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Ascot Resources Ltd
Symbol AOT
Shares Issued 376,351,128
Close 2022-01-25 C$ 1.05
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Ascot hopes to complete Premier engineering by April

2022-01-25 11:15 ET - News Release

Mr. Derek White reports

ASCOT PROVIDES UPDATE ON PREMIER GOLD PROJECT PROGRESS TO DATE AND PLANS FOR 2022

Ascot Resources Ltd. has provided an update on the Premier gold project (PGP), located in the Golden Triangle of northwestern British Columbia, with respect to progress to date and development plans in 2022. This release includes a detailed project schedule and an updated capital cost estimate for the project. Building on the success of the early works program in 2021, Ascot remains on track to commence full-scale construction activities and underground development in April, 2022, with first gold pour targeted for the first quarter of 2023. The company has also received the Environmental Management Act permit, completing the JPAA (joint permit application amendment) for the project.

Derek White, president and chief executive officer of Ascot, commented: "The company made considerable progress on preconstruction and early works activities in 2021 and is now pleased to have received the final operating permit for the Premier gold project. Despite facing various challenges last year, including the loss of key equipment at sea due to weather events, the Ascot team stepped up in meaningful ways and adapted to stay the course towards production, positioning us to execute on the project in 2022. We are excited to get the Premier mill restarted, with first gold pour anticipated around this time next year. The Golden Triangle of northwestern B.C. has been a focal point for Canadian mining mergers and acquisitions in recent years, and Ascot has one of only three mills in the entire region. Notwithstanding project delays and cost pressures, we are confident in our ability to execute on the remainder of project construction during 2022, on the path to becoming Canada's next gold producer."

Project progress to date

Before the Mines Act permit issuance in December (see news release dated Dec. 7, 2021), Ascot was able to advance many project preconstruction activities as a part of the early works program. The focus of the program was preparing for the delivery of the ball and SAG (semi-autogenous grinding) mills and their subsequent installation inside the mill building. This was a major success for the project and was on time and on budget such that the construction activities inside the process plant are not currently on the critical path schedule. Other major areas of early works progress included initial earthworks activities for the new water treatment plant, the Cascade Creek diversion channel, and the Dago pit liner for temporary waste and water collection. The temporary construction camp with total capacity of approximately 170 people was also installed adjacent to the mill building.

Concurrent with project activities on site, detailed engineering has been advanced to 70 per cent complete. Designs for these areas are substantially complete: site roads, power supply, water treatment plant, tailings facility, Cascade Creek diversion channel and several areas inside the mill. Remaining areas to be engineered are the process plant piping, electrical and instrumentation. The company anticipates substantial completion of detailed engineering by approximately April, 2022.

Project procurement has progressed well so far despite numerous challenges in global shipping and transportation. While there are increasing pressures related to supply chain and inflation across the entire mining industry, the project is not wholly exposed to these risks given the existing infrastructure and the procurement completed to date. The ball and SAG mills were ordered in 2020, arrived on site in 2021 and were installed. Ascot has ordered approximately 87 per cent of the remaining fixed equipment for the project. Key orders remaining in the plant relate mostly to piping, instrumentation and bulk consumables. Outside of the plant construction, the major pieces of equipment yet to be received are the replacement water treatment plant clarifier and tailings thickener (see news release dated Dec. 7, 2021). Upon learning of the loss of those items, Ascot quickly arranged the refabrication orders for these items. The fabrication of the clarifier and thickener is progressing well and Ascot anticipates completion by the end of February, 2022, followed by delivery scheduled in April, 2022.

Ascot is in the final stages of selecting a supplier for the company's underground equipment fleet, which Ascot currently anticipates requiring on site in three tranches: the first in September, 2022, a second in January, 2023, and the remainder in August, 2023, as the mining area expands. This is in addition to and after the mobilization of the underground development mining contractor in April, 2022.

Ascot estimates construction of the Premier gold project is approximately 23 per cent complete as of year-end 2021. Major areas of focus for the project in 2022 will be the underground development and early access to initial mining areas, the delivery and installation of the new water treatment plant, the completion of the Cascade Creek diversion channel, the tailings facility earthworks, and the completion of the process plant circuit. These activities all lead toward starting mill commissioning later in 2022 ahead of initial gold pour anticipated in Q1 2023.

As anticipated in Ascot's news release dated Dec. 7, 2021, the British Columbia Ministry of Environment and Climate Change Strategy has issued to Ascot the Environmental Management Act permit PE-8044. This permit amendment is primarily related to water discharge requirements during the production phase at PGP and solidifies Ascot's fully permitted status. The receipt of this permit is another key condition to draw down the remaining $75-million (U.S.) under the company's project finance facility with Sprott Private Resource Lending Corp. and Beedie Capital.

