110.4-million (U.S.) and IRR of 34 per cent, with a three-year payback period and life-of-mine net cash flow of $151.8 million (U.S.);
  • Pretax NPV (5-per-cent discount rate) of $144-million (U.S.) and IRR of 40.6 per cent;
  • Total amount of gold recovered is estimated at 558,700 ounces;
  • Average annual gold production of approximately 111,700 ounces;
  • Peak annual gold production of approximately 119,600 ounces in year one;
  • Mine life of five years with a one-year preproduction period;
  • Average crushed material gold grade of 0.72 gram per tonne and average run-of-mine gold grade of 0.24 g/t;
  • Low LOM strip ratio of 1.1:1;
  • Royalties -- 0 per cent;
  • LOM direct operating cash cost is estimated at $780 (U.S.) per ounce of gold recovered and average LOM all-in sustaining cost is estimated at $832 (U.S.) per ounce of gold recovered;
  • Preproduction initial capital cost estimated at $81.23-million (U.S.), using contract mining;
  • LOM capital costs estimated at $97.5-million (U.S.).

Otis president and chief executive officer Craig Lindsay states: "This PEA marks an important milestone in Kilgore's development and we are encouraged to the enhancements in the project's economics. We now have an important road marker outlining where the deposit stands from an economic perspective and we expect to see a continuous improvement as the deposit evolves. Indeed, the most exciting feature of Kilgore is what lies ahead in terms of the potential to grow the deposit, find new deposits and significantly enhance the life of the project. Our focus going forward will be about growth via the drill bit."

The economic model assumes a gold price of $1,300 (U.S.) per ounce. All currency figures stated herein are United States dollars unless otherwise noted.

The technical report, entitled "Independent Technical Report and Preliminary Economic Assessment, Kilgore Project, Clark County, Idaho, U.S.A.," has an effective date of July 30, 2019, and is available under the company's profile on SEDAR and the company's website. The PEA was authored by Global Resource Engineering Ltd. of Denver, Colo.

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

PEA overview

The Kilgore deposit is interpreted as a low-sulphidation epithermal deposit associated with caldera-related volcanic and intrusive activity. The current defined resource area is a zone of mineralization approximately 800 metres long, 600 metres wide and 325 metres deep from ground surface to the maximum inferred mineral resource depth. Mineralized intercepts in the deposit generally average 40 metres (130 feet) and range up to 100 metres (330 feet) in thickness.

The PEA envisions recovery of gold from crushed and run-of-mine mineralized material using a heap leach facility. The pregnant leach solution from the heap leach would be collected in a dedicated pond and either recirculated or processed in the adsorption-desorption-recovery (ADR) plant. The gold in the solution would be collected on activated carbon in a series of carbon-in-column (CIC) vessels. Gold recovery would take place through stripping the activated carbon into an enriched solution that reports to an electrowinning circuit. The gold would then be recovered as a sludge that would ultimately be smelted into high-purity dore bars. Important project metrics are presented in the included tables.

 
                                     SUMMARY PROJECT METRICS

Assumptions
Gold price                                                                             $1,300/oz
Production profile
Total leach tons mined                                                              54.0 million
Total waste tons mined                                                              60.0 million
Head grade -- crushed                                                        0.72 g/t (0.02 o/t)
Head grade -- ROM                                                           0.24 g/t (0.007 o/t)
Mine life                                                                              5.0 years
Tons per day mined -- crushed                                                15,000 tons per day
Tons per day mined -- ROM                                                    15,300 tons per day
Strip ratio (waste: mineralized material)                                                  1.1:1
Average gold recovery -- crushed/ROM                                                     82%/50%
Total gold ounces mined                                                                  752,200
Total gold ounces recovered                                                              558,700
Average annual gold production                                                        111,700 oz
Peak annual gold production                                               119,600 oz in year one
Unit operating costs
Total operating cash costs                                                               $780/oz
All-in sustaining cost                                                                   $832/oz
Key economic measurements
Royalties                                                                                     0%
Pretax NPV 5%/after-tax NPV 5%                                       $144-million/$110.4-million
Pretax IRR/after-tax IRR                                                             40.6%/34.0%
Undiscounted operating pretax cash flow/ after-tax cash flow       $193.3-million/$151.8-million
After-tax payback period                                                                 3 years

The total estimated capital costs for the project, including contingency, are $97.5-million, with initial capital costs of $81-million, as shown in capital costs table.

                                  SUMMARY OF KILGORE CAPITAL COSTS (MILLIONS)

Capital cost item            Year -1  Year 1  Year 2  Year 3  Year 4  Year 5  Year 6  Year 7    Year 8   Total

Total mine capital costs       $3.90   $0.00   $0.00   $0.00   $0.00   $0.00   $0.00   $0.00     $0.00   $3.90 
Total process capital costs   $41.12   $0.00   $0.00   $7.87   $0.00   $6.03   $0.00   $0.00     $0.00  $55.03 
G&A capital costs              $7.21   $1.52   $1.52   $1.52   $1.52   $1.42   $5.00   $0.00     $0.00  $19.71 
Working capital               $15.46   $0.00   $0.00   $0.00   $0.00   $0.00   $0.00   $0.00  ($15.46)   $0.00 
Contingency                   $13.54   $0.30   $0.30   $1.88   $0.30   $1.49   $1.00   $0.00     $0.00  $18.82 
Total capital costs           $81.23   $1.52   $1.52  $11.27   $1.52   $8.94   $6.00   $0.00  ($15.46)  $97.46

Mining method

The PEA study utilizes open-pit mining with mine planning based on economic pit shells generated by mine planning software. Mine production is planned at approximately 30,000 tons per day or 11.1 million tons per year of leach feed (mineralized) material. With an average waste-to-leach-feed-material strip ratio of 1.1 to one, the average mining rate is approximately 61,500 tons per day of leach feed and waste material. The open-pit mining at Kilgore was designed utilizing contract mining.

 
                                  MINING SCHEDULE

Parameter                    Year -1  Year 1  Year 2  Year 3  Year 4  Year 5   Total

Crush tons (Mt)                 0.02    5.48    5.52    5.48    5.48    5.12    27.1
ROM tons (Mt)                   0.14    6.14     4.7    9.05    5.23    1.70    27.0
Total leach material (Mt)       0.16    11.6   10.22   14.53   10.71    6.82    54.0
Waste tons (Mt)                 0.89    7.88   14.37   22.52    7.75    6.54   59.95
Total material moved (Mt)       1.05   19.48   24.59   37.05   18.46   13.36  113.95
Au ounces -- crush (Koz)         0.3   120.4   117.5    99.0   112.1   121.4   570.7
Au grade (o/t) -- crush        0.014   0.022   0.021   0.018   0.020   0.024   0.021
Au grade (g/t) -- crush         0.48    0.75    0.73    0.62    0.70    0.83    0.72
Au ounces - ROM (Koz)            0.8    40.9    31.8    60.1    36.0    11.8   181.5
Au grade (o/t) -- ROM          0.006   0.007   0.007   0.007   0.007   0.007   0.007
Au grade (g/t) -- ROM           0.21    0.24    0.24    0.24    0.24    0.24    0.24

Recovery methods

A conventional heap leach process is best suited for the Kilgore deposit; higher-grade material would be crushed prior to being placed on the heap and the rest would be treated directly as run of mine. Mined material with a cut-off grade greater than 0.01 o/t (greater than 0.34 g/t) would be crushed to one-half inch to improve gold recovery as indicated by metallurgical testing; grades between 0.004 o/t (greater than 0.15 g/t) and 0.01 o/t (less than 0.34 g/t) would go straight to the leach pad as ROM material. All material placed on the pad would have lime added prior to pad placement for pH control. The ROM material would be trucked and dumped on the pad and ripped with a dozer after each lift is complete. The crushed material would be conveyed/stacked on the heap leach facility (HLF). The pregnant leach solution from the heap leach would be collected in a dedicated pond and either recirculated or processed in the ADR plant. The gold in the solution would be collected on activated carbon in a series of CIC vessels. Gold recovery would take place through stripping the activated carbon into an enriched solution that reports to an electrowinning circuit where the gold would be recovered as a sludge that is ultimately smelted into high-purity dore bars.

Operating costs

The total life of mine operating costs are estimated to be $423.7-million. Average LOM unit costs for mining, processing, and general and administrative expenses are $2.29/mined ton, $2.89/process ton, 51 cents/process ton, respectively (annual estimates are shown in the operating costs tables).

 
                SUMMARY OF KILGORE ESTIMATED OPERATING COSTS (MILLIONS)

Operating cost item             Year -1  Year 1  Year 2   Year 3  Year 4  Year 5    Total

Total mine operating costs        $1.95  $43.71  $47.14   $81.65  $54.86  $35.68  $264.99
Total process operating costs     $0.08  $33.12  $30.41   $37.90  $31.31  $24.01  $156.83
Total G&A operating costs         $0.15   $2.76   $2.76    $2.76   $2.76   $2.58   $13.77
Total operating costs             $2.18  $79.59  $80.31  $122.31  $88.93  $62.26  $435.57

                    SUMMARY OF KILGORE ESTIMATED OPERATING UNIT COSTS

Item                     Year -1  Year 1  Year 2  Year 3  Year 4  Year 5  Average LOM total