Project schedule

As previously announced (see news release dated Dec. 7, 2021), most outdoor construction activities have been paused for the winter and underground development has been delayed until approximately April, 2022. During Q1 2022, minor works will be progressed inside the mill building, and detailed engineering and the remaining procurement will be concurrently advanced.

Ascot is planning to ramp up full-scale construction activities in April, 2022. Critical work areas include the construction and installation of the new water treatment plant, the excavation of the Cascade Creek diversion channel, the tailings facility earthworks, process plant piping and instrumentation, and initial underground mining development.

The replacement clarifier and thickener are scheduled to be delivered to site in April, 2022, which includes approximately one month of contingency for shipment to account for continuing global supply chain pressures. Installation of the new water treatment plant, the foundation for which has already been excavated, is anticipated to be complete by November, 2022, allowing the commencement of process plant commissioning.

Concurrently, underground development is scheduled to begin in late April, 2022, starting from the S1 portal at the Big Missouri deposit. Initial development and stoping ore is anticipated to be accessed by October, 2022, which will enable process plant commissioning to begin by year-end 2022, followed by the first gold pour early in 2023. In order to hedge against mining and grade variability, three initial Big Missouri stoping areas are planned to be accessed in 2022, concurrent with primary development towards the Silver Coin deposit.

Capital forecast

In March, 2021, before starting preconstruction activities, including early works, Ascot announced an updated project capital cost estimate of $176-million (see news release dated March 18, 2021). Now with the Mines Act permit in hand and a more definitive project schedule, Ascot is reporting an updated project capital estimate of $224-million, reflecting an increase of 27 per cent over the March, 2021, figure. A breakdown of the cost increases by area is provided in the attached table. At a high level, the factors that have caused cost increases to the project, in order of influence, are: fixed indirect costs caused by schedule delays, weather impacts, piping and instrumentation labour productivity, indirect cost inflation, supply chain pressures and COVID-19 protocols.

Indirect and owner costs plus $30-million

The camp and construction facilities cost increased primarily due to delays in the project schedule, requiring the temporary construction camp to be on site for longer than initially planned. Higher food costs, COVID-19 protocols and snow clearing have also contributed to the increase. Road maintenance and site services costs across the Premier site are higher than estimated. Freight and logistics costs are higher due to the global supply chain crisis.

Construction management costs increased due to the construction period being delayed until the end of December, 2022, compared with the end of September, 2022, as originally planned. Insurance costs are higher than previous estimate due to additional insurance coverage on the tailings storage facility.

Process plant plus $8-million

Lower labour productivity has been used for the piping and instrumentation activities going forward. Costs for systems and instrumentation for electrical equipment in the mill have increased due to supply chain pressures and inflation.

As at year-end 2021, Ascot had incurred a total of $60-million on the project. Based on the updated capital cost estimate, there remains $164-million left to spend on the project, including a $15-million contingency, representing a buffer of 11.3 per cent on the project costs going forward less mining costs. Varying levels of contingency were assigned to different project areas based on risk assessment. Of the remaining $164-million in costs yet to be spent, approximately $103-million has been committed under purchase orders as of year-end 2021.

Ascot has a higher degree of confidence in the updated capital estimate as it is based on real-world costing through the early works program and because the company has now ordered most of the remaining key equipment and materials to complete the project. The only remaining items that have yet to be ordered are process plant piping, control systems and limited amounts of steelworks, all of which have been assigned higher levels of contingency.

Ascot ended 2021 with a cash balance of approximately $59-million (unaudited), and there remains $75-million (U.S.) (approximately $94-million) undrawn on the project finance facility, bringing total available liquidity to approximately $153-million. This is less than $164-million left to spend, which does not include various corporate costs, including, but not limited to, exploration drilling, general and administrative expenses, working capital and minimum cash balance requirements, security deposits, and permit maintenance costs. As a result, Ascot will be pursuing additional financing options in the near future to address capital requirements arising from the aforementioned project delays.

Qualified person

John Kiernan, PEng, chief operating officer of the company, is the company's qualified person as defined by National Instrument 43-101 and has reviewed and approved the technical contents of this news release.

About Ascot Resources Ltd.

Ascot is a Canadian-based junior exploration and development company focused on restarting the past-producing Premier gold mine, located in British Columbia's prolific Golden Triangle. Ascot shares trade on the Toronto Stock Exchange under the ticker AOT. Concurrent with progressing the development of Premier, the company continues to successfully explore its properties for additional high-grade underground resources. Ascot is committed to the safe and responsible development of Premier in collaboration with Nisga'a Nation as outlined in the benefits agreement.

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