Mine ($/mined ton)         $1.86   $2.24   $1.92   $2.20   $2.97   $2.67              $2.32
Process ($/process ton)    $3.73   $2.85   $2.97   $2.61   $2.92   $3.52              $2.90
G&A ($/crushed ton)                $0.47   $0.54   $0.38   $0.51   $0.76              $0.51

                COSTS PER GOLD OUNCE

Item                               Average LOM total

Cash operating cost/Au ounce                    $780
All-in sustaining cost/Au ounce                 $832

The Kilgore deposit includes potentially recoverable silver as well as gold. Silver assays were conducted on approximately 3,906 samples, however, they were not incorporated into the block model and therefore the mineral resource estimate of August, 2018, did not address silver. Silver has not been included in the PEA as there is insufficient data to support a silver resource model at this time; silver would be recovered during the heap leach process and ultimately form part of the dore.

PEA sensitivities

The PEA examines the effect on NPV 5 per cent of up to a 20 per cent increase or decrease in capital (capex) and operating (opex) expenditures. NPV 5 per cent is most strongly influenced by the price of gold.

The opex and capex tables show the change in NPV 5 per cent over a range of opex, capex and gold prices.

 
  NPV 5% SENSITIVITY TO OPEX, CAPEX AND GOLD PRICE
 
NPV 5% in $M                                     Opex 
            
               -20.0%    -10%    0.0%   10.0%   20.0% 
Capex  -20.0%   186.6   157.4   128.2    97.5    69.2 
       -10.0%   178.1   148.9   119.4    88.4    60.0 
         0.0%   169.3   140.0   110.4    79.0    50.3 
        10.0%   160.3   131.1   101.1    69.3    40.2 
        20.0%   151.0   121.8    91.6    59.1    29.9
 
NPV 5% in $M                            Gold price/oz 
        
                 $900  $1,100  $1,300  $1,500  $1,700
Capex  -20.0%   (8.1)    51.6   128.2   202.8   276.4 
       -10.0%  (17.8)    42.2   119.4   194.3   268.0 
         0.0%  (27.8)    32.4   110.4   185.5   259.5 
        10.0%  (38.1)    22.3   101.1   176.5   250.7 
        20.0%  (48.7)    11.9    91.6   167.2   241.6 

NPV 5% in $M                            Gold price/oz 
        
                 $900  $1,100  $1,300  $1,500  $1,700
Opex  -20.0%     14.4    94.5   169.3   242.1   313.3 
      -10.0%   (10.4)    63.5   140.1   214.6   286.6 
        0.0%   (27.8)    32.4   110.4   185.5   259.5 
       10.0%   (45.9)     7.8    79.0   156.3   230.9 
       20.0%   (57.1)   (9.5)    50.3   126.3   201.7 

 
     IRR SENSITIVITY TO CAPEX, OPEX AND GOLD PRICE
 
Posttax IRR in %                                     Opex   
          
                  -20.0%  -10.0%     0.0%   10.0%   20.0% 
Capex     -20.0%   63.5     53.6     43.8    33.9    24.6 
          -10.0%   56.8     47.7     38.6    29.4    20.9 
            0.0%   50.8     42.4     34.0    25.4    17.5 
           10.0%   45.6     37.8     30.0    21.8    14.4 
           20.0%   40.9     33.7     26.3    18.5    11.6 

Posttax IRR in %                            Gold price/oz 
        
                   $900   $1,100   $1,300  $1,500  $1,700
Capex     -20.0%    2.6     20.4     43.8    66.2    87.3 
          -10.0%  (0.0)     16.7     38.6    59.3    78.8 
            0.0%  (2.4)     13.4     34.0    53.3    71.5 
           10.0%  (4.6)     10.5     30.0    48.0    65.1 
           20.0%  (6.6)      7.8     26.3    43.3    59.4 

Posttax IRR in %                           Gold price/oz  
       
                    $900  $1,100  $1,300  $1,500  $1,700
Opex      -20.0%     9.0    31.0    50.8    69.0    86.1 
          -10.0%     2.2    22.2    42.4    61.4    78.8 
            0.0%   (2.4)    13.4    34.0    53.3    71.5 
           10.0%   (7.2)     7.0    25.4    45.1    63.7 
           20.0%  (10.0)     2.6    17.5    36.9    55.6 

The sensitivity table illustrates the effect of gold price and discount rate on NPV.

             NPV 5% SENSITIVITY TO GOLD PRICE

NPV 5% in $M                                 Discount rate

                              0.0%    5.0%    7.0%    9.0% 
Gold prices USD/oz  $900    (13.9)  (27.8)  (33.2)  (37.9)
                    $1,100    50.9    32.4    23.2    15.1 
                    $1,300   151.8   110.4    96.8    84.6 
                    $1,500   239.7   185.5   167.6   151.4 
                    $1,700   326.3   259.5   237.3   217.3 
 

Project enhancement opportunities

The PEA demonstrates the potential economic viability of the Kilgore project and also outlines a number of opportunities for project enhancement:

  • Continue drill testing the near-surface potential of the deposit by drilling to north, south and west where it remains open including fracture/fault studies to better define the relationship between mineralization and structure, and oriented and geotechnical drilling to assist in mine design studies. This will be followed by an updated resource estimate.
  • Optimization of the mine plan -- the PEA represents the first step toward addressing the viability of a mining operation at Kilgore. Further work may identify opportunities for cost saving, such as waste-haul optimization and improved pit sequencing through pit phasing.
  • Metallurgy -- work is currently under way on drill core from areas not previously tested. Continuing metallurgical test work is critical in ensuring that process design is the most appropriate for the Kilgore deposit. Any additional work may lead to changes in the recovery curves used for this study and more advanced studies may identify other ways to further enhance recovery.
  • Additional assays of all available materials currently in storage to create a silver resource model; the addition of silver to the resource may contribute positively to the economic model.
  • Continuing lithogeochemical and petrologic studies of existing material will lead to a better understanding of the mechanisms of mineralization and controls on the distribution of gold within the rocks present. This will enable Otis geologists to develop a full paragenesis of the deposit within both the volcanic and sedimentary host rock sequences.

Alan Roberts, vice-president of exploration, states: "This study has shown that Kilgore's compact nature, that is the gold ounces occur within a single cohesive and contiguous body of mineralization, is potentially economically viable and amenable to open pit, heap leach mine operation. Continued exploration through drilling combined with ongoing surface investigations may extend the known resources and will improve our understanding of the deposit; this in turn can be applied to further enhancing the economics of the existing deposit, and to ongoing regional exploration for additional deposits at Kilgore and in similar geologic settings in eastern Idaho."

Future plans

Otis Gold is committed to a program of continuing to address key development requirements and advance the project while further demonstrating economic viability in the most efficient way possible through:

  • Continued drilling to address potential resource conversion, possible additions to the resource through drilling adjacent to the existing resource and drilling of superjacent surficial deposits, and testing of new targets;
  • Metallurgical testing to better understand the leach characteristics of the deposit, and differences in grade between core and reverse circulation drilling;
  • Revised resource model to include both gold and silver that requires additional silver assay from stored materials;
  • Geochemical characterization of waste rock;
  • Further baseline environmental and engineering studies.

The company's Aug. 14, 2018, mineral resource estimate formed the original basis for the PEA (see Otis news releases dated Sept. 28, 2018).

                      RESOURCE ESTIMATE FOR THE KILGORE PROJECT, CLARK COUNTY, IDAHO, U.S.A

                                                    Indicated                                             Inferred
          Tonnes (1,000s)  Grade Au (g/t)  Ounces Au (1,000s)  Tonnes (1,000s)  Grade Au (g/t)  Ounces Au (1,000s)

Resource           44,600            0.58                 825            9,400            0.45                 136        

Qualified persons

David Rowe, CPG, Terre Lane, Registered Member of SME (No. 4053005), Jeffrey Todd Harvey, PhD and Registered Member of SME (No. 04144120), and JJ Brown, PG and Registered Member of SME (No. 4168244RM), are qualified persons under the instrument (Form 43-101F1, and companion Policy 43-101CP). Mr. Rowe and Mr. Brown conducted independent site visits to the Kilgore property on Aug. 9 through 14, 2017, and Aug. 4 through 5, 2018, respectively. The conclusions and recommendations in this report are based on information available as of March 31, 2019.

Mr. Roberts, MSc, CPG (AIPG: CPG No. 11260), vice-president of exploration, serves as the qualified person for this news release, and has reviewed and approved the technical content contained herein.

About the Kilgore project

The Kilgore project lies on the north-eastern margin of the Miocene-Pliocene Kilgore Caldera complex in the Eastern Snake River Plain, Idaho. The Kilgore project contains the Kilgore deposit with a current NI 43-101 resource: indicated resource of 825,000 ounces Au in 44.6 million tonnes at a grade of 0.58 g/t Au and an inferred resource of 136,000 ounces Au in 9.4 million tonnes at a grade of 0.45 g/t Au. The Kilgore deposit is a low-sulphidation, gold-bearing, quartz-adularia epithermal system hosted in tertiary volcanic rocks, local tertiary intrusive rocks and basement Late Cretaceous, Aspen formation sedimentary rocks.

About Otis Gold Corp.

Otis is a resource company focused on the acquisition, exploration and development of precious metal deposits in Idaho. Otis is currently developing its flagship property, the Kilgore project, located in Clark county, Idaho, and the Oakley project, located in Cassia county, Idaho.

We seek Safe Harbor.

